Corporate reorganizations are a time-proven way of meeting big strategic needs. They’re also a time-proven way of upsetting employees and creating new, unexpected problems. That’s why we’ve long felt the job of transformation is never complete until cultural issues – the way people work together in the company – have received as much attention as corporate structure.
We worked on a project that offers a good, practical picture of what it means to match culture to structure. The company, a large, global life sciences company, had long been managed primarily on the country level, and it suffered from a familiar set of consequences: It was difficult to create and execute global strategies and to work at scale. Process excellence was elusive as local leaders put their own stamp even on support functions. It was time to become more top-down and global – while at the same time increasing customer-centricity and agility.
And so, the company had reorganized into a more centralized, global organization and continued to have a few questions:
- What was still standing in the way of progress?
- What new ways of working together did they need to adopt?
- And – with the clear intention of keeping the project focused – what four or five actions would have the greatest impact in moving them toward their goals?
As our team analyzed the situation and talked with management and employees, we quickly gravitated to five areas for improvement. These workstreams, as we called them, won’t necessarily be appropriate for every company, but they provide a great illustration of the kinds of issues that arise in teaching a company to adapt a new approach to organization.
More on Our Five Workstreams for Innovation
1. Stop overplanning and focus on value drivers.
The company, perhaps because it granted its country units so much autonomy, devoted a remarkable amount of time to annual operational planning. The process didn’t quite get to the level of making every department submit a month-by-month schedule for office supplies, but it came close. Our analysis showed that the company devoted the equivalent of 800 full-time employees to the task each year – and senior management was the hardest hit. It was a low-value use for high-value employees, who would be better used in planning crucial events such as new drug launches, which can make or break a product’s commercial prospects. To achieve its agile goals, the company needed to let go of some of its buttoned-up, accounting-driven approach, replacing it with an approach focused on value-drivers. That didn’t mean that management should ignore lesser issues, but this was to give them a level of attention more in line with their contribution to building value.
2. Institutionalize the three-way conversation.
In the company’s old structure, reporting lines for non-business functions such as human resources, legal, production, and so forth ran through the country general manager. That meant decisions on hiring, goal setting, and performance assessment were ultimately the responsibility of local staff and the local business head. The reorganization rerouted reporting lines to executives in charge of global functions, leaving local managers in charge of only a few functions, especially sales. While there were clear advantages to the system in terms of standardizing procedures and achieving excellence in support functions, too often country organizations’ business needs were ignored. The pendulum had swung too far.
The solution: Bring the country managers back into the process, so that hiring, goal setting, performance appraisal, and other functions are now a three-way conversation. That way, both local needs and broader corporate needs and standards are represented at the table – and as a bonus, there is a serious annual (at least) interaction between the country heads and the function heads their employees report to.
3. Do talent management like you mean it.
Most of the workstreams we identified related directly to issues created by the company’s new structure, but this one was always more about culture than structure. Life sciences, of course, is a talent-driven industry, and the company had instituted a program to identify high-potential individuals and provide them with additional training and resources. The program was at least partly in place. Talented individuals had been identified, and the company had amassed a huge catalog of training materials. But there were gaps: Many of the selected individuals were never informed of their new status, and those who were faced a bewildering array of training choices with no guidance on what to choose. The solution was straightforward: A schedule of development conversations with the selected employees and their managers, a new, streamlined marketplace for training materials, plus coaches to suggest paths of development.
4. Give country business units a way to collaborate and speak with one voice.
The company has three major divisions with some synergies, but also some individual needs. When the reorganization did away with the role of country general manager, each country ended up with three local division heads and no mechanism for encouraging coordination and collaboration. To fill the gap, we created a leadership council for the three divisions, with regular meetings, where they could discuss joint business opportunities and local issues like working with local workers’ councils. Issues that touch only one division are off the table at the council, while issues that require a single official voice – dealing with governments, for instance – are assigned to a new role we created: the country speaker.
5. Change management.
In retrospect, in the course of the difficult early stages of the reorganization, the company probably undercommunicated why it was making changes, how it wanted to relate with customers, and what employees could expect in the future. This sort of under-communication is a common error, but one that can create persistent problems. To avoid committing the same mistake again, the company took aggressive steps to make sure employees knew why things were changing again, how they would be affected, what they needed to do, and how the company planned to support them. The chief executive officer made sure employees received frequent messages from him about why change was good, and the company devoted half a day at its annual meeting for top managers to not just discussing speed to market and customer focus, but walking through presentations that clearly modeled collaboration and interactivity.
And the lesson of this company’s successful realignment of its culture? As we said earlier, the point here is not to say these specific solutions will work for your company, but rather to point to the kinds of solutions you can find by focusing on cultural change. No reorganization is perfect, and every corporate structure requires its own sort of organizational competence on the part of employees. Building that competence through listening, analyzing, and then building smart procedures that help people do a better job is the key to creating transformation that works for the long haul.