Making Complex Organizations Work. Making Complex Organizations Work.
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The challenge of today’s increasingly complex organizations is captured very well in a December 2004 article in Harvard Business Review featuring an interview with Sam Palmisano, then CEO of IBM. http://hbr.org/2004/12/leading-change-when-business-is-good/ar/1.
He talked about 100,000 cells in IBM –
“Think of our organizational matrix. Remember, we operate in 170 countries. To keep it simple, let’s say we have 60 or 70 major product lines. We have more than a dozen customer segments. Well, if you mapped out the entire 3-D matrix, you’d get more than 100,000 cells—cells in which you have to close out P&Ls every day, make decisions, allocate resources, make trade-offs. You’ll drive people crazy trying to centrally manage every one of those intersections.”
So this is a strong argument against using a command and control hierarchical structure in the 21st Century unless you have a very simple product, an uncomplicated customer delivery process and a very straight forward and stable marketplace.
Here is what we have identified as the advantages of a matrix organization based on our work with leaders in a number of international organizations.
Like most things in life there is also a downside and things that are not so advantageous about complex organization working.
What is critical for making any complex organisation work are individual accountability, shared values and way of working, shared processes, and opportunities for understanding and knowing your key stakeholders.
ABB was for many years used as the illustration of how a complex matrix structure can be made to work. How did they make it work?
The company was organized into 1300 companies divided into 5000 profit centres with a maximum of 50 people. You can avail of the muscle of a big company but with a strong entrepreneurial, local approach. The business area heads were on the boards of the top companies. So they helped the company heads to develop their strategies. It was divided into regions. The country managers were responsible for profit. Business area heads were responsible for developing the business area.