CEOs (and activist investors) are pushing for simpler organizations with more autonomous, accountable business units. This call to action comes around every few years.
Nelson Peltz’s ultimately unsuccessful bid for a seat on the P&G board was predicated by a frustration over the complexity and cost of the organization and his desire to force a “streamlining” of the company’s famous matrix. Almost lost in the back and forth is the fact that CEO David Taylor is already doing much of what Peltz wants in terms of unbundling complex reporting lines and aiming to make major operating units more autonomous.
This is not a new dilemma. The challenge for every company with a portfolio of closely related businesses – sharing customers, product technologies, or infrastructure – is how to gain the benefits of scale through common platforms and local relevance through empowerment of the operating units.
For some time, the trend was toward stronger global functions with matrixed relationships down into the business unit as a way to knit together the business units into a coherent whole. What is new now is the desire to get the benefits of an integrated company with the speed of a loosely connected portfolio.
The desire to unwind the matrix and free up the operating units from excessive central control puts the business unit general manager at the pivot point of the new operating model. This manager needs to drive a growth agenda, while taking advantage of the larger company’s capabilities and resources where it makes sense - in effect, to run an agile, relatively autonomous business unit while simultaneously drawing on and building on the assets of the parent company to reward shareholders.
Corporate leaders and HR should keep an eye on this trend and ask these questions:
- What is the new role and behavioral expectations of general managers in a divisional company that must deliver the benefits of both agility and scale? What type of general management talent have we traditionally grown? Are they ready and prepared to operate in the new model?
- What leadership/talent practices need to be redesigned to fit this agile, but leveraged, operating model? What role does talent management play in developing leaders who are comfortable running their own business while at the same time acting like true enterprise leaders?
- What is the role of the CEO and the executive leadership team in setting these expectations for senior leaders across the company? How can top executives role model these expectations, and contribute in tangible ways to building scalable enterprise capability?
Trends come and go in organization designs, like most other management disciplines. But the idea of building an organization for agility as well as scale is here to stay. We can assemble structures and processes to make both possible, but leadership behaviors, talents, and skills must be aligned to bring these models to life. CEOs and HR leaders would do well to design talent practices to hire, select and develop business unit general managers who can do just that.
This article is co-authored by Amy Kates and Greg Kesler, managing partners of KatesKesler. Kates is a member of i4cp’s Thought Leader Consortium .