The economic recovery of 2010-2015 has triggered a number of high-profile mergers, but even more break-ups and spin-offs among large global companies, particularly those based in the US. Between 2012 and 2014 alone, Kraft, Royal Dutch Philips, Hewlett Packard, Ingersoll Rand, ConocoPhillips, Darden, and E-Bay agreed to split off substantial portions of their business in response to a groundswell of hostility toward underperforming diversified companies. The chief executives of iconic companies including DuPont, Amgen, and GE were under pressure from activist investors such as Bill Ackman, Nelson Peltz, Daniel Loeb, and Carl Icahn to do the same. Even P&G announced its intention to shed more than 50 percent of its brands “in order to simplify the way we organize and manage the company” (Byron 2014).
As organization designers this trend intrigues us. Have conglomerates and diversified companies under-performed because of failures in enterprise strategy? Or, are these companies failing the acid test for organization effectiveness, stumbling on execution brought about by lumbering, layered, and siloed organizational models, unsuited to delivering on diverse, global strategies?
Companies such as Nike, P&G, Deere & Co., Medtronic, PepsiCo, Unilever, IBM, Levi-Strauss, and Philips have created elegant organization models and consider their worldwide, matrix organizations to be sources of competitive advantage. Some leadership teams inhabit these models as though they are second nature. Others struggle mightily.
No companies have completely solved the challenges of bringing these complex organizational models to life, but many have made great progress. Studying these companies up close is productive. There are reasons some deliver superior results with these organizational arrangements while others seem to have real problems.
We have written a new book that explores what those success factors are and how other companies can learn bring their global operating models to life. Look for it in November: Bridging Organization Design and Performance: Five Ways to Activate a Global Operating Model, by Greg Kesler and Amy Kates, Wiley Publisher, 2015. We discuss the five activators in our February 2016 webinar. To view a recording of the webinar, click here.
Greg Kesler and Amy Kates