For years, leaders have tried to create smooth-running organizations where complexity, tension, conflict and overlapping lines of authority are at a minimum. Organizational simplicity is great when the business is simple – when there are only a few products, serving a few markets (in one or two countries). Leaders execute business plans, the corporate functions support them directly, and together they are a tightly-knit team. Lines of authority are clear and there is little need for “dual-reporting” lines, typical of a matrix organization.
But in a complex, multi-divisional company, managing brands across several products and geographies things get more complicated. Learn to love it. The world is a more complex place today, and harmony is often the wrong goal. When there is no tension among businesses and functions and geographies there’s a good chance value is being left on the table somewhere.
Nike’s money-making matrix
Take Nike, marketing a core brand across a number of consumer categories with hundreds of footwear and apparel products all over the world. The voice of the global soccer consumer has made its way into Nike’s day-to-day decision making, and with record-shattering results. But the seasonal story line for the swoosh has to deliver for basketball, running, fitness and other consumer categories too, so the global soccer team has to line up behind a bigger marketing story. That’s only the beginning of the creative conflict. South Africa wants to go one way on footwear design profiles and color palette while The Netherlands, Brazil and Korea may argue for a different mix.
Simply put: to ignore any of these competing voices diminishes the potential of Nike’s powerful blend of brand, design and market reach. Nike executives simply cannot afford to keep things simple – to make the wrong compromises. Nike’s executive team is very intuitive about how to make money by working the complexity and the tension across the matrix in their organization. They do it a lot better than most.
Confronting the confederates
Even the traditional holding companies – like GE and Philips – are now adding complexity to their organizations by integrating across sectors. It’s no longer enough for the separate businesses to act autonomously to make sales calls to the same corporate customers, or to set up their own infrastructure in China and India. They have to be willing to give in to some dual reporting back to the center to leverage those assets for the greater good. That means a matrix and it means tension. Much of the payoff in these historically fractured organization models is in reduced costs, but it doesn’t end there.
Senior leadership must learn to lead a more diverse, sometimes dissonant orchestra. A clear approach to operating governance is the key to making the tension in the matrix work for customers, shareholders and the assorted teams inside the business.
Look to two places for the solution: smart “organization design” and the right leader behaviors and skills.
Forget straight lines and dotted lines
Great talent may well overcome lousy organization design. But who would choose that course? Global organization design is no longer about straight lines and dotted lines. Dual-reporting means sorting out which voices must have a strong voice in decision processes. In the end it’s about conscious power sharing and bringing the conflict out onto the table. Smart organization design spells it out: one voice gets a stronger vote on brand decisions, while another gets the golden vote on channel management and yet another on product design. Even in giant functional organizations like Cisco, which has turned loose scores of cross-functional innovation councils with money and power, the decision rules are spelled out. At Nike, while it takes some time to get the varied voices heard and to wade around a bit in the conflict, leaders don’t dither. It’s not always a pretty process, but decisions get made and things happen fast once all hands are in.
It helps to think about organization design as more than boxes on a chart. Aligning structure, processes, measures and how you pay people are all critical. And you have to get the right talent in the right jobs.
Leaders who can make conflict productive
The second key to making it all work is the leaders who engage on this new field of play. Companies from Levis to Green Mountain Coffee Roasters are teaching leaders how to lead in complex organizations. There are four things leaders in the matrix need to learn:
- Build the right networks and relationships
- Manage up and sideways – with aligned targets and initiatives
- Influence with more compelling ideas and personal sources of power
- Make conflict work – lead through polarities for greater creativity
The cost of management time is higher in complex organizations. It’s unavoidable. But it follows that poor decisions, delayed decisions and confused roles ultimately reduce return on management time. It’s time to design organizations and develop leaders to make the conflict work – to pull all of the value possible out of the diverse assets of the business.