Tetris was, in 1984, the first Russian entertainment software to be exported to the United States. The gameplay was simple yet sophisticated: manipulate the random sequence of differently shaped falling tiles and fit them to together to create lines without gaps. Players lose when they can no longer keep up with the increasing speed and the tiles overflow the playing field.
Similarly, many business leaders are forced, nowadays, to play managerial Tetris. In order to evolve from bricklayers to architects, they need to understand how the key elements of the organization fit together and perform trade-offs between strategy, structure, processes, people and systems. The higher their position, the more elements they need to handle, the quicker they need to decide, and the larger the impact of wrong decisions. Success is defined by the ability to puzzle together conflicting needs and survive the complexity associated with a central feature of modern organizations: fragmentation.
Like Tetris, fragmentation offers the potential of infinite gameplay. Unfortunately, in most organizations, it leads to a loss of meaning and decreased levels of engagement. Let’s look at three cases that illustrate how fragmentation prevents people from giving their best.
A global packaging company had transferred all its back-office finance functions into a shared service center in Eastern Europe, organized around “centers of excellence” in accounts payable, accounts receivable, general accounting, fixed assets, and treasury. All operations had been neatly cut in operational silos to generate economies of scale. “Now that we have created efficiency, we want to ensure that new team members stick to our operating policies,” commented the senior manager in charge.
Looking into the operations we found no specific control weaknesses at an individual level, but the end-to-end process was not in control. Lack of ownership made us struggle to assign process recommendations to specific individuals. When we asked people why they were or were not performing a certain task, they responded “That is not my job,” or “I would prefer not to,” as postmodern incarnations of “Bartleby, the Scrivener.” The senior manager agreed with the findings, but ominously added: “You should talk to the operations manager about those issues.”
Faced with strong competitive headwind from manufacturers in China, a Western European clothing company was looking for ways to cut costs by 15% and increase the average days payable outstanding by five days. A few days into the assignment, the company turned out to have more than 80 payment terms set up in their ERP system. Most of them were in contradiction of the contract and supplier invoice.
The problem was so obvious that we were puzzled that it still existed. The procurement manager pointed out that the organization is constantly engaged in what he called a “battle of the forms.” At first, we found his terminology almost theatrical — but then he explained that supplier contracts are negotiated in every country, the set-up in the ERP is centralized in the Baltics, purchasing tasks are performed across the various business units, and the accounts payable is outsourced to a third party provider in India. Not only was the set-up actually theatrical — the procurement manager was also a tragic hero.
During a recent process audit at a large fast-moving consumer goods company, we were looking at the overall organizational structure, general processes and financial performance in the supply chain. Initial discussions with local management led us to interview a manager “with a broader view on the topic.” He introduced himself as Warehousing Manager EMEA, but the scope of his role turned out to be narrower. “I am responsible for the management of spare parts for vending machines in Europe,” said the manager. The overall organization of the warehousing infrastructure in Europe was, in his words, “strictly VP knowledge.”
In order to navigate the process and infrastructure, we had to work our way through management layers, locations, responsibilities, and subsets of responsibilities. Interestingly enough, the willingness of management to push ownership to the frontline had the opposite effect: people were clueless. The fieldwork controls escaped testing, as none of the owners was able to provide the required documentation, and the atmosphere was haunted by invisible scapegoat VP’s — an easy but corrosive way out of accountability.
The three cases above share a fundamental problem. Of course, there is the lack of people’s knowledge for what happens beyond their own functional silo, or the lack of management overview. It is obvious that ownership should go beyond job descriptions. But officially, these people were right: it was not their job, and the broader overview should be with the VPs.
However, the real problem was that people did not seem to care very much. The quiet acceptance of things-as-they-are, as inefficient and frustrating as that might be, was striking. What it is, in fact, is a crisis of engagement. And it is not only caused by lack of knowledge, but also by lack of control.
These last few years have seen the organization of work evolving through a growing functionalization of the leadership structure, the rise of shared service centers to efficiently handle administrative functions, and strict internal controls to prevent fraud and errors. The arguments are typically efficiency, cost reduction, and management authority.
Take the example of the shared service center: While it might decrease fragmentation at an internal process level, it also increases fragmentation at the company level. Economies of scale support the business case — but that set-up, more specifically combined with a command-and-control culture, has significantly reinforced bureaucracy in a way that shrinks individual roles and responsibilities. When managers are becoming superheroes at optimizing sub-fragments of work and when any further gains are made at the expense of something else, controls and efficiency reach their limits.
The organizational structure is pivotal. The value of knowledge in a top-down structure typically depends on the owner’s role and level, and knowledge typically flows in one direction, not cross-border, let alone cross-process or cross-function. The actual process users’ hands-on ideas and experience are not systematically captured in the decision-making process. As knowledge sharing is neither facilitated nor promoted, collaboration and value creation inevitably suffer. Building in a matrix structure can help, but it does not solve the issue per se.
Also, engagement is negatively correlated with control. Gary Hamel explains that shrinking an individual’s scope of authority equals shrinking “their incentive to dream, imagine and contribute.” In a way, employees are reduced to children, who need sometimes embarrassing approvals for decisions with limited financial impact.
The good news is: engagement can be boosted on an individual and organizational level. Here are three specific tips.
Companies work with people — and people want stories. Even if life has no pre-existing purpose, people still want to know: does what I do make anything (or anyone) any better at all? It is a matter of meaning: people are motivated when they see the meaning of what they do, see their contribution to a bigger thing, have payoffs that make a difference, and are acknowledged by others for that contribution.
So how can you tell a better story? First, define why you are doing what you are doing; second, define your requirements towards marketing and communication (do not leave it up to them to tell the story); third, install a culture of transparency and meaning. Dow Chemical, for example, shares day sales and inventory numbers with everybody in the company, including the workers doing the heavy lifting on the front lines.
Every company has a divine proportion, an optimal form of organization with management layers and spans of control. In some contexts, for example, when the work requires close supervision due to strict product quality requirements, a classic hierarchical pyramid might work. In other contexts — for example project-driven environments — an agile organization structure will fit better. And in yet other contexts, for example, when collective creativity defines sustainability and success, a flat network organization will serve the purpose. The organizational structure needs to fit the company’s strategy and purpose — flattening is not by definition a panacea.
Here is how you can find your company’s divine proportions: first, what is the purpose of your company? Second, which dimensions need to define the organization of your company? Third, how can you promote leadership and accountability over control, and motivation over coercion? The approach works even better bottom-up: just replace “company” with “team.”
Zero-based fragmentation (ZBF), as an organizational principle, starts with a review of the structure and relevance of each process step through the eyes of the employees actually doing those steps. Each individual new task needs to be challenged with three very simple questions: Does it add meaning to the work of the employee? Does it increase the sense of ownership for the employee? Does it reduce the complexity of the process, the team, and the organization?
Engaging in such a review will put a minimum of focus on creating and protecting a sense of meaning at work. It will also help managers to (re)design processes and controls that increase the understanding on the part of people as to how their individual tasks contribute to the organization’s overall mission. Of course the review meeting is only a start — from then, ZBF should become a governing principle in all new processes and tasks.
Working your way up from the individual tasks to the process and organizational design will develop awareness. Your organization comprises of people; motivation is the most powerful driver, and knowledge and control breed engagement. The time has come to put people first. Start at the bottom, share your success, and the rest will follow.
Alexander Van Caeneghem and Jean-Marie Bequevort are practice leaders in complexity reduction at management consultancy TriFinance in Belgium.