Red Globe

Activating the Global Operating Model

By Amy Kates and Greg Kesler
Managing Partners, Kates Kesler Organization Consulting

CEOs often call us two or three years after a major organization transformation. They are frustrated that their sophisticated global organization model is not delivering business results. They see complexity and stress caused by managers struggling to work across organizational boundaries to execute on the growth plans.

This friction and frustration can be avoided. In our work, we have developed an understanding of what typically goes wrong between design and actual results and how to bridge the gap through “activation.” We have identified five organization activators that enable companies to deliver on their strategy.

What Typically goes Wrong
The challenges our clients face are largely rooted in the complexity of their operating models, which include multiple lines of business, geographic and customer markets, consumer categories, and go-to-market channels.

While a global operating model can be a unique source of competitive advantage, most global operating structures look about the same. They’re made up of Regional Commercial Units, Global Functions, and Global Business Units, put together in a matrix.

The real differentiator is how to use the organization model to achieve both agility and leverage. A company must enable its teams to collaborate across organization boundaries, time zones, cultures, and national boundaries to create value at the critical connection points, and move at the speed that consumers, customers and competitors demand.

Unfortunately, and unnecessarily, many companies struggle to realize the intentions of these elegant operating models. We see six common mistakes:

  1. Companies overlay global product or brand teams onto the existing structure, creating excess layers which lead to confusion around authority and accountability.
  2. Functions become global, setting global standards, creating global programs, and driving shared services without redesigning these groups end to end. This results in duplicated and uncoordinated global, regional, and local activity, increased cost, and shadow functions created to cut through the confusion.
  3. Leaders are reluctant to create clear decision rights. As a result, protection of territory, fear of loss of status, past relationships, and attempts to stay out of one another’s business all contribute to an avoidance of the hard work of moving power. Leader effectiveness declines.
  4. Processes and management systems are not adjusted around new conversations and decisions. When these are not attended to, operators reject the new model and go back to old patterns and habits of interaction.
  5. Leaders fail to adjust the measures of success. A leadership and management team must understand new expectations, be motivated to work in the new environment, and be given the skills to succeed. Employees often resist a matrix structure because they just don’t feel prepared for the necessary levels of cooperation and power sharing.
  6. The CEO doesn’t change the work of the executive team. These leaders now need to come to the table with an enterprise view. CEOs often give in to the fear of missing financial targets if division leaders have to now become engaged in enterprise activities. But, until they do, no other changes will get made.

The Five Activators

  1. Design Unique Value-Adding Layers. Ensure that every layer provides unique value with a specific role to play in linking center-led and regionally dispersed resources.
  2. Create Innovation and Execution Networks. Design and use networks to move ideas, innovations, and talent horizontally.
  3. Enable The Business Handshake. The key conversation happens over the business handshake when global and local leaders co-own goals, measures, and mutual expectations. This is more than alignment. It is a shared vision of the possibilities across organizational product, geographic and functional boundaries.
  4. Strategically allocate Power, Governance, and Decision-Making. Create a set of smart guardrails that guide collaborative decision making. We need the delegation, vertically, down into the operating structure so that the middle is empowered to take action. Horizontally, governance conversations sort out the role of the global center versus that of the regional organizations so that priorities are clear and initiatives can be executed with speed.
  5. Select Matrix-Ready Leaders. All of this is necessary, but not sufficient. The wiring is nothing without the right know-how; leaders who have been selected for, developed, and enabled against a profile for succeeding in global, complex organizations.

Successful activation doesn’t mean that you don’t have complexity. It does, however, result in the right kind of “rewarded” complexity, which creates value through horizontal connections between global and local teams and across businesses and markets. Companies that embrace and master the challenge of rewarded complexity see ideas, innovation, and talent move faster across the network and the efficiency benefits of global scale and leverage while maintaining a connection to local markets.

For more on this topic please see this article on Activating Global Operating Models, or visit KatesKesler.com.

http://www.business.dtu.dk/english/thought-leadership/global-operating-model
21 NOVEMBER 2017