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Dysfunctional Functions

By Vaidyanathan Nateshan

The world is turning into a global village and with the advent of skill centres, rather than products, forming the basis for geographical boundaries, competition is entering a phase never seen before in history. One of the most significant change has come about in the mindset of people and their professional growth rates. People seek newer challenges, but wither out quickly in cross-functional roles, where they are not able to comprehend and contribute effectively to the strategic direction of the organisation. This has also given rise to lesser tolerance and more attrition with higher burnout rates, leaving behind messy successions and board room fire fighting.

One of the most important issues that has been troubling Boardrooms and HR managers takes its roots in the functional division of an organisation. The classic division of organisations as functions has created walls or “silos” under which, people thrive, specialise and aspire for growth, resulting in frustration on not being able to grow beyond a point.

Another issue lies in the fact that the functional managers are not able to look beyond the walls of their fortresses and the senior management faces real issues in getting them to think on an organisational scale, resulting in restricted delegation and resultant increase in workload of senior management themselves.

The questions that classically arise at this juncture are – What happened to the classic view of division of labour? What is happening to the well-oiled machinery and why is there a sudden issue?

What are the issues?

The issues in creating functional silos have arisen because of the advent of technology and the increasing specialisation of professionals involved in the process. It is surprising how this apparent benefit has created an issue for the organisation.

· Technology has given rise to enterprise wide business process systems and these have defined the way in which work in each function has to be done. For example an accountant processing payables in his organisation only makes sure that the work, billed for, is completed and is supported by a valid purchase order. This has blinded him to the environment in which, the organisation he is working for operates.

· Every professional is becoming increasingly specialised in his sphere of activity. This blinds him to the realities of the business environments in which, the organisation operates. This necessitates the fixation of priorities for each individual top-down, thereby reducing effective management time.

· Professional thinking has turned into procedural manifests, dictated by a body of knowledge and practice called professionalism and out-of-the-box thinking is restricted to the Research units. Innovation is conspicuous by its absence and recognitions and rewards is based on compliance, rather than thought.

· Functional silos have also created the concept of “my area” and an organisation is turning into little kingdom, which has the clear mandate of defending itself from the accusations of the other kingdom.

· Focus has turned more towards “routing” an issue rather than solving it. It is considered an achievement that one functional silo is not responsible for creating a bottleneck in the process.

It is becoming more of an organisational issue to integrate thinking, even though the systems are integrated. This can come only on relooking at the way an organisation is structured functionally, rather than pushing thinking processes top down.

A different way to look at structures

An organisation is a function of resources working towards a common goal – to make money, providing adequate return on investment with a sustainable revenue model.

This definition, explained so candidly by Mr. Jeff Goldratt in the bestseller “The Goal” actually provides the guidelines for structuring an organisation.

An organisation is a function of three areas – Business Development (Making money), Business Sustenance (Providing Return on Investment) and Business Continuance (Sustainable revenue model).

Again the products of an organisation can also be fitted into the modes into which the organisation is being decided – development, sustenance and continuance. Fitting this to the BCG product matrix, a continuance product is a Cash Cow – a mature product with a good market share and low effort requirement in terms of capital investment and promotion, a sustenance product is a Star – a mature product with requirement of continuous investment to maintain the market share and the development product is a dog / question mark, where considerable efforts are required to be deployed to make the product more successful or consider strategic priorities to promote the product.

If an organisation becomes aware of this continuum, it can be very effectively extended to leadership styles. We have the Development CEO who focus only on the growth and development of the organisation, through new business ventures or products and expansion into new and currently non-existent markets. The Sustenance CEO focuses on the existing customers and strengthens relationships with them and builds on the strength of repeat businesses and strong customer relationships. He grows with his customers and develops the organisation around the requirements of his current, strong customers. The Continuance CEO is process driven and seeks to strengthen the existing processes and the foundations on which the business is built. This leader is interested in making sure that adequate systems and infrastructure are in place to ensure that the processes in the organisation are at maximum efficiency and the resources used in the organisation, at all levels, are utilised to their optimum capacity. There are certain leaders who are a combination of all three, like the legendary Jack Welch - He undertook development measures like outsourcing the back office to India, sustenance measures like selling off all companies that were not number one and number two and focusing only on his star performers and continuance measures like integrated systems and Six-Sigma. However, if we read into these measures, we will understand that he took it phase-by-phase. He played the role of the three CEOs, focused on one particular role at any point of time. The continuum in organisations require all leadership styles to be present at any point of time. The degrees of influence of each business viewpoint would vary.

How should an organisation be structured

An organisation should be structured based on the same continuum that is discussed in this article. Contrary to popular belief, even the sales team can be divided on these lines. Sales Managers have demonstrated, time and again, their affinity to take up challenges relating to new products, new markets or relationship oriented or simply being focused on the mechanism of conducting sales.

The following benefits ensue to an organisation due to this reorientation:

· People who are fitted into roles based on their aptitudes, instead of functions are more motivated and hence, increased productivity. Additionally, fitment would also not be an issue as the person responsible will easily grasp the requirements out of his job and the learning curve becomes very steep.

· People, at key areas, would become cross functional as they would be comfortable in building up their activities across functions, as long as all the functions speak the same language.

· Functions would disappear and “teams” would form enabling the importance being given to the correct issues at the correct time. For example, the person handling payments in a development organisation would react to change more quickly and would be more nimble than a person handling payments in a continuance division, where he would be more process driven.

· There would be a sense of purpose in direction efforts of the CEO and the Board of Directors, as the focus areas can be biased based on the current needs of the organisation.

· The cross-functional nature of the division creates focus teams for the organisation, who have thought leaders in the making to take the organisation through any economic vagaries, where the respective team would take charge.

Change management without upsetting the applecart

How can organisations get into this reorientation without upsetting the existing structures in place is part of the change management initiative of the CEO. However, there are some broad guidelines that can be implemented to smoothen this transition.

· A few thought leaders can form various teams in the organisation divided into development, sustenance and continuance. These teams should recommend projects and procedures to propel the organisation from their perspective.

· Reward processes should recognise the three areas, without any ambiguity or bias towards bottomline, thereby encouraging the sustenance and continuance efforts also.

· A highly focused cross functional strategy group should guide and monitor the activities of these teams and provide direction and support for their initiatives.

· These activities should form part of the performance evaluation of the person concerned and areas of improvement should be recommended towards the aptitude of the person.

· The CEO should be able to motivate all the teams equally, with constant reassurance of career progress and job satisfaction.

If organisations can wake up to this reality and start structuring their activities around these lines, there would be more real growth and more focused teams with really low attrition rates.

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Vaidyanathan Nateshan is heading Strategy in an upcoming Pharma company in India and can be contacted at vnateshan@hotmail.com.