This is because the work is becoming less transactional and more about complex problem-solving and creative work.
By Herman Singh, CEO of Future Advisory
Collaboration is now the primary driver of execution in corporations and between firms. This is because the work is becoming less transactional and more about complex problem-solving and creative work.
To succeed in either category, many people must work together. As a result, we are transitioning from a world of co-ordination or co-operation on transactional work, to one of deep collaboration on more complex work. This is an audacious task, given that the modern matrix organisation makes this task extremely difficult to complete.
A typical role in a matrix organisation could involve multiple bosses being a line and functional boss but also business unit heads and both regional and industry sector bosses. It’s instructive to track how the modern matrix organisation evolved, what it’s good for and why it’s here to stay.
All organisations are focussed on allocating responsibility and accountability to co-ordinate decision-making and resource allocation, which is the mechanism through which any firm executes its strategy. The modern organisation evolved from another global sector that for millennia needed structure to marshal and allocate resources optimally towards a common objective. This was the military. It is no coincidence, therefore, that the modern organisation was therefore set up along command-and-control lines and often by executives who were ex-military officers as well.
The command-and-control structures were split between the centre and then lines of functional or area specialisation with a highly hierarchical system to channel orders downstream and feed reports and updates back to the top. Efficiency of execution necessitated that all levels stayed in their lanes and followed instructions to the letter. So organisations had silos focused on finance, marketing, technology, and operations. This made sense in a world where best practice was well understood, and cause and effect were tightly coupled. There was low uncertainty and high stability in the business environment.
So the challenges of this structure became apparent as we noted the inability of the organisation to change market needs. It was an organisation that made sense when the mission was clear and well understood, but less optimal when neither was true. This pressure to move away from a purely hierarchical structure accelerated as markets started to fragment and firms diversified into multiple product lines.
This saw the emergence of the SBU or the strategic business unit in the 1970s, popularised by firms like GE. Firms then had two vectors to manage: function and business line. This was further complicated as the markets began to globalise thanks to the efforts of the World Trade Organization at global trade harmonisation.
This resulted in firms operating in multiple markets and countries – so-called multinational corporations – and the need for greater flexibility increased due to higher complexity in all aspects of the business. Suddenly one had three vectors to manage: function, business line and now region.
At a lower level, one also had the challenge of multiple products within a business and then a further complication with increased regulation and demand for oversight, and the need for even greater assurance as the ESG wave accelerated.
Enter the matrix organisation as the plaster placed across the highly fragmented operating environment. This meant that organisations had multiple C-suite officers overseeing business line, function, oversight and region. The objective of these structures was to harmonise and optimise the way that the firm operated by sharing good practice and best practices globally through shared centres of excellence. These were great intentions but very difficult to execute in an organisation that could easily range from a few thousand in a few countries to a few hundred thousand spread across over 200 countries with thousands of locations.
Customers then came to the fore in what was increasingly a buyers’ market and were looking to a new client-centric approach rather than the product-led one of the last few decades. Firms needed to integrate customer-centricity with product push. This led to an industry-centric silo with key account managers and even industry specialists, adding a further overlay of complexity to what was an increasingly chaotic environment. This meant that middle managers could easily end up with four to five reporting lines, some of which were solid and some dotted to complicate this situation even more.
To partially solve this problem, some firms adopted a federal model where the centre was small and focused on key shared services and functions, while the business lines to a large extent ran themselves. These firms effectively operated like a private equity firm at the centre.
These organisational quagmires were referred to as the firm’s operating model and looked great and simple on PowerPoint, but were a nightmare to operate in. To a large extent, they were trying to formalise the allocation of responsibility and accountability to co-ordinate decision-making and resource allocation.
Enter the digital age, and suddenly the stress fractures manifested due to several underlying causes. Good practice and best practice suddenly did not cut it anymore. The markets were fragmenting and localising too quickly, and what was previously optimal became deprecated very rapidly due to the advent of new technology. The matrix organisation, already under severe pressure, began to burn more and more energy to try to keep up.
The pressure to innovate rapidly and to explore both novel and emerging practice was growing, but neither of these could be executed within the legacy structure of the firm. It was clear that a new paradigm for a way of work was emerging. This called for greater collaboration between different divisions, functions, regions and the centre in order to operate in a more agile manner to respond to new strategic threats from tech giants, start-ups, black swan events and greater investor demands, and to attack new market opportunities arising from the digital tsunami swamping the world.
Collaboration is a new superpower in larger firms. Collaboration allows one to know more than they could on their own. Collaboration was only possible in an organisation where trust was embedded and firms provided psychological safety to all staff.
This presented a fundamental shift in the way professionals had previously operated. In the hierarchical, function-based model, the focus was on communication. There could be multiple and conflicting goals and agendas, often silo-based. Staff learn separately and share the lessons learned. Decision-making was based on agreeing to disagree. Accountability was held individually, and teams were operating with complete independence.
The matrix structure placed the emphasis on co-ordination. This meant that although there was one goal, there were still multiple agendas in silos. Learning was through delegation of tasks and sharing of knowledge developed individually. Decision-making was based on voting with a majority rule. Accountability remained at the individual level and teams in different parts of the organisations were partially interdependent.
The new emerging way of work places the emphasis on the collaboration in the third iteration of the organisation that is sometimes referred to as the Hive. In this new approach the learning emphasis is placed on joint knowledge generation, with common inquiry across teams.
Decision-making is now based on obtaining sufficient consensus through social negotiation or data-driven decision-making. The entire organisation is now operating with one goal and one agenda, with both formally and informally constituted cross-silo groups now carrying accountability and being completely interdependent. It is important to reiterate that a key element of collaboration effectiveness is trust, and that is an entire topic for a future article.
