Overcoming challenges in an underperforming economy require businesses to take tougher measures for continued growth and performance. Larger multi business unit organizations however face more formidable challenges when adopting such measures or targeting transformation. Any large FMCG or other business organization with multiple business units, will have such units seeking to maximize their own profit and loss statements. To keep up with competition, their business unit heads will want to target significant investments in innovation and seek new markets for growth.
However the problem with larger multi business unit organizations is that they are not ready to abandon their decentralized operating model, which allows business unit leaders to establish their own cultures and undertake their own business decisions. In most cases such an approach results in business unit leaders making independent decisions that are then either copied in part or in total based on their results within the rest of the business units without their relevance or applicability. Decisions for transformations unit by unit are mostly unlikely to work.
Companies can achieve cohesion among decentralized business units and transform their culture - but only if their business unit leaders take time to identify and commit to a common cultural goal and then set minimum standards for how each business unit will achieve it. That involves asking what is the business unit expected to change, how will it change, and who is responsible at that level? More importantly such cohesion needs to be driven from the very top i.e.at the board level with identified KPI and targets.
The companies that adopt such cohesion directed at the board level may realize quicker decision making, greater operational agility, and stronger buy-in and engagement from their teams thus usually resulting in better overall performance.
During the last few years many management experts have focused on the ideal process and strategy for business transformation. Majority of such research shows that effective business transformations are more likely to succeed when the proposed culture change is in line with the company’s overarching strategy and value creation goals. However, in practice this is difficult to achieve. Even when there is an alignment when it comes to overall business strategy there are still diverse goals within internal business units which make any transformation initiative more challenging. Product teams may not necessarily be aligned with sales teams as focus of product teams is towards bringing about continuous improvement through improved control processes whereas sales is driven by market trends and customer behaviors. As such the product team would therefore be internally focused in contrast with sales which is externally focused. Overall alignment would therefore not be achieved if such teams work with varying targets and different objectives. This would also challenge any attempt towards bringing active business transformation both in terms of timelines and strategy.
In such instances the transformation strategy requires business units or departmental leaders to identify common and overarching board objectives in the context of how they create value for the whole organization (not specific business units or departments) and based on that outline a step by step approach towards effective implementation of the transformation strategy.
At times a major challenge is how to identify and define board level objectives for the organization as strategy development doesn’t necessarily drive input from the top only. Put simply, such objectives can only be effectively identified through data and debate. Business unit heads can use surveys and feedback to gather insights from their managers and employees in the business units about perceived sources of competitive advantage. Organizations can internally conduct workshops, focus groups, and other forums for debating and getting insights to both product and market trends and requirements. The time required to gather such feedback and data and use the same to outline an overall suggested strategy document will depend on organization and sector specific factors, but eventually, an overall comprehensive and cohesive business transformation strategy recommendation should emerge from such analysis.
Continued internal feedback and assessment through such exercises are also extremely helpful for business unit heads or departmental leaders to be able to draw explicit connections between their day to day work and the organization’s broader strategic objectives.
As such for the board to develop and approve the organization’s broader strategic objectives and based on the same outline a business transformation strategy it needs to ensure that it is backed with critical and achievable targets. It is based on these targets on which business unit heads or departmental leaders need to commit to KPIs that are directly linked to the achievement of such board objectives, as well as the desired management practices or behaviors.
The biggest challenge however remains in the effectiveness of any business transformation strategy through a centralized approach given the varying objectives and independence of various business units and their leaders. The central team managing the cultural transformation may be viewed as doing something to the business units rather than with them. There effectively then may be no buy in at the level of business units thereby resulting in failure of the strategy regardless of it being approved or directed from the board. Having a common aspirations and business objectives through a down up approach is therefore the touchstone that can mitigate some discomfort and miscommunication. As such an effective transformational strategy even though outlined through a centralized functional approach needs letting the business unit heads and departmental leaders retain ownership and accountability for what’s changing, how it will happen, and who is responsible.
Business transformation isn’t really possible without effective cultural change within any organization. This requires change of behaviors and mindsets for any such strategy to be effective. To transform the organization, companies should consider identifying the discrete day to day individual behaviors that need to change. Whereas individual independence is necessary but business unit heads need to be more collaborative in their decision making and provide more incentives to their teams also to share knowledge and work across silos. It is only then that a shared approach towards achieving critical objectives may be developed and achieved.
Strategy and transformation is not a science. Each business has its unique requirements and every organization both culturally and resource wise has different variables. As such no one intervention or approach will fit the bill. Companies can, however, utilize established change management principles when developing and implementing a transformation strategy in some combination, to shift individual mindsets and behaviors relevant to the business aspirations and objectives. Such principles include identifying and mirroring success stories both internal and external, taking ownership of the process through both assignment of roles and responsibilities as well as regular progress monitoring and most importantly organizational capacity building and development. Each business unit can be responsible for creating and implementing such principles but they need to outline their strategy on how and when to initiate them.
When it comes to identifying success stories for instance, the key business leaders must be encouraged to lead initiatives associated with achieving the most critical business objectives which would help reflect success to other departments or business units within the organization. This would not only act as a motivating factor but also encourage collaboration and break down organizational silos. To create greater understanding and conviction, business unit heads or departmental leaders could define and use KPIs that are directly linked to the business transformation objectives, and senior management could find
ways to communicate early and often about the overarching change story and how various business units are playing their parts.
When it comes to capacity development and capabilities key business unit leaders must identify critical skills needed to, achieve key business or growth objectives such as lead the market in innovation. They could then develop such strategies that could be applied to achieve certain identified milestones, depending on roles, responsibilities, locations, and so on.
Most importantly the business transformation strategy needs both ownership and oversight from the Board. This can be most effective if there is a central transformation role, such as head of strategy or Chief Transformation Officer (CTO), who can be effectively empowered and tasked for the transformation effort. The overall role has to be very interactive to the extent that the Head of Strategy or the CTO should schedule regular meetings with the business unit heads and departmental leaders throughout the process and agree upon progress milestones, KPIs and most importantly resource management. As such business unit heads of departmental leaders need to give updates on critical decisions, progress on goals, or emerging concerns. These updates will give the Head of Strategy or CTO greater line of sight into what various business units are doing and whether there is information that might be relevant across the organization.
Business transformation requires departmental cohesion and a shared approach towards achieving organizational objectives. Such meetings can therefore provide the right forum through which the Head of Strategy or CTO can understand and guide on business unit leaders’ transformation plans ensuring that they are comprehensive, ambitious, and properly resourced. They can also provide a platform for business unit heads and departmental leaders to discuss KPIs and other organizational metrics, which should be collected and assessed regularly. Doing so will encourage the business units to be transparent about their performance and accountable to the other business units.
Success in the business transformation process is achieved through a clear understanding of both business unit heads and departmental leaders of who is responsible for which initiatives and who will monitor and update on the progress. As such that is why the central role of CTO or Head of Strategy for such monitoring on behalf of the Board is so critical.
Most organizations face the most difficult task of organizational alignment due their heavily siloed structure. There’s no reason a heavily siloed organization determined to run its transformation in a decentralized way can’t achieve success. However, it is critical for the board and the strategy team leaders to work closely with the business leaders to manage the diversified business unit objectives to be aligned with the overall business transformation objectives and goals.
The writer is a staff member