Sunday, July 6, 2014

Can an Organisation be Too Big?

In a 2009 article by Julian Birkinshaw and Suzanne Heywood they highlighted how “too big to fail, became the mantra during the recent economic crisis. As markets and public confidence plunged, political and financial leaders agreed to pump billions of taxpayer dollars into major financial institutions, insurance and auto companies, keeping them on life support until someone could figure out how to save them for the long term. But does it make sense to bring these giants back to life if the underlying illness isn't cured? What if, in addition to being ‘too big to fail,’ some of these companies were also too big to manage?”
The problem with large organisations is that the vision and standards of the CEO, however strong they may be, can be diluted and changed as you progress down the organisation structure into politically managed silos that have created their own ‘environment’ to work in – where some of these environments can be highly functional and others highly dysfunctional.
In fact one of the most common phrases that you’ll hear in many large corporates is the word ‘dysfunctional’ where as Birkinshaw and Heywood highlight the name gives it away. “This type of complexity is simply bad. It makes work more difficult and doesn't create value, nor does it mitigate risks. Our research suggests that dysfunctional complexity creeps into a company over years through the perpetuation of practices that are no longer relevant, through the duplication of activities due to mergers or reorganizations, and through ambiguous or conflicting responsibilities.”
As organisations expand above the 1 billion pound or dollar mark there seems to be some tacit agreement amongst researchers that performance actually declines at the employee level and forms of dysfunction are easily spotted within parts of the organization as managers, especially over-promoted managers, create their own power silos through clever posturing within their reporting ranks.
These silos create the dysfunctional environments that breeds demotivation, lack of innovative thought and under performance. And these large corporates can be compared to large government structures, where individual managers create their own ‘nests’ to look after their own self-interest, often at the expense of the organisation’s overall strategy and vision. 
As Birkinshaw and Heywood suggest, “getting rid of complexity can be difficult. Executives can disagree, for example, about the root causes of dysfunction. For some companies, consensus-based decision-making may be seen as a defining strength, and so worth the extra time and effort. Other companies may just find the process slow and unwieldy and prefer having fewer people involved. The time and effort involved in figuring out what is dysfunctional and what is designed complexity also may simply outweigh the benefits. The size of the prize has to be substantial before you put your employees through a major restructuring.”
Another classic behavioural trait in a large corporate (as well as other sized organisations) is that the best people want to share their ideas and have them listened to. However, a lot of companies have a vision/strategy which they are trying to execute against and often find opposing voices to this strategy as an annoyance and a sign that someone’s not a ‘team player.’ If all the best people are leaving and disagreeing with the strategy, you’re left with a bunch of ‘yes’ people saying the same things to each other. Leaders have got to be able to listen to others’ points of view, always incorporating the best parts of these new suggestions.
It’s within these weird, large corporate environments that really good potential future leaders can be found, but they turn out to be people who never get the chance to raise their head above the parapet, as the current leadership is all too well aware of the danger a good, passionate leader could have on their cozy environment.
So be wary of the super large corporate structure and be prepared to learn new behavioural skills to survive in this often toxic political environment where ‘who you know and who you suck up too’ can be more important than your skills, experience and day to day performance.
Birkinshaw, J. and Heywood, S. (2009). The Wall Street Journal. 26th October.

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