Organizing for value
These simple statements are profound since I saw this issue throughout my career. Part of being a successful manger in a large corporation was how to “hide” (we called it protecting)certain projects to keep them going and avoid the tough decisions. These actions often led to inefficient resourcing of the critical projects needed to meet both the long and short term goals. As this excerpt implies, our organizational structures often encouraged this activity.
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• When large companies are organized in the traditional division structure, strategic decisions too often fall to managers under pressure to meet budgetary demands. Success in one unit masks underperformance in others, while ventures that promise strong future growth go underfunded because they don’t contribute to short-term bottom-line numbers.
• One way to shake things up is to review the strategy and performance-management processes and to make decisions at the more granular level of value cells. Value cells are smaller units (20-50 for a large company) that represent the economics of the individual, simple businesses that any company is built of, such as customer segments, product groups, geographic markets, and new technologies.
• By emphasizing these value cells rather than aggregated bottom-line division numbers, this approach sheds light on which activities should be the target of additional investment—and which should be divested entirely. Changing managers’ roles won’t be easy, but in the long run, it will be worth it.
