Making
collaboration across functions a reality
Fast-changing
global markets put a premium on simplifying processes radically and breaking
through silos.
Companies have long
struggled to break down
silos and boost cross-functional collaboration—but the challenge is getting
more acute. The speed of market change requires a more rapid adaptation of
products and services, while customers increasingly expect an organization to
present them with a single face. Even well-established multinationals routinely
fail to manage operations end to end.The result: interactions with customers are sluggish; complex,
customized products are hard to create on time and on budget; and blocked lines
of communication make new sales and distribution channels difficult to
navigate.
The basic principles for improving performance—imposing
stretch targets from the center, empowering cross-functional teams,
standardizing processes, tightening up execution—are mostly familiar. But
making these things happen is a different matter. In many companies, ownership
of processes and information is fragmented and zealously guarded, roles are
designed around parochial requirements, and the resulting internal complexity
hinders sorely needed cross-business collaboration. What’s more, in our
experience, companies that apply traditional solutions (such as lean and
business-process reengineering) either exhaust their managers with efforts to
rework every process across business units or, by contrast, focus too
narrowly within functions.
Our observations of 25 companies in a wide range of
industries in Europe, Asia, and North America have led us to conclude that
perspiration is as important as inspiration in addressing these challenges.
Here’s the story of how two companies launched new approaches successfully. One
needed to focus narrowly to fix a critical process that compromised its core
business. The other, swamped by the complexity of its processes, required a
broad-based transformation.
Resetting
targets
Executives at a communications-services company were
initially puzzled by feedback showing that only 65 percent of its customers got
a working connection when they first attempted to use a new premium fiber-optic
product. After all, the functions responsible for the various parts of the
process—the sales, back-office, operations, and logistics teams—had received
scores of more than 90 percent in an earlier survey to assess their ability to
“get things right first time.”
On closer inspection, executives discovered that field
engineers, under pressure to meet new orders, had cut down on the time they
spent with customers during installation, prompting a flood of requests for
help to call centers. Back-office staff, meanwhile, were struggling to cope
with incomplete and often incorrect orders submitted by the sales team. More
fundamentally, collaboration was weak and incentives were misaligned. Sales and
marketing, for example, rarely discussed how they could work with field
engineers (or vice versa) to address problems. Meeting the needs of customers
wasn’t included in individual or functional performance targets.
The company responded by setting several breakthrough
targets aimed at uniting different teams and pushing them beyond their usual
work practices and patterns. One target, for the sales and field-engineering
teams, was to halve the number of requests for help to the call center
following new installations.
At the same time, the company established new
cross-functional teams charged with controlling the installation process from
initial order to after-sales service. As a result, teams that traditionally had
separate workflows and little shared responsibility were forced out of their
comfort zones. The cross-functional representatives convened every week to
review how well they did on a set of cross-functional key performance
indicators and to generate further ideas for improvement. These meetings
provided an opportunity to choose the high-payoff areas for execution—it was
clear, for instance, that engineers should spend additional time in the field
educating customers (at their premises) about successful connection procedures.
Senior leaders reinforced accountability by assigning a strong manager to
coordinate the process end to end.
The impact of this cross-functional collaboration has
been tangible: first-time-right delivery has increased to over 80 percent (from
65 percent), customer satisfaction is up, and the number of requests for help
to the call center during the first six weeks after installation dropped by
one-third, with a commensurate reduction in costs. The leadership concluded
that focusing on the way a single process broke down across functions, rather
than following the initial impulse to have each of them address a range of
process issues, generated a better solution, with far less stress on management
resources.
Rethinking
processes and roles
After steady performance declines in key business areas,
the reconstituted board and new CEO of a global industrial company realized
that internal complexity was hampering its reputation for innovation. Sixty
businesses, each with its own P&L, often devised or maintained their own
fairly similar processes, sometimes even lauded internally as marks of
innovation. “We were like the UN without translators,” one executive noted,
“with different language and terminology describing nearly every process.” In
one division, half of the job titles in a commercial function were unique to a
single person, making it hard to share information and thwarting potential
economies of scale and the transfer of skills across businesses units.
Different ones often swarmed clients with different and uncoordinated
approaches; for example, each sales team pursued customers with separate
promotional materials and financing arrangements. Atomized processes led to
fragmented IT architectures, which allowed only a limited sharing of production
or customer data.
The company’s leaders concluded that squeezing marginal
improvements out of thousands of processes wouldn’t achieve their goals. Their
response was to launch a multiyear business transformation built on two levels
of a tightly specified architecture. One was bottom-up, grounded in an
end-to-end view of markets and customers, the other a top-down redesign of the
company’s operating model.
Rewiring
expectations
The company started by identifying a few hundred
combinations of global businesses and local markets: matrix-like operational
units known as business-market combinations. The executives in charge of each
of them co-owned P&Ls and had free rein to overturn conventional ways of
working and forge cross-functional and cross-business combinations. They also
set stretch goals that no individual function or business could meet on its
own. These included achieving a number-one market position, reaching new
segments in emerging markets, embracing new business models, and opening new
sales channels.
A group of transformation leaders was created to fight
cultural resistance and help connect teams end to end. Monthly reviews by top
executives tagged lagging business-market combinations requiring extra
attention. One of the business units in need of change manufactured lower-tech
products. It had long operated in an oligopoly market with high margins and
sluggish multiyear technology cycles but now faced threats both from chip-based
offerings with six-month technology churns and from more efficient competitors,
some in China, offering better-priced products.
A business-market combination took the lead in
redesigning its value chain end to end. Early on, it agreed to move new
products from sourcing to retail shelves in 50 days rather than the usual lead
time of up to 300 days. This radical shift in tempo forced the company to plan
more collaboratively with retailers, to introduce platform-based product
designs that encouraged input across business units, and to redesign regional
supply chains to keep pace with the changing components.
Within 18 months, this business-market combination
turned around its performance—from heavy losses to a number-one market
position, with healthy margins. Company leaders noted that few of the changes
were fundamentally new in concept; it was the mind-set and behavioral shifts
that had enabled broader collaboration and made the real difference. They also
concluded that they could accelerate cultural change by investing in leadership
capabilities rooted in transparency and regular feedback. This overcame the
impulse of many managers to sidestep any changes that might lead to conflict.
Revolutionizing
processes
Without more standardized processes, however, the
innumerable variations in operating models across the company’s many businesses
and geographical markets would hamper collaboration between the new
cross-functional and cross-business teams. This would continue to stymie
innovation, constrain cross-business sales, frustrate efforts to achieve scale
economies in IT, and inhibit the sharing of information and skills. Team
leaders, including some of those initially most skeptical about change, had a
year to simplify processes. They began by defining seven value chains that
created and delivered value to customers in truly distinctive ways. These value
chains served as the operational platforms for manufactured products, large
projects, two distinct software business models, and three broadly different
service businesses. By identifying what really mattered to customers, the
company consolidated more than 80 value-chain designations.
For each designation, the team leaders identified
cross-business processes across the company that were truly distinctive,
typically about 10 percent of the total. They allowed variations only in
processes that were needed to serve specific customer segments or to satisfy
regulatory requirements. The hundreds of others were slotted into standardized
process templates that could be supported by readily available IT. A new and
relatively concise process lexicon replaced a massively complex compendium that hindered cooperation—for
example, by including dozens of business-planning definitions that prevented
units from sharing forecasts. Standardization also led to vastly simplified
roles (reducing them to just a handful of roles for each function), as well as
to shared performance metrics and capability frameworks.
The changes have had a striking impact on the company’s
morale, ways of working, and performance. Multiple sales teams in a region, for
instance, with a transparent view into each others’ order books, can now negotiate
deals collaboratively with customers across a range of products. The greater
transparency has enabled health-services businesses in one part of the group to
learn from the large-project capabilities of manufacturing-oriented units.
Consumer-products businesses have been able to share speed-to-market insights
with other units. In IT, a consolidation of approaches to enterprise resource
planning has expanded opportunities to share data and develop more robust
analytics. Meanwhile, to remain agile, functional teams from different units
coalesce and disband as demand and business conditions shift.
As in most transformations, pockets of resistance took
time to unblock. In one business, sales managers pushed back when asked to open
their book of potential clients to colleagues in other units, arguing that
critical intelligence would leak to competitors. In reality, core competitive
information was well protected, and when the list was opened, several business
lines came together to win a big contract to serve a major new customer. By
making senior managers owners of simplified process repositories, the company
hopes to keep complexity from creeping back at the grass roots.
Overall, however, the leaders have been struck by how
cultural change takes hold once proof of the gains from transparency and
collaboration become tangible. They point particularly to the way functional
“ambassadors” outlined the benefits of standardization, so that a multitude of
variations on a commercial process for forecasting sales and managing leads
could be replaced by just one. These ambassadors, with their strong knowledge
of how to standardize processes, have taken on a second mandate: collaborating
with peers from other functions to link processes end to end. New measures of
accountability, and end-to-end performance targets (for functional leaders)
tied to them, have served to bring teams together.
While markets remain fluid and organizational change is
hard, executives across a wide range of companies and industries must expect silos
to continue obstructing joint action among functions. But they can head off the
problem before it overwhelms them if they establish the kind of targets,
end-to-end accountability, process standardization, and execution-oriented,
collaborative culture the two companies described here did.
About the Authors
Ruben Schaubroeck is a principal in
McKinsey’s Antwerp office; Rob Theunissen is a principal in
the Amsterdam office, where Felicita Holsztejn Tarczewski is
an associate principal.
http://www.mckinsey.com/business-functions/organization/our-insights/making-collaboration-across-functions-a-reality?cid=orgfuture-eml-alt-mkq-mck-oth-1603
No comments:
Post a Comment