Breaking down silos

The new horizontal organization meets the demands of today’s dynamic marketplace

Organizations have traditionally been structured vertically. The marketing function, the sales organization, the engineering department, and human resources: each operates in its own silo.

In today’s highly dynamic, just-in-time, on-demand marketplace, the best returns come to those organizations that tear down the silos and go horizontal. This doesn’t mean just turning the silos on their side. It means breaking through the walls of the silos and connecting the people inside in a dynamic way that improves process efficiency, as well as the delivery of services and products to customers and clients. It’s as dramatic a change as any for an organization, and presents some unique challenges to human resource managers.

The horizontal organization is one that faces outward. It maintains its focus on what it is delivering to its customers, as opposed to the vertical enterprise. In a vertical enterprise, employees get caught up in functional processes and hierarchies, and risk losing track of the customer.

Think of the challenges of providing an integrated service to a customer of a telephone or cable company. There’s the standard service, for the home phone or cable TV; but with digital technology expanding, the number of related and sometimes overlapping digital services has exploded.

Now the telecommunications company has the challenge of providing service to one customer across a wide expanse of technical and non-technical frontiers.

Billing inquiries, data services, technical enquiries about the quality of service, product feature enquiries: all of these needs could be even more complicated if, for example, the customer is both a resident and a small business operating out of the same address. The horizontal organization is able to link all of these functions across traditional boundaries into a service offering that appears seamless to the customer and generates a higher level of satisfaction and loyalty.

The move to horizontal structures is happening because customers, in both the private and public sectors, are demanding it. They want the organizations they deal with to be able to respond quickly and comprehensively to their changing requirements, and quick change is something that the vertical organization is rarely good at. If I am a customer of the cable company, and want to add digital TV, I want them to know who I am, what services they currently supply me with. I want them to integrate my billing, provide me with one number for support and give me a great pricing deal on the new package. Oh, and I want it ASAP.

Going horizontal

The question then is this: if it’s a requirement of today’s world — indeed, a demand from customers — that you transform into a horizontal organization, what’s the first step? How does an organization do it?

As with any transformation, the impetus comes from the top. An organization’s leader has to make a fundamental commitment to collaboration across the leadership level. Governance structures must be in place to reinforce collaboration. People have to be measured and rewarded in a way that reinforces collaboration. The organization’s entire value system has to shift. Forget about what’s done on the inside of the organization and focus on what’s delivered to the outside — to the customers.

The biggest problem for organizations moving from the silo to the horizontal is getting stuck in the middle. Leadership may pay lip service to a horizontal enterprise that values collaboration and working across disciplines, but if all staff performance measures or career development opportunities are vertical, and the only way to move up in the organization is to show loyalty to your immediate boss, then the organization will remain stuck on a vertical plane.

Moving to a horizontal model is a significant cultural shift and requires the development of different skills, different working styles and different measurement systems. A critical need is to develop better ways of recognizing and rewarding teams by focusing on the measurement of outputs. People still have to be measured individually but they have to be measured against criteria that support the move to horizontal collaboration.

Measurement can’t be pulling against gravity. Make sure people are not being pulled away from the goal by metrics that aren’t focused on the real objective.

HR also needs to revamp traditional career development and management programs to ensure 360-degree input and broad consideration of cross-silo career options.

Creating these cross-functional groups is where the HR professional’s resource management skills are tested. In a horizontal environment, many resources might be pooled. From that pool, employees are assigned because their skills are matched to specific project needs. Staff move away from having one boss who owns and controls them. They become responsible to the project owner or customer — to the goal of delivering excellence. This flexibility allows an organization to adapt as needed. It breaks down those verticals.

The purpose of building cross-functional groups is to tackle a problem or exploit an opportunity by bringing people with different areas of expertise to the table. These groups can be virtual. People may be in different areas but share something, like a technical expertise or project management skills. A specific mandate brings together a virtual team, enabled through technology. They are together for a period of time, and when their mission is achieved they are disbanded.

Accountability

When an organization starts working horizontally, attention needs to be paid to governance and accountability. The traditional vertical organization knows who approves, who is responsible, and who is held to account for success and failure. It’s not so clear in the horizontal organization, but it needs to be. Some companies are recognizing this with process owners: individuals who are responsible for a whole process as it cuts across traditional organization boundaries.

Traditional vertical organizations have typically designed jobs to be very specific and narrow. As the organization begins to think and act horizontally, it must start using broader definitions of roles that allow more flexibility for people to move, adapt and develop. It adds value to human capital, which after all is said and done, is the only resource an organization possesses that actually increases in value with use.

Building a horizontal world is immensely complex. It requires dedicated attention that is not the automatic methodology of command and control. It requires great clarity in the definition of roles, responsibilities and performance measurements. And to make it just a bit more complicated, a horizontal organization doesn’t stop at the organization’s traditional boundaries.

Organizations work in extended networks today. Within that network, an organization needs to focus on its core competency — on what differentiates it. Then it needs to rely on others in a virtual horizontal network. That adds to the challenge, but where the challenge is met is where the opportunities lie. The returns are worth it.

Barbara Crawford-Cook is a Toronto-based managing consultant with IBM Business Consulting Services (Canada). She can be reached at [email protected]. Mike Applin is a Toronto-based partner with IBM Business Consulting Services (Canada). he can be reached at [email protected].




The need for speed

In an international survey of more than 450 CEOs recently conducted by IBM Business Consulting Services, only 13 per cent of CEOs rated their organizations as good at responding to changing business conditions. Only 10 per cent rated their organizations as good at responding to external forces.
An organization’s ability to quickly adapt to external forces, the survey concluded, was one of the most important challenges faced by leading CEOs.

That suggests that the organization that can respond quickly to a dynamic marketplace will have an advantage over up to 90 per cent of the rest of the market. The way to become more responsive, and to achieve that advantage, is to work horizontally to improve time to market and radically increase service levels.

In the CEO survey, more than 60 per cent said they need to do a better job capturing and understanding customer information rapidly to make swift business decisions. Almost 60 per cent pointed to the ability to respond to customer dynamics in real-time. More than 50 per cent predict greater customization of products by specific customer segments, with most CEOs focusing on significantly increasing customer input on the development of new and better products.

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