Download the accompanying webinar recording here: http://optin.matrixmanagementinstitute.com/cross-functional-warfare-webinar
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Does your Quality function believe it’s more important than Customer Service? Do your areas compete for the limited resources to get their goals met? Are the silos between your functions wider than the Grand Canyon?
In this second webinar in our summer series, Jason Myers, our Chief Marketing Officer, offers insight into the real causes behind a common matrix challenge – cooperating across functions. Jason will share a case study of how this shows up and effects an organization and will offer new rules for operating that can help you eliminate the silos and improve cooperation and collaboration across functional areas.
You'll Learn:
Why competition in a team does not work
How the operating system is a root cause of this challenge
How this problem negatively effects the organization and it’s individuals
The new rules for ending the warfare
Today we're going to talk about a ubiquitous problem – conflict between company functions. And when it escalates, it can be all out cross-functional warfare.
It might show up like two leaders facing off against each other for resources. They fight for power. They fight for reward, and they fight to come out on top.
In a less aggressive scenarios, they may simply refuse to share resources, or information. But when push comes to shove, They blame the other areas for their problems.
Whether they fight aggressively or passive-aggressively, it’s all behavior that is harmful to the organization as a whole and the teams and individuals affected by it.
Today we are going to talk about why this warfare exists, -c- what effect it has on the organization and –c- what you can do to stop it.
Cross functional Warfare is a symptom that you’re operating in a competitive environment. Consider this: why is it that wars break out between nations in the first place? Religion and real estate, right? At it’s core, it’s always because One of them wants something the other has. This same dynamic is true in modern organizations.
Now, we’ve all been taught that competition is a good thing, and there certainly are instances where it does produce good results. Individual athletes compete against each other and each becomes better. But notice how that changes when we look at competition within a team, a sports team for example.
If those of you that have played team sports in the past, like basketball or football, what is your perception of a showboater? Why do you think that the players all give credit to the team in the post interviews?
But even worse, what if the players on a basketball or football team competed with each other? Usually when that happens, they lose. Team mates get angry. Cohesiveness is gone.
So, competition between two teams can be useful, but competition within a team is not…
…and an organization is a team. Competition within an organization is destructive. When an organization competes internally, it loses. What does it lose? –c- It loses its ability to optimize. It loses its ability to achieve its strategic goals.
We tend to think of this idea that internal competition that may or may not escalate to warfare is a result of individual leaders who simply just can’t get along. But the issue is deeper than that.
Let me tell you a story about a client we worked with – I’ll call this company HAL to protect the guilty. One of the divisions of HAL called us after the company had undergone a massive restructure.
Let's say this HAL company is a global publisher of educational materials. Traditionally they were in the textbook business but they have been slowly expanding into other electronic learning products. They produce these learning materials - print or electronic for K through 12 and for the college market.
Before the restructure, each market segment – elementary, high school, college and electronic had its own vertical. Included in that vertical was product research and development, product marketing, sales, service and production, as well as the support functions like HR, IT, etc. These vertical market segment areas had their own P&L's and so they acted like mini-companies.
There was some cooperation within the vertical, but each vertical competed with the other verticals that they were in competition with. Elementary competed with High School. High school with college. Print competed with Electronic, etc.
The senior leaders at HAL knew they had problems and they felt the most important issues facing the company before they decided to restructure were as follows:
First, the customer experienced each business unit as a separate company, and so it was like they were dealing with 6 different companies (three textbook and 3 electronic). Six different sales people might potentially call on a single customer and none of them knew what the other was selling.
Second, the business units competed with each other and because textbooks were still the top earner for the company, it got most of the budgeted resources and the electronic product groups, who are the future for the company, were struggling.
Third, they felt they were missing out on economies of scale by having 6 business units and no significant central functions.
Fourth, the regional focus was all on the US and so their European and Asian businesses were struggling. In addition, most of the content they produced had a US bias.
And so, the senior leaders and the Board of Directors decided that the answer to these problems was to restructure. They centralized a number of functions including HR, IT, Marketing and Sales. In Sales, they moved all of the sales people into one central function and that function was then broken up in geographies – -c- North America, -c- Europe, -c- Asia, etc.
Now let's keep in mind that when the sales people reported into the market segment business units, everyone in the business unit cooperated. Competition however did exist between the business units.
As they moved into a centralized structure, these groups stopped cooperating with one another. The centralized units like Sales or Marketing or IT started competing with the decentralized groups like High School Electronic Programs.
Warfare also broke out between centralized groups such as Sales and Marketing. Why?
Why do people who know each other well and have worked together for years suddenly start competing with each other? Do they suddenly dislike their prior co-workers?
The cause of inter-silo warfare doesn't lie with the individuals involved. These individuals were capable of cooperating before the restructure and so they are capable of cooperating after it.
As Dr. Deming used to say about quality problems back in the 90's, "It's the system, stupid." –c- The cause of internal competition is the management operating system being used to run the organization. The operating system that the HAL organization used is called –c- Vertical Management 1.0 but we can simply refer to it as the –c- Hierarchical operating system, and I’m sure most of you know it well.
Before we talk about how this system leads to cross-functional warfare - let's explore some characteristics of this operating systems and the devastation it leaves in its wake.
This Hierarchical operating system is focused on the verticals -c- – the functions, the departments, the business units. Goals are set for each vertical area. Budgets are allocated to vertical units. Leaders of these areas are accountability to achieve their goals within their budgets. They are evaluated and rewarded based on whether they achieve those goals and live within their budgets.
In addition, the primary relationship in the organization is between the boss and his or her direct reports. Assignments are delegated through this relationship. Performance is reviewed through this relationship.
I think you get the picture. You must have worked in an organization at some point that used this operating system.
So what effect does this operating system have on an organization?
First, each vertical area becomes a sort of silo. –c- Each area seeks to optimize itself – be the best it can be. It has its own goals, its own mission. In the HAL company, the new vertical even started creating their own logos, as if they were separate companies.
When each area tries to optimize itself, competition ensues.
It also has the effect of cutting off interconnections that should exist between each vertical and the rest of the organization.
So, why is this a problem?
Because the processes that serve the customer are cross-functional or what we call horizontal. They cut across the whole organization.
Why? Why did all of these people who had worked together before and who were doing basically the same jobs as before have no much trouble reintegrating the cross-functional processes so the organization could be successful? It wasn’t because they didn’t care.
Let's look at HAL. HAL's operating process starts with a new idea for an educational product.
The outputs of that sub-process go into development, and then into product marketing and production. From there into sales and then into customer service. This is one continuous process or it should be if it wasn't dammed up by silos.
Think of the silos as dams in a river that should be flowing smoothly downstream.
The dams occur where the hand-offs from internal suppliers to internal customers are severed and this happens when the two parties are competing with each other. This delays or stops the process altogether.
Damming up the flow affects the organization's ability to implement strategy. In our HAL example, the organization came to a standstill for almost two years while people tried to reconnect the parts of the cross-functional processes that had been ripped apart. The flow of the river declined to almost a trickle. Market share dropped. People left. It was a disaster.
Why? Why did all of these people who had worked together before and who were doing basically the same jobs as before have no much trouble reintegrating the cross-functional processes so the organization could be successful? It wasn’t because they didn’t care.
Before we talk about why this happened, let's look at the effect this had on the individuals and teams involved – the people who were caught in the cross-hairs.
Product leaders, for example, were at a loss as to how to meet their targets when half their team no longer reported to them. In addition, product leaders started battling each other for who would get the most resources from the centralized sales group.
They fought over who would get the development resources, who were in a different silo within their own business group.
Electronic products fought with paper products group.
Why? Was it just that the people above them were at war, and because they are part of their army, they ended up fighting with the enemy?
-c- And how does this all affect individuals? Particularly the individuals trying to get something produced? The person whose job it is to actually get the work done?
Well, it sucks, frankly. They are weighed down by inter-silo warfare that gets in the way of the relationships they need to be successful.
It creates extra work to coordinate with other groups. It takes time to go up the chain to get decisions that could have been made at lower levels.
It is demoralizing and stressful.
The people at the top who are playing this game might be enjoying it, but the rest of the organization is not. The rest of the organization suffers.
So, let's come back to the cause. It's the system – the operating system that an organization is using and the one most organizations use has competition and warfare built right into it.
Let's explore the old operating system a bit more. In the HAL company, like most other organizations, strategy is deployed down through the vertical hierarchy. Sales has its goals. Product development has its goals. Marketing has its goals. This is Rule 1 to cross-functional warfare.
Rule 2 is to make each functional leader accountable for only what happens in his function - for only fulfilling his goals. This lines everyone up in the function to focus on what's important to the function or business unit and not to anything else.
Rule 3 is to set up governance within the vertical units. This is typically done through staff meetings where decisions are made within the function.
Rule 4 is to prioritize work within the function, in line with functional goals. Sales is optimized. Marketing is optimized. Product development is optimized.
And Rule 5 is to create a performance management and reward system that recognizes people for filling their functional goals.
Follow these simple steps and voila, you have competition and possibly warfare.
When we work with clients, we like to do simulations of this system, so that leaders can experience the dysfunction that ensues. Reasonable, intelligent, well-meaning leaders start to play the game, based on the rules just described, and they immediately begin to compete with one another.
So, the rules of the game that most organizations are playing by are ones that lead to cross-functional warfare. Those rules are designed to optimize each individual area and let the leader of that area do whatever he or she wants in order to reach the goals of the area.
Then senior leaders are surprised that functions or business units aren't working together so what do they do?
Do they change the rules of the game? No. They restructure.
They replace one set of silos for another set.
You have to stop restructuring to try and solve this problem. This isn't a structure issue. It's an operating system issue.
Let's look at what an operating system that breaks this cycle looks like.
New rule #1, deploy strategy down through cross-functional steering councils who have accountability to oversee a horizontal segment of the organization. In the case of HAL, we helped them set up a steering council that consisted of basically the people who used to be in the old business unit.
You see, it doesn't matter where people report, what matters is where you govern. Right now, most of you are probably doing governance within the vertical dimension - in the silos - where goals and priorities are set and decisions made.
This needs to shift –c- into the horizontal dimension - the cross-functional dimension - so that governance happens by a team consisting of the key stakeholders of that segment of the business.
Rule #2. Use a matrix accountability system in which a person’s first accountability is to the organization as a whole - we call this organizational accountability and then –c- to their teams. In our HAL example, everyone on the new steering council had team accountability to ensure the success of that cross-functional part of the business. This took precedence over any functional accountability they had.
Cross-functional steering councils coupled with matrix accountability is the power that busts down the dams and lets the water flow without interruption to the customer. And it helps to employ Rule #3.
Rule #3 – prioritize cross-functionally, within the horizontal steering councils. Prioritization across the organization is key to breaking down the silos and ending the competition. Cross-functional prioritization puts everyone on the same page.
When the organization is run in a cooperative manner, with cross-functional processes streamlined and integrated, -c- people can focus on the work, not on the politics. They are more productive. They are happier. They don't jump ship so easily because it's rare to find an organization that operates this way.
It's not enough to exhort people to work together if the rules you have in place reward them for doing just the opposite. And by reward I don't just mean compensation. Reward is anything that is the path of least resistance. If I'm accountable for getting something done, I'm going to take the easiest path to that goal. What you have to do is make the easiest path one that is based on people working together, people cooperating.
Cooperation needs to be the bedrock of an organization if you want to optimize it and successfully achieve your strategic goals. You don't get cooperation just by imploring people to do it. You have to set up the system so they HAVE to cooperate. That by cooperating they succeed. And you have to train them in some new skills, because in the horizontal dimension, the cross-functional dimension we have been talking about, there is no hierarchy. That means there are no authority relationships. Leaders have to learn to lead without authority, otherwise they won't be successful in an organization driven by cooperation.
What we do at MMI is help organizations make this transformation, from vertically focused to cross-functionally focused, from competition to cooperation. We do this through a variety of programs that are targeted specifically at where you are on the spectrum of vertical to horizontal and where you want to progress to. Our master consultants have been doing this for 25 years, with companies in every sector and in every part of the world. If you could use some help, in becoming more peaceful and more productive, we’d love to talk to you.
I would now like to open up the floor to questions. If anyone has questions about anything we’ve covered today, please raise your hand or enter your question in the chat box.
So, what is cross-functional warfare costing you? Do you have symptoms of the hierarchical operating system? Want to find out? Take our one-minute assessment and we'll give you a report on how you're doing. Or give us a call and we can talk specifically about what's going on in your organization and how we might be able to help.
