Guest post by Stephen Wilson, co-author of Growth in the Age of Complexity.
In a world that values instant access to information, it is ironic—and frequently frustrating—that corporate decision cycles are getting longer.
On our most recent visit to Australia, to meet with executives and to preview findings from our new book Growth in the Age of Complexity, this was the theme that kept recurring. Our audience consisted of CEOs and CFOs of the Australian units of several multinational organizations headquartered in North America or Europe. The key issue they shared with us was one of speed, particularly the speed of decision-making as the local country unit sought approval from the company’s headquarters for key initiatives focused on Australia customers.
Said one exasperated CEO, “Decisions take months!”
It gave us pause—as these executives worked for aggressive, market-leading organizations—and it sparked an underlying question: If these companies struggle to move quickly amidst today’s complexity, does that mean that traditional strategies for speed are insufficient?
The Challenge of a Distributed Workforce
In many cases, the answer is yes. Complexity is making us slower, while product lifecycles are accelerating. Against those conditions, the status quo is not acceptable. Moreover, we are increasingly operating in “distributed” work environments: a retail store manager needs to make decisions quickly for his customers, far away from the head office in New York; our friends from Sydney need answers quickly so they can react to their Australia-based competitors. But, there is a tension. Businesses that devolve into a series of country-based fiefdoms, without any global or regional coordination, may end up with enormous complexity and lacking scale.
In other words, it’s not a matter of centralization vs. decentralization. Either choice, as a monolithic strategy, is a bad one. Your operating model, systems and strategy need to ensure customer proximity and relevance even while preserving core elements of scale.
New Strategies for Speed
The Joint Special Operations Command (JSOC) provides an interesting case study on how to improve speed in a complex environment. JSOC under the leadership of General Stanley McChrystal initially struggled in the battle with Al Qaeda in Iraq and Afghanistan. The culprit? The complex bureaucratic structure of the military made keeping up with Al Qaeda’s amorphous and shifting networks impossible.
In response, JSOC pivoted and replaced its emphasis on efficiency and risk-mitigation with a focus on adaptability and responsiveness. It made two changes in its approach to decision making that were previously anathema in the military:
- Liberal sharing of information, which McChrystal refers to “Radical Transparency”
- Decentralization of authority, which enabled quick decisions at the local level
Radical transparency was what enabled decentralization of authority. It was the means to ensure everyone was pulling in the same direction, as informed as possible. Without some form of guiding blueprint—whether that be culture, norms, or decision rules—decentralizing decision-making authority can end up with high levels of complexity, internal disarray and suboptimal outcomes. In this regard, the military has an advantage in terms of the high levels of training, traditions and rules of deployment. In the corporate world, we need to get equally adept at creating rules of thumb that can help guide distributed decision-making. The key is to provide base-line guidance around leadership’s intent upon which local-level decisions can be based.
Some companies are already doing this. Compass Group, the contract foodservice and facilities management company, manages a distributed global business through its Management and Performance Framework (MAP), which boils down what matters in business performance to five key areas (two revenue-related and three cost-focused). Compass has been successful in executing its strategy, because it has trained more than 10,000 of its employees throughout the organization to understand it deeply. This enables everyone to understand the drivers of the business, which is critical as management and decision-making have become far more local.
Stephen Wilson is Managing Partner at Wilson Perumal & Company where he advises corporate executives and private equity leaders on critical strategy and performance issues. He is co-author of Growth in the Age of Complexity and Waging War on Complexity Costs, both published by McGraw-Hill.