“Things are moving so fast we can’t keep up!”
Two weeks ago, Macy’s announced that they were falling short of their 2019 financial goals. Sears and JC Penney are closing more stores. Even Walmart and Walgreen’s have announced they will close stores. Brick and mortar are giving way to the digital age. Amazon continues to grow at breakneck speed. Over ten years, Amazon’s revenue has increased about 12 times, whereas Target Stores’ revenue has increased about 1.2 times.
When we look at the retail industry specifically, and others more generally, it’s clear that traditional organizational structures are falling short. They are unable to keep pace with the demands of the digital economy.
The advancement of the Internet over the past two decades has taught us that we must run our organizations differently for our businesses to thrive, and perhaps even survive. This digital transformation is inevitable. To successfully move into the future, leaders need to strike a balance between organizational hierarchy and cross-functional coordination. While there still needs to be accountability for results, organizations need to be able to move faster to achieve these results.
In the late 1800s, Fredrick Taylor pioneered the idea of specialization to speed production. Before this, companies employed craftsman to build one product at a time. This was slow, tedious, and drove enormous variability in the quality of the end products. Taylor pioneered greater efficiency through organizational structure and discipline. No one person produced a product any longer. Through a structured organizational design, different workers had responsibility for small components of the product’s fabrication and construction. In time, this expanded to other parts of the organization. Payroll clerks computed payroll check amounts, and accounting personnel wrote the paychecks. Order-takers received phone calls from customers who wanted to place orders, a warehouse clerk prepared the product for shipment, and a transportation clerk shipped the product to the buyer. All this structure drove phenomenal efficiency. One Fortune 150 company drove $160 million of annual cost out of their supply chain through these efficiencies. Throughout most of the 20th century, organizations employed Taylor’s ideas to drive more and more cost out of their production.
However, this specialization drove hierarchical adherence which in turn promoted cross-functional dysfunction – especially during times of change. If leaders wanted to deploy a new product design or improve business processes across the organization, they ran into huge amounts of resistance from their employees.. This led to lots of failure of organizations to achieve results in desired time frames, if at all.
This means that organizations must reduce their dependence on hierarchical adherence and drive more toward teams that work more effectively cross-functionally. People in these organizations must operate at higher levels of cross-functional collaboration, requiring greater trust, healthy dissent, and greater ability to engage in informal accountability.
This starts at the top. The leader of an organization must be willing to give up traditional command and control in favor of a more facilitative approach. He or she must be passionate about their organization’s mission, must be humble, and must demonstrate greater trust and willingness to engage in healthy dissent.
In addition to these personal characteristics, these leaders must also:
- Hold their leadership team accountable to strip away the armor and work cross-functionally – more than ever. They must model and require more openness, more willingness and a greater propensity to challenge each other.
- Promote and model the idea that employees across the organization work together more effectively to drive these outcomes and are willing to challenge each other to do so.
All leaders must give up the old command and control mentality that Fredrick Taylor inspired. They must become more of a coach, helping direct reports, and the entire organization drive to these new behaviors which in turn drives to a greater culture of cross-functional effectiveness.
This article is the subject of my upcoming webinar, How to Drive a New Culture to Embrace the Digital Age, which will be produced and delivered by PMO Strategies. Click here for more info.
Dedicated to your profitable transformation,