Know the importance of your organization’s structure and operational model.
We know for a fact that organizations need substructures to remain efficient – or they risk paralysis. This commonly translates into structuring by specialization or products and regions.
Global healthcare organizations are no different. It’s commonplace to find pharmaceutical manufacturers structure themselves based on regional presence – and/or by the drugs they sell. If you look at a chain of hospitals, you’ll find that they organize based on location – and by specializations like physicians, surgeons, nursing staff, support staff, etc. The benefit of this structure is that each unit within the organization then has a clear purpose, capabilities needed to deliver, and defined operational procedures. They are set up to be agile. But this approach is not without trade-offs.
The fodder that feeds silos
In her book, The Silo Effect, financial journalist Gillian Tett states that an organization’s structure impacts how one looks at the world and approaches problems. When regions and products are vital to an organization’s structure, teams are designed to only work towards the growth of one part of the organization, setting the tone for internal competition.
Yes, competition keeps everyone on their toes. But it also creates a fight for resources and financing. Invariably, one team gains at the cost of another. That’s not all; it also breaks down lines of communication. Teams don’t share data; collaborate on platform provisioning; or their understanding of customers – giving birth to silos. The result is broken customer experiences (CX), resource utilization redundancies, and increased licensing costs.
Breaking down silos
Introducing an agile mindset into the company’s culture and building a unified vision goes a long way towards breaking down silos. But they alone don’t work, and neither does technology. In light of recent events, conversations around moving away from monolithic infrastructure and the benefits of decoupled tech stacks towards supporting speed and agility have gained significant popularity — all valid. However, achieving scale isn’t possible or sustainable without the right operational processes and communication systems that cut across regional and product/service-based silos.
Most large organizations have been through a few ‘reorgs’ to keep pace with the market and stay ahead of the competition – swinging between centralized and decentralized structures. Complete centralization slows down decision efficacy and efficiency – regions will often find themselves a step behind. Decentralization, on the other hand, promotes agility but not scale.
It’s tempting to look for a simple ‘if, then’ formula to choose between the two. But the truth is that this is a journey unique to every organization, rooted in its vision, goals, and needs.
Finding the right operational balance
A Forrester study found that the key to finding balance is getting data right; using partners; being fast, not accurate; accelerating with platforms, and tech discussions that align with business value. Therefore, it is essential to consider the following elements when finding the right balance for your organization.
- Who owns the customer data?
- What are your value streams, and how is it measured? Meaning do you measure growth by the revenue each product/service generates or is there another mechanism in place?
- How do you leverage economies of scale?
- What is being done to ensure regions are being enabled and empowered vs artificially/principally constrained? Should they be given free rein, or should you consider building a tech stack that empowers them all with the ability to personalize and launch quickly?
The above considerations are common to most large organizations. You’ll uncover more that are unique to your business needs – and they will serve as the levers that allow you to organize for scale. It’s imperative that you think of them as a dial that can and should be measured and re-evaluated over time for adjustment based on your needs instead of a fixed value. How do these levers work?
Here’s a scenario combining the last two considerations in the context of a global pharma company. Finance and platform requirements invariably go hand in hand. The odds are that the same customer has a different experience with each drug brand under the parent company’s umbrella. Why? Because some drug brands probably have a larger budget than others. If the organization’s goal is to deliver consistent and valuable experiences, turning the dial-up on these two levers would make sense. One way to achieve this is by establishing a Shared Services or Centre for Innovation capability. This capability’s sole purpose would be to provide the platforms and features needed for all the drug brands to deliver a consistent experience. At the same time, regions are free to compose and orchestrate features that are limited to their needs with the budget allocated to them.
Deciding on what should be centralized
It isn’t an easy decision for any leader/CEO to make on its own and is made even harder by power struggles. These questions provoke critical thinking.
- Is it mandated by law, or in the case of public companies by external stakeholders?
- Does it add significant business value? If not, is it part of a larger initiative that does? Assign a concrete value like 10% increase market share or group profits.
- Can it eliminate bureaucracy or rigidity?
- Will it reduce motivation amongst managers and individual contributors?
You want to check the yes column on at least one of the first three questions – and a no on the last one. Applying these questions to the above scenario might look like this;
- Is it mandated by law, or in the case of public companies by external stakeholders? No
- Does it add significant business value? If not, is it part of a larger initiative that does? Yes, it reduces investment cost by xx% increasing profits by xx%.
- Can it eliminate bureaucracy or rigidity? Yes
- Will it reduce motivation amongst managers and individual contributors? No
Two of the first three questions are marked yes and the last is a no. In such a situation, creating a model/capability that is dialed up to be more centralized is worth the effort. Apply these three questions to all the elements considered, and you'll land at the operational balance that works for your organization.
If you found this blog helpful, the next blog in the series covers addressing patient experience while organizing for scale.
Originally published on CIO Applications.