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Activating the Global Operating Model

Greg Kesler and Amy Kates

8.12.14

The business environment for today’s multi-national company is more challenging than ever.

Companies that compete globally require organizational operating models as robust as their

strategies. Companies such as P&G, PepsiCo, IBM, Philips, and Nike have created elegant

organization models and consider their worldwide, matrix organizations as a source of

competitive advantage. Some companies operate inside these models as though it is second

nature. Others struggle mightily. There are clear reasons for this and we will explore them in

some detail, and provide a road map to effectiveness.

Across most global companies, three consistent organizational elements make up their global

operating models:

• Geographic market units

• Global business units (products, brands, or customer groups)

• Enabling and commercial functions

Figure 1 illustrates how Deere and Co. communicates the relationship of its operating model

elements internally and externally.

Figure 1: Deere’s Global Operating Model

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Global Operating Model

An interdependent set of organization structures, processes, governance mechanisms, metrics

and reward systems that tie together center-based business and functional teams and diverse,

geographic teams in order to execute complex, worldwide strategies.

Such organization frameworks embody the promise of the matrix – that a company can have it

all. Superior global products and brands, local market responsiveness, and cost-effective

functional systems and processes. The reality is that many senior executives in companies

trying to execute on a global strategy are frustrated by the challenges of meeting any of these

objectives.

Efforts to get closer to the customer through stronger regional-based commercial organizations

do not necessarily lead to greater customer focus in the offering. New brand-building ideas,

whether developed in the center or in a market, are often slow to move across regions.

Decision-making often grinds to a crawl as power dynamics play out in the face of scarce

resources. Anticipated cost-savings never materialize as global functions build out expensive

processes and systems in the spirit of becoming world class.

After working closely with over twenty large US and European-based global companies during

the past decade, we have concluded the problem is not in the fundamental design of these

operating models. The challenge is ineffective and incomplete activation. Despite large-scale,

well-funded change initiatives, sophisticated communication programs and worldwide

management meetings, the hard work of bringing these complex organization designs to life is

often unfocused or not sustained over the three or more years that it typically takes to truly

embed new ways of work.

In short, it’s one thing to design global business units, regional operating units, and worldwide

functions; it’s quite another to figure out how to get them to interact effectively to serve

consumers and customers profitably.

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Common obstacles to the global operating model

Two opposing forces are at play in global operating models: agility and leverage. Agility is all

about speed and flexibility – the ability to anticipate and respond to opportunities. Leverage is

the advantage conferred by size – the ability to invest in the technology, systems, and specialist

talent that smaller competitors can’t afford. All too often, however, the more a company tries

to realize the benefits of leverage by imposing common ways of work from the center, the

slower that decision-making out in the markets tends to become. But, it doesn’t have to be this

way.

Smart leaders are trying to move toward a balance of decision authority between the global

and local elements of their organization; and, in many cases, this shift is away from the

allocation of power that may have served it well in the past (see Figure 2). For some, the bias in

decision-making has historically been local. The challenge then is to drive more global influence

into management processes. In other cases, we see companies that were very successful

establishing global business units and now need to place more skills, capability, and governing

authority back into regional and local markets, especially in developing markets where one size

clearly does not fit all.

Figure 2: Balancing the Matrix

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A.G. Lafley’s return to P&G in 2013, after a short retirement period, illustrates the need to

revisit these dynamics from time to time. Lafley decided to reset the balance of power and

resourcing across P&G’s complex matrix by placing more authority for building worldwide

brands back in the global brand teams by removing marketing roles from the geographic

market development units.

Some of the common obstacles to an effective and balanced matrix that companies create for

themselves include:

• Excess layers and duplicated work make the organization slow and internally focused.

• Global product teams are overlaid on to local commercial organizations without

adjustments in the basic P&L structures, creating friction.

• Global functions are designed independently from the needs of the business, leading to

unexpected costs and service disappointments.

• Overly complex councils and networks are plastered on the structure to force

collaboration.

• Leaders do not know how and are not motivated to work in a matrix – metrics and

reward systems continue to drive old behaviors.

• The corporate executive committee is allowed to continue as a group of individual

leaders, each focused entirely on their own business versus the needs of the enterprise.

Sidebar: How Global Do You Need To Be?

The path to global business management has not been a straight line. In the 1990s and earliest years of

the new millennium all bets called for a flatter world with movement toward more global products and

more commonality in consumer tastes and choices. While some of this has turned out to be true, that

picture is far too simple. In fact, consumer tastes remain stubbornly local, particularly in food, beverage,

apparel, and consumer goods markets. Capital equipment manufacturers cannot compete in India or

China by retrofitting products engineered for developed markets, regardless of the reliability benefits

these products may have over local competitors (Govindarajan and Trimble, 2012). Europe has hardly

evolved into a single market, and developing markets have proven to be very difficult places to do

business, with continued trade barriers and regulatory variations that add to the logistical challenges of

moving goods and services across hobbled infrastructure.

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Most companies are really a mix of both global and local brands and products. For years we watched the

diminishment of country management structures and a concurrent rise in the power of global product

units. Today many companies are now dialing back on those global product lines to put more emphasis

on locally-tailored products that can compete against emerging market players that know local

customers and markets well.

Consider the continuum of global companies operating with a global footprint in Figure 3. At one end of

the spectrum a Philips or BMW truly has a global product; others, such as a Nestle, operate quite locally

in most categories.

Figure 3: Most global companies represent a mix of local/global assets.

Others, and these are the most complex, fall in the middle, with portfolios of both global and local

products. Heineken has a broad portfolio of products as shown in Figure 4. Some, such as the Heineken

brand, are truly global brands and these are managed quite appropriately from Amsterdam in order to

create a common brand message and position in the marketplace. Others products are more regional,

such as Sol, and these need oversight and support from the center, but they need to be executed in a

local way, because they are still essentially regional brands. At the very left side of the continuum are

local brands, such as Schneider, in which both strategy and execution needs to be much more local.

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Figure 4: Heineken’s brands range from truly global to quite local

Rewarded and unrewarded complexity

Complexity is a given for global organizations. But there are two kinds of complexity and

distinguishing them is important. One is rewarded complexity, the necessary complexity to

support a multi-faceted strategy, indicated by the number and nature of contact points among

diverse teams and business units, dispersed around the world. The reward is in the

management attention that is brought to the nodes where value is created – the intersection of

customers, brands, products, emerging markets, shared services, and other strategic choices.

Often, rewarded complexity is a result of making things simpler for customers. The powerful

Walmart business units inside P&G, Unilever, and many other consumer brand companies

create enormous complexity challenges for leadership inside these suppliers, but Walmart, the

customer, is well served. This is a positive form of tension in the matrix. Often when

organization models are made “simple” for leaders to manage internally, it is the customer who

is left frustrated – for example, by having to deal with multiple sales reps from several different

product divisions of the same supplier.

Unrewarded complexity, on the other hand, is largely the result of unnecessary layering and

misalignments among structure, roles, decision-rights, processes and rewards systems.

Confusion and frustration, internally and for customers, are nearly always symptoms of

organizations that have fuzzy roles and decision rights, competing incentive systems, and

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leaders who do a poor job managing across the boundaries. It is this unrewarded complexity

that has given the matrix a bad name – manager and employees blame the organizational

model, when in fact it is poor execution that is to blame for the friction and frustration.

Rewarded Complexity Unrewarded Complexity

Reflects the complexity of the strategy –

the number of connection points among

business units and functions necessary

to extract the most value

Unnecessary layers, P&L units, dual

reporting, duplication and other

structural elements that do not add value

Table A: Rewarded and Unrewarded Complexity

ACTIVATORS – BRINGING THE GLOBAL OPERATING MODEL TO LIFE

Our consulting work and research reveals six practical actions that bring these complex

organizations to life. We believe these activators are what differentiates companies that gain

sustainable results from their global operating model from those that don’t.

1. Anchor layer. Establish one anchor operating-unit layer of organization and a single

value-added layer for consolidating infrastructure.

2. Functions as integrators. Use the functions as a mechanism to knit the global product

groups and geographic markets together.

3. Innovation and execution networks. Build formal networks of global and local capability

with guidance from the center.

4. Planning and performance management handshakes. Design key management

processes to foster clarity at the highest value nodes in the matrix.

5. Governance. Allocate power and decision rights to balance speed and scale, consistent

with the business strategy.

6. Matrix ready leaders. Select and develop leaders who can and want to thrive in a

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complex, global organization.

Each activator is discussed in further detail below. However, while each activator is necessary

to matrix success, none by itself is sufficient. The six work in concert to ensure that structure,

processes, measures of success, and behaviors are all aligned and reinforcing.

One: Anchor layer

In large, complex organizations identification of what we call the “anchor layer” can help deliver

both agility and leverage by effectively reducing complexity and duplication. An anchor layer is

the core profit and loss and strategic business unit in large, multi-national companies.

Layers of P&L units represent one of the most common forms of unrewarded complexity in

large, global companies. The layering of sectors, groups, divisions, and brand or product units is

common in large, multi-product companies. Equally as common are geographic, commercial

organizations that stack regions on top of clusters, on top of country market units.

Collaboration is difficult and expensive to engineer in a complex matrix. Unnecessary vertical

layering makes it more difficult. Horizontal connections between the core global product units

and regional commercial units are more easily wired together when each has a clear partner,

designated as the anchor layer.

Supervisory layers may be necessary to maintain reasonable spans of control in very large,

geographically diverse companies. But each level should play a unique, value-adding role to the

business (e.g. portfolio oversight vs. P&L management vs. commercial execution). When one

layer is designated as the anchor operating unit layer, and all others serve that layer, waste and

duplication are eliminated in the vertical structure and accountability is enhanced.

A parallel design concept is the “single value-added layer” for enterprise-wide functional

support groups. Staff functions should concentrate most decision support resources at a single

layer of the organization in a manner that optimizes productivity and the need to stay close to

the anchor operating unit layer.

In sum, when a company designates an anchor layer it gains at least three benefits:

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• Decisions are made at the right level to optimize business unit vs. enterprise trade-offs

• Cross-unit collaboration is made easier by designating clear “docking stations” or

connection points between global and local business units

• Support staff attention is focused on the right priorities

The example of a global food and beverage company illustrates these benefits.

Food & Beverage Co. (F&B) is a $65bb food and beverage giant built primarily around

geographic P&L units. Four layers had evolved over a number of years within these geographies

including an enterprise level, where all key functions reside, and three operating unit layers

beneath, each with a set of P&Ls, down to the country level. Each layer had all of the key

functions, from marketing to finance to human resources.

A cross-company design team came back to the CEO and President with two simple ideas:

a) Designate one “anchor layer” for geographic business units and redesign the other

general-management layers to either serve or oversee that anchor operating layer

b) Concentrate all infrastructure in a single, value-added layer of support functions to the

extent practical

The new relationship of the layers is shown in Figure 5.

The anchor layer for F&B Co. was defined as the region (clusters of countries), the second layer

of general management. The layer above, geographic zones (generally continents), was

designated as a span-breaker. The country level below was focused tightly on commercial

execution.

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Figure 5: Anchor Layer at F&B Co.

Functional infrastructure was to be elevated to the enterprise level, or pushed down into the

regional, anchor operating-unit level. Duplication of functional staff would be removed from

the country level, especially financial analysts who were not longer needed to massage the

once complex P&L reporting process. [See the section, Functions as Integrators for more on this

idea.]

Just as importantly, local brand marketers could now be consolidated into region category

teams within the anchor layer. This construct would now provide a docking station, or single

point of contact, for the global category leaders out into the field, thus enabling a consistent,

worldwide network of brand-building and innovation resources. [See the section, Innovation

and Execution Networks for more on this idea.]

Finding the anchor layer requires a bit of due diligence. It is important to decide at what level

the primary strategic and tactical profit and loss decisions in the business should get made. A

simple test is often to ask: at what level can trade-off decisions across categories, markets, and

investments in innovation and brand building be optimized for the good of the enterprise, while

still keeping decision making close to the customer and consumer? Trade-offs at too low a level

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will deliver sub-optimal results; trade-offs at too high a level will result in slow decisions

insulated from market realities.

Two: Functions as Integrators

Many companies oscillate between a centralized and decentralized philosophy, and leaders will

argue which is better. This is a false debate. Today’s large companies need the benefits of both

enterprise level resource trade-off decisions and the agility of empowered business units.

Finding the balance is not easy. In no place does the tension between center corporate staff

and field based operators play out more strongly than in the functional dimension of the global

operating model. Many companies miss the opportunity to align worldwide functions as critical

integrators of the business unit/market matrix. When looked at this way global functions can

provide both strong enterprise oversight and guidance along with the specialized expertise that

allows business people in the market to make better decisions. Let’s look at how to achieve

these “both/and” benefits.

All functions, whether enabling (e.g., IT, finance, HR, legal, strategy, business development) or

operating (e.g., supply chain, marketing, consumer insights, R&D), can share a similar design

logic that allows them to connect into the business/market node in the matrix. The logic starts

with a clear understanding of the difference between center-led and centralized management.

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Figure 6: Center-led allows for strong integration without unnecessary control

In this model (see Figure 6), the vertical axis represents degrees of integration or linkage. The

top of the axis doesn’t imply that work has to be done at a global level; rather the company is

able to use its size to afford very specialized resources and move management time and

attention around the world onto the highest value problems and opportunities. This can only be

achieved if there is an enterprise view on talent, budget, resources, and priorities. The

horizontal axis is about control – how tightly are decisions controlled with regard to how

functional work is done in the operating units.

There is a sweet spot for a given company in the design of center-led functions and governance.

The goal should be to gain high degrees of integration without high degrees of control for work

that must deliver both scale and speed. Some work and decisions – risk management, brand

standards, big investments – should be centralized at the corporate level. Other work and

decisions are so local that no value can be added from people sitting outside a given market

and are best left decentralized. However, in most global companies, there are many decisions

that benefit from the benefits of speed and local responsiveness, but which are also aligned

with a common, global agenda. This can be achieved through a sophisticated use of formal

networks, centers of expertise, shared agendas, strong governance, guardrails, and common

process.

The center-led concept connects here with the anchor layer. Functional decision support should

be embedded in the anchor business-unit layer where business strategy is being made – HR

business partners, finance managers and the like. Shared services, centers of expertise, and

other business-neutral work should be aggregated at the highest practical geographic level to

gain the benefits of scale and shared resources. Functional oversight and enterprise policy then

sits at the global level. The combination of center-led and anchor layer ensures that functional

work is not unnecessarily duplicated and that each role provides a unique contribution.

Execution is local but work agendas and processes are set at higher levels.

Below is an example of how these ideas play out in an HR function. (See Figure 7.)

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Figure 7: Center-led and anchor layer concepts applied to the HR function

At each of the four levels there is a unique set of work. Once there is agreement on the basic

model the work then is very easily sorted. We can create a staffing model and a talent plan that

puts the right talent at the right level. In these organizations often the most exciting jobs are

not the most senior jobs, so it also creates a much more dynamic career path for functional

staff that may be horizontal rather than vertical. This view also sets out very clearly what teams

we need to build and how we need to invest in those teams. And the framework makes very

clear the governance processes that we need to put in place in order to make the right kinds of

center-led decisions. So this model helps us to create not just an effective and efficient

function, but one where leaders can make smart choices regarding what work should be done

in common and together for the benefits of scale, and where managers should be empowered

to make decisions locally to achieve flexibility, speed, and local competitiveness.

Three: Innovation and Execution Networks

The center-led concept provides a strong framework for designing support functions so that

they can serve as integrators across the product/market matrix. The same idea can be extended

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to the discussion of how to best manage innovation and initiatives that require collaboration

across the globe. Too many times we see managers trying to optimize the hand-offs and

interfaces between the center and the field. We suggest that a better goal is the creation of a

dynamic network among center and field-based resources.

Consider a large consumer brands company that had ignored leverage for the sake of local

agility in its advertising and promotion decisions and its new product development programs.

Global brand teams at this company influenced a very small portion of the worldwide spend,

leading to costly duplication and continual disappointment on the innovation front. Decisions

were skewed toward incremental and short-term investments. (See Figure 8.)

Figure 8: Example of global influence on worldwide spending initiatives

The solution in this situation is not to shift control to a central organization, but rather to think

about how to network the total spend and activity in a much more transparent, interdependent

way.

The new organization model for the company’s global category team structure is centered on a

formal network of cross-functional teams around the world. The goal is to increase the portion

of worldwide spending on initiatives that are scalable and transferrable across regions, without

Adver sing and Promo on Spend

R&D Spend

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necessarily centralizing control over the budgets.

In the networked organization the global category teams act as a player/coach for good ideas

that can and should reach across regions. Those good ideas can come from anywhere, but the

center gives them visibility through the planning process. Then, backed by robust consumer

insights, contracts are set among anchor layer regional partners who want in on a given

initiative that is a good fit for their markets. Ideas are funded in partnership among

participating regions. Roles of the center and the regions are defined for a given initiative,

based largely on where the capability and the capacity resides to do the work. This allows for

more specialist expertise to be based in the field, but available across the enterprise.

An organization design team at the company, made up of marketers, R&D leaders, and other

functions from around the world, determined that there were four key roles to be played in any

product innovation or brand-building initiative. These four roles serve as the basis for assigning

responsibilities between the global center and the regional operating units. Most importantly,

they can be configured into purpose-built networks based on the needs of a given initiative. As

shown in Figure 9, the four roles are:

• Set the strategy and governing the initiative

• Create content

• Act as the test market

• Receive and execute the new content

Every cross-regional initiative can be chartered with this framework. The network for each

initiative is configured to reflect the nature of the work to be done. The launch of a

breakthrough innovation can be handled differently than the refresh of a regional brand,

allowing each to move at the right speed.

For example, the worldwide catetory team will agree to center-led oversight of a big brand or

innovation initiative, but the actual development work will be performed in the region that

possesses the capability and the resources that fit that initiative.

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Figure 9: Roles are defined for each global initiative in partnership between global and regional players

Regions sign up with the understanding that a new program of this nature must be scalable and

fit for use in other markets. Everyone in the network is working against a common agenda for

this initiative with a clear role. This center-led model harnesses the entrepreneurial energy

often found in a highly decentralized cultures, while substantially reducing the duplication and

sub-optimal approach to investment that prevailed in the past.

A product development program might look something like Figure 10, where the center plays

the governing role, but content is developed in USA and Mexico and then tested in Turkey and

Saudi Arabia for eventual roll-out in Asian markets.

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Figure 10: Networked roles for a new product development initiative at a large CPG company.

Four: Planning and performance management handshakes.

Management processes are powerful means of activating a global operating model. These

forums and conversations bring together those who have power and influence to set direction

and ensure that work flows horizontally. None are more critical to activating the global

operating model than the strategic and operational planning and business performance review

processes. The processes shown in Table B are core to many global companies.

Table B: Management processes are critical sources of alignment in the global operating model

As we noted above, rewarded complexity is realized when management attention is paid to the

nodes in the matrix that create value. Joint planning between a global operating unit and a

regional commercial unit (or customer team) is the forum where the natural tensions between

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the global and local objectives are played out to resolution. We call this forum the business-

market handshake. This granular approach to growth planning draws management attention to

the business-market combinations with the greatest potential (Baghai, Coley and White, 1999).

The handshake is focused not only on joint business plans, but also on the quarterly and annual

business-performance management routines. The planning/performance-management loop

engages the right partners to jointly own the plan and the results.

Unilever and Philips have both implemented the handshake model in their global businesses.

Philips, the diversified technology company based in The Netherlands, turned this concept into

a planning and control matrix as a part of its “Philips Business System.” With its 20 global

product businesses (forming the business anchor layer) and its 17 key market clusters (forming

the market anchor layer) a planning grid can be laid out for what the CEO refers to as the 300

“business-market combinations (BMC).” The Pareto principle is applied to focus on those 20%

of the nodes that will deliver something close to 80% of the growth plan. For example, the oral

health market in Brazil, where people brush their teeth three times a day with standard

toothbrushes, is an outstanding business-market combination for Sonicare toothbrushes that

requires targeted investment in innovation, brand building, and commercial excellence. The

worldwide head of Sonicare and the commercial head of Brazil co-own the plan for growth (see

Figure 11.) Decisions are delegated extensively to this partnership in the new Philips culture.

Surprisingly, we often find that annual operating targets are set independently from strategic

growth plans. This senseless miss can cause a complete breakdown in the handshake. Sales

teams in the field chase financially-driven targets, uncoupled from the shared growth plan. A

holistic planning calendar for the corporation is a first step to setting the right sequence to

these conversations.

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Figure 11: The business-market planning grid focuses on most critical growth franchises in the partnership

It is a natural next step then to move from setting an integrated planning and control cadence

to defining the right metrics for each partner and agreeing to the routines through which they

will jointly manage the ongoing push and pull that is part of executing in a matrix.

P&L metrics need to be carefully aligned in these handshake combinations (Schuster and Kesler,

2011). The Philips financial staff labored to define both shared and controllable P&L elements

for both the business unit and the market unit leaders. Revenue goals for each are identical, but

the regional market owns elements of profit contribution, related to price realization and cost

of selling, that are different from the gross margin metrics that a global product unit leader will

typically own.

This business system requires a change not only in management processes and metrics, but in

the behavior of senior leaders. At Philips, CEO, Frans van Houten encourages his sector heads

(span-breakers above the anchor layer) to avoid interfering with these critical business

partnerships at the anchor layer and to practice exception-based management.

The business-market handshake is the centerpiece of a management system in the global

operating model. The next logical activator is the allocation of power and decision rights within

that management system.

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Five: Operating Governance

The start point for simple and effective governance is to recognize the benefit of tension that is

built into the matrix. Tension in the matrix draws energy to sources of value that may compete

in the short run (e.g. regions driving top line growth vs. business units driving margin) and for

which the resolution is important to the long-term health of the company. The goal of effective

decision rights is to let that tension play out until the best decision for the business can be

made (Kesler and Kates, 2012). Effective decision rights allow for true empowerment and speed

by enabling managers to make sound choices at the lowest practical level possible. They are

worth pursuing.

Unfortunately, decision-rights efforts – supported by RACI, RAPID, DICE and other spreadsheet

tools – often turn into a frustrating exercise with little impact, except to codify the obvious. And

for good reason; often this work is focused on activities and role clarity, rather than allocations

of power around high value and high-risk decisions. However, when the company has

designated an anchor-operating unit layer and has adopted a planning and control process built

around a business-market handshake, there is a context for decision rights and they can

provide real guidance for leaders.

Governing forums. Before building out RACI charts, it is important to define clearly what the

governance forums in the enterprise will be, and what role each will play. Examples of

governance forums include executive committees, operating committees, and councils focused

on specific topics such as growth strategy, pricing, marketing policy, IT standards, etc. Most

companies have a variety of these in place, but often their roles are unclear, they may overlap

in some decision areas, and they may leave gaps in others.

Periodically, the role of each forum should be evaluated with attention to:

• Defining a contribution that is unique and separate from P&L and function leaders

(usually this means playing an integrating role for the enterprise)

• Clarifying decision-making authority vs. communication, coordination, and other tasks

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• Avoiding interference with the business-market handshake partners: ask, how can

company-wide forums contribute to more empowerment of the anchor layer and speed

of decision-making?

This last point is key, and can be a bit counter-intuitive. Corporate executive committees

empower anchor business units when they play an active role in providing the strategic clarity

for business decisions, such as setting company-wide, new-product investment priorities. This

center-led, integrative executive work creates the framework in which managers close to the

ground can be free to act. It provides them the context in which to make good judgments. It

reduces the need for approval levels and controls around each transaction. Clear direction on

priorities and boundaries from the top is required for true empowerment in the middle.

Decision rights. In the balanced matrix decision-making is collaborative, but committees don’t

make decisions in fast moving companies. The tension in the matrix needs to play out so that

decisions can be informed from all the relevant perspectives but, at the end of the day, one

player in the handshake must be able to make the call on a given issue if agreement cannot be

reached. Picture a 51%/49% partnership on critical issues, where the golden vote depends on

the subject matter. For examples, one voice gets a stronger vote on advertising and promotion

decisions; another owns the tipping vote on channel management; and yet another on product

design. (Galbraith, 2009) Because the decision right tips to one partner or another, based on

the topic, the worn-out notion of dotted lines and straight lines serves no useful purpose.

Reporting lines don’t determine who makes the call; rather power is allocated based on which

role is best positioned to take accountability for a given outcome.

John Deere, Philips, and other companies have adopted simple tools for documenting decision

rights in the handshake. In place of RACI charts these companies utilize a simple binary tool that

designates which partner has the 51% vote in each of a handful of high value or high-risk areas.

It is important to stress we are designing a partnership, and it should be the exception to the

rule when one partner needs to call in the golden vote. Accountability for a decision doesn’t

just mean that one gets to make the decision. It means that one is accountable for a good

decision. In a matrix, that requires consultation and collaboration.

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In our experience, the practical approach is to keep the number of decision rights to a very

short list of about eight scenarios where the tension is likely to be most acute and the choice

made will have high impact. Usually this short list will cover 80 percent of the conflict

situations. Simplicity is the rule here.

Six: Matrix Ready Leaders

The focus on the design of the global operating model and the activation of the matrix that

connects the players means deliberately shaping relationships and conversations among

leaders. While the design of management processes is necessary, it is not sufficient. Talent is

the twin engine to organization for strategy execution. The matrix that underlies a global

operating model requires strong leaders that can manage multiple teams, influence peers

without authority, and proactively align competing agendas that may be coming from above.

The success of a global operating model depends largely on competent leaders who are willing

and able to navigate the power dynamics inherent in a complex organization.

We suggest three foundational steps to creating matrix-ready leaders.

A. Communicate what success looks like. The innovation, planning, and governance

conversations described above depend upon leaders coming to the table able to

advocate a data-based point of view, but then find resolution in the best interests of

the enterprise. Table C highlights the six competencies that we have observed make

the difference between those that survive and those that thrive in a matrix. The list

doesn’t replace a company’s leadership profile, but is a useful augmentation for

assessment and development. When leaders bring these mindsets and skills to the

table, much of the friction in the matrix is reduced.

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Table C: Matrix Competency Profile

B. Fit role to motivation. The anchor layer concept is also a useful lens for assessing

talent. Just as each layer of work needs to provide a unique contribution, the leaders

at each level need the motivational fit as well as the know-how to fill those unique

roles.

For example, the business group or sector is often a span-breaking layer between the

global centers and a set of countries, markets, or business units. The units in the

group may have some connection – same continent, market development stage, or

product technologies – but often they are configured fairly arbitrarily as a

management convenience. However, in addition to creating manageable spans of

control for senior executives, group executives can provide important linking,

coordinating, consolidating, and communication functions. Leaders who succeed in

these roles see themselves as coaches to the units in the anchor layer and they help to

translate corporate directives into local strategies and bring the voice of the market

back up to the global groups. Leaders who want to be general managers and create

Competency Definition Some Questions to Ask

Business and

organization

savvy

Seek to understand how money is made and work gets

done. Understand the role and interrelationship of

functions and processes. Display curiosity about the

business and environment. Reframe issues into the

broader business strategy. Cope effectively with political

realities.

• Do I know the objectives and constraints my internal

partners are working under?

• Do I understand the criteria they are using to make

decisions?

Relationships and

networks

Cultivate a broad network and connect people. Get the

right people around the table to resolve an issue.

Respect and appreciate differences in perspective and

background. Seek to understand others’ objectives.

• Have I invested in building social capital for myself and my

staff to knit the organization together?

• Do I have a trusting relationship with the people I need to

collaborate with?

InfluenceSell proposals based on compelling ideas, data and

insight. Shape the opinions of key stakeholders.

• Can I articulate and sell ideas across organizational,

geographic, and cultural boundaries?

Open

communications

and courage

Create open channels of communication and listen.

Proactively inform all relevant parties of decisions made.

Put difficult issues on the table, encourage frank

discussion, and recognize when consensus is not

possible and decisions need to be made.

• Am I using the tension created by the matrix to reach better

solutions?

• Am I collaborating, not compromising?

• Am I skilled at “getting to yes” based on facts, not positional

power?

Conflict

management

Analyze problems from different points of view.

Discourage backdoor lobbying. Be willing and able to

advocate for a point of view without diminishing

working relationships. Know when to escalate

unresolved issues.

• Have I aligned my agendas and personal management style

to with the multiple leaders and peers I have to work with?

• Am I comfortable putting a tough issue on the table – do I

know where to take the dialogue when we don’t agree?

Talent mindset

Assume all employees are part of the enterprise talent

pool and find opportunities to develop. Share and move

talent into other parts of the organization.

• What have I done to contribute to the broader talent pool

of the organization?

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business strategies and manage P&L centers will find this role frustrating and tend to

interfere with decisions better made at the business unit or market level. Even though

a manager at the group level is apparently higher in the hierarchy, often the anchor

layer jobs are more appealing to the leader with a strong general manager mindset.

Be clear on the requirements of the role and staff with an eye to motivation for the

unique contribution expected. (See Table D.)

Table D: Profiling success factors for leaders at each level.

This notion of motivation extends to the design of the senior-most executive team. If

the operators that sit on this body believe that they need a high degree of autonomy

to succeed, the dynamics of the executive team tend to devolve to “I won’t interfere

with your business if you don’t interfere with mine.” What is needed instead are

strong business leaders that can also comfortably wear an enterprise hat and help the

CEO make trade-offs that are in the best interest of the company overall. In addition

to mindset, the right set of metrics and rewards for these executives can go a long

way with helping to motivate collaboration!

C. Enable leaders with the skills and tools to succeed. Success in the matrix requires

leaders who can communicate the “why” of their organization to their teams. To do

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this, they first have to understand themselves what a matrix is, why it is being used at

the company, the common challenges, and the roadmap for building an effective

organization. A three-pronged approach to enablement works best: 1) education on

the matrix and clear expectations for behaviors, 2) skill-building focused on

strengthening networks, managing up, influence, working virtually, conflict

management, and adapting communication styles, and 3)“operating mechanism”

workshops that bring intact teams meeting together to build relationships and align

roles, accountabilities, decision rights, and business and management processes.

Working globally and sharing power across the matrix requires leaders that are clear in

the objectives and behavioral expectations, but also have confidence in their own ability

to manage the inevitable conflicts that will arise.

***

Since an organization’s design needs to be as complex as its growth strategy, given the realities

of the global business environment it is clear the matrix is not going away. In our research and

practice, we have learned that those companies that struggle the most to make these

organizations work do so because the designs have not been fully activated. They are often not

the wrong designs; they are incomplete designs.

Bringing a global operating model to life requires sophisticated and coordinated ways of

thinking and behaving across the management ranks. And it is perfectly fine not to get it all

right at the initial rollout. Better to design with the expectation that as people work through

real situations there will be learning and adjustments to make. We suggest building in a matrix

health check at six, 12, and 24 months to identify what’s working well and what needs to be

fine-tuned or added. Fully implementing one of these organizations is a multi-year journey that

requires sustained energy from leadership. The six activators provide the roadmap to get there.