“Strategic direction is more important today. It's about providing a framework for managers to navigate through the fog of complex chokes. No company can avoid this."

– C.K. Prahalad –

Case 1: Redesigning The Global Organisation – An Indian Multinational in Making

Client:  The Client is a large, independent and publicly quoted company in material sciences business. Their products are used for removal and finishing of metal and other surfaces. They also make speciality industrial ceramics and key raw materials for their industry. Their customers belong to auto / auto component, engineering, mining, cement, petro-chemical, construction and home improvement industries besides other players in their own industry. Part of a highly regarded US$ 2.5 bn Indian Group, they are the leader in their industry in India.

Background: Over the previous fifty years of its existence the Company had grown slowly, steadily and conservatively. In 2005-06 I had advised and assisted them to envision their future. They had resolved to become a global leader in select businesses and formulated their competitive and growth strategies accordingly. By end 2007 they had substantially expanded their footprint worldwide.

Subsidiaries in India, Australia, Canada, USA, Middle East and South East Asia were poised to grow rapidly. They had established green field operations in several countries and made strategic acquisitions in China, Russia, and South Africa. The latter two had considerable potential. Even as vigorous integration efforts were continuing, the Client had made plans to expand operations in Africa, West Asia, Americas and Europe.

During the three years of frenetic growth, the firm’s organisation had evolved tactically on as-needed basis. The old structure had been focussed on the domestic market. But for the top leadership and a few handpicked senior managers, the management team had little experience of managing operations and partners spread across five continents. At this time the astute leadership of the company felt the existing organisation structure needed redesign. If left undone it would impede growth and hinder the firm’s global ambitions.

Task:  The Client needed two solutions.

  • A template for the global organisation structure that would serve their needs for the next three to five years. It would be a period of growth and investment in new operations as well as through acquisitions. Large investments in capacity in India and abroad would enable them to sharpen their competitive edge even as they increased market access in different regions. During this phase the global structure would serve the needs of a fast growing multinational. It would also facilitate transition to the organisation of the future.
  • A road map for the global organisation structure that would serve the firm for the decade beyond the next 3 to 5 years. The Client would adopt the new model over time. The Company asked for an approach towards an ideal organisation for the long term future rather than a definitive organisation chart.

Conceptual Foundations and Methodology:

Strategy and organisation effectiveness were considered to be the key parameters for designing the organisation structure. Structure should be consistent with the strategy of the organisation. At the same time it should enable smooth operation and effective execution of the firm’s action plans.

Strategy typology (Raymond Miles and Charles Snow, 1978) was used to determine the Client’s strategy type. Miles and Snow had suggested that companies are characterised by four broad types of strategy they adopt: Prospector, Defender, Analyser, or Reactor. The study of the Client’s history confirmed their strategy type was Analyser.

Richard Daft’s (Organisation Theory and Design, 8th edition) model of effectiveness was used to understand the current and future position of the Company on dimensions of Focus (internal or external) and Structure (flexibility or control). It was determined that the Client was externally focussed and had, in the past few years, become flexible in the way they managed their operations. Significantly, the firm was expected to progress further and faster on these two dimensions in the future.

These two theoretical models were the principal tools used to design the organisation of the Client.

Organisation structures of Bharat Forge (case study by J. Ramachandran & Sourav Mukherji, 2005) and Ranbaxy Laboratories (case study by J. Ramachandran & Mukesh Sud, 2005) were studied to draw lessons from the instances of two globally successful Indian companies.

The project involved careful study of the operations, strategies and future direction of each business unit and subsidiary. Nearly a hundred top managers were met and interviewed in many plants, commercial and corporate offices in India, Russia and China.

During the project, observations and data were shared with the CEO and the Company’s operating board (different from the statutory board) in stages. Their inputs were used to refine conclusions, test hypotheses and narrow prospective designs for the organisation.

Recommendations: The final report presented to the Company’s Chairman and the operating board made recommendations in the following areas.

  • How the subsidiaries and associate companies should be dealt with. Which should be the engines of growth, which relationships should be managed for strategic reasons and which discontinued.
  • Composition of statutory and operating Boards of subsidiaries and associate companies.
  • Guiding principles for future acquisitions, organic growth and incubation of new ventures.
  • The need for leadership development at the top and middle was stressed. A few managers in the Indian parent and in one of the acquired companies were ready for global responsibilities. It was suggested that they be inducted. The report pointed out the great need to groom a cadre of senior and middle managers for bigger responsibilities.
  • It was deemed essential that the Company centralise and aggregate certain functions – procurement for example. Such operations were identified and their structures redesigned with linkages in business units, subsidiaries and operating locations.
  • The Client was advised to develop a culture commensurate with their global aspirations and character. Specific recommendations were made on issues of accountability, recognition of merit and loyalty. It was pointed out that managers must build and leverage internal networks rather than rely on hierarchical structures of the past.
  • Organisation charts were recommended for all business units and their subsystems like plant operations, marketing set-up, procurement, R&D, etc. The organisation of the corporate office and the leadership team of the global corporation formed an important chapter of the final report.
  • The model for the organisation of the future – beyond the next 3 to 5 years – was presented. It would serve the corporation’s long-term vision and strategy.

Implementation: The Client accepted the report with appreciation and has proceeded to implement it in a phased manner.