Mapping is the key to going horizontal

by Onno van Ewyk

It is hard to imagine an organisation of any size being able to operate without a management hierarchy to control and coordinate its activities. It is even harder to imagine one without specialised departments for such things as design, production, or marketing. But many leading companies are experimenting with just such a scenario. They are dismantling their pyramid structures, removing hierarchical control, and abandoning departmental specialisation.

In the US such well-known corporate giants as AT&T, DuPont, General Electric, and Motorola are moving towards what is becoming known as "the horizontal corporation" in which traditional internal departmental divisions and well-defined layers of authority are blurred or destroyed to allow an organisation to respond more quickly and effectively to market changes.

The driving force behind these changes is an over-riding commitment by the organisation to continually focus on meeting customer needs and recognition that hierarchical management often works against this by encouraging self-serving internal fiefdoms more intent on increasing their own power than serving the customer.

In hierarchical structures employees often look to satisfying their bosses first and customers second. A lot of corporate time and energy is expended on inter-departmental communication and information flow up and down the hierarchy which doesn't further the organisation's aims. As a result decision-making is slow and internal agendas begin to displace the resolution of customer related issues.

The horizontal structure is aimed at eliminating this "running on the spot" activity or "corporate churning" by organising around 'processes' instead of specialist skills. General Electric's lighting business for example identified 100 key processes directly connected to identified customer needs in its $3 billion worldwide operations, including new-product design and improving the yield on production machinery. Staff now work in cross-functional teams each of which owns an entire process. The whole operation is overseen by a senior team of less than a dozen people.

While reorganising around 'processes', Ryder System, a large US vehicle leasing organisation, discovered that acquiring a vehicle for lease involved some 14 to 17 transfers of paperwork and control between specialist departments. Change to a horizontal structure reduced this to 2 to 5 and purchasing cycle time was cut to one third.

But the companies concerned and expert commentators both warn that the move from a vertical to a horizontal structure involves a lot of difficulties and not a little pain. Choosing the right processes is a demanding and critical task. Then staff have to be persuaded to abandon old departmental allegiances and broaden their outlook which is psychologically threatening and unsettling for many people.

Extensive training is required to cope with the multi-disciplinary demands of the new roles, performance evaluation and reward systems must be changed to reflect teamwork and customer satisfaction, and information systems must be transformed to monitor process performance instead of departmental performance.

Before tinkering with the organisation chart, senior management's most critical task is to identify the markets and customers it wants to win and analysing how best to achieve this. A good starting point is to draw a 'Customer/Supplier Map' or 'Relationship Chart' to picture how the current organisation structure ties into customer needs. The map can then be re-drawn as often as is necessary to identify the key processes best suited to respond to customers and drive up productivity and efficiency.

The Customer/Supplier Map is a sort of inverted flowchart which starts with key customer segments and draws arrows down to the organisation's functional activities which relate directly to those segments. The arrows extend right through to the key suppliers on whom the organisation relies.

By mapping the customer's relationship into every aspect of the organisation, discrete tasks can be identified and grouped into overall processes ready for re-organisation into horizontal control structures. The map helps to highlight where uncertainties and difficulties lie and acts as a starting point for planning the radical shift from vertical to horizontal.

The concept of the horizontal corporation is the first indication that the 100 year old bureaucratic model which has proved so durable will eventually be overturned rather than simply modified and adapted with such techniques as matrix management, cross-functional project teams and corporate integration roles. It is too early to predict the demise of the vertical organisation but it is already being labelled as a "still- breathing dinosaur" by some commentators - simply too slow and cumbersome to cope with the pace of global competition and the age of rapid information flow.

19/8/94
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This is one of a series of articles written by Phil Cohen and Onno van Ewyk, HCi . Most of the articles were also published in the Australian Financial Review. This article may be reproduced only with the permission of HCi Consulting (email HCi ). Copyright HCi, 1993-1998.