Organizational Transformation: A multi-Dimensional view

Many organizational theorists have stressed is absolutely essential to have representatives from finance, accounting, marketing, and operations to redesign a company’s transformation process. No matter how strong the talent within each department, every individual sector of the company will inevitably be subject to some degree of tunnel vision. In short, every department will believe that its own field of specialty and the paradigm through which it views the current market and the company’s future is the most important one. An example of this might be a marketing department that has come up with a unique and innovative promotions opportunity, such as employee pricing, that may boost sales and satisfy the department’s data regarding demand, but costs the company too much in the long run for it meet a crucial financial ‘bottom line.’ A contrary example might be provided by an accounting department that has discovered a way to slash costs, but will eliminate certain aspects of the company’s current line of cars that are crucial to the company’s image when marketing its product. These are just two hypothetical examples of how organizational decisions regarding customer demand or pricing cannot be confined to the expertise of individuals from the department directly responsible for making specific decisions. When an entire organization is being restructured, the change must be comprehensive and holistic, not simply directed by one vocal group of people.

At GM specifically, different areas of corporate interest have often been in conflict. Although its recent financial woes with its labor unions have gotten the most press, and are exercising the most notable drain upon its resources, many auto industry analysts trace its current problems back to 1984, when former Chairman Roger Smith nearly drove the company into bankruptcy. “Back in the mid-1980s, GM failed spectacularly when it introduced an all-new line-up of mid-size coupes. They hit the market just as buyers started switching, en masse, from 2-doors to sedans and SUVs” (Einstein, 2002:1). An over-emphasis on financials and operations yielded insufficient attention to marketing data about shifts in consumer buying trends. Although GM rebounded by introducing popular lines of SUVs in the 1990s, even in 2002, one auto industry analyst warned: “Once the king-of-the-automotive-hill, controlling as much as half the American marketplace, GM [has] suffered steady declines in share, margins and earnings, its plants some of the automotive world’s least efficient” (Einstein, 2002: 1). Consumers were buying fewer GM cars, and GM factories were inefficient in their standard operating procedures — both issues had to be addressed for the company to become profitable.

What conflicting objectives might you anticipate from each area?

So why do conflicting objectives between departments in an organization undergoing the same crisis ensue? Take the concept of “lead time,” or the number of months or years it takes to get a car into production once a company has frozen its basic design (Einstein, 2002:2) Operations might want to reduce this time as much as possible, but marketing might want to keep the time plan more flexible, so alterations can be made in the car’s style to reflect sudden changes in demand, like a sudden desire for smaller or more fuel-efficient cars because of a spike in gas prices. Finance and accounting departments might be pleased at the revenue saved through lead time reduction, but might also be resistant to acquiring new types of machinery to make production more efficient, for fear that such efforts may not pay off in the recent bottom line.

Thus, conflicts can occur because of three reasons:

Temporal differences in departmental focus. Marketing departments may focus on the upcoming sales figures in the next season, finance and accounting may focus on the need to show a good return on investment in the upcoming statements to shareholders. Operations may take a long-term view in terms of savings from obtaining new equipment, while accounting departments may be more wary of the projected expenditure.

Conflicting ideas about company image and mission. While financial departments may want to show how well the company is doing to company shareholders, accountants may have concerns about keeping returns ethical and compliant with regulations, even if it means showing less of a profit. Marketing department’s desires to reach out to a potentially lucrative new market may face operations obstacles.

Personality conflicts — quite simply the personality profile of employees drawn to different specialties might be quite distinct, and not altogether compatible, even if they are part of the same organization — the departments may have different organizational cultures.

What are the advantages and disadvantages of using a cross-functional team in redesigning a company’s transformation process?

“cross-functional team is a group of employees from various functional areas of the organization…who are all focused on a specific objective and are responsible to work as a team to improve coordination and innovation across divisions and resolve mutual problems” (Kotelnikov, 2007). By using a cross-functional team conflicts between different departments are more likely to be aired immediately, rather than result in greater problems later down the line. Also, this type of team can bring a more nuanced and multifaceted perspective to the need for an organizational transformation. The ideal of these types of teams are that they create synergy and out-of-the-box thinking by providing multiple perspectives. These teams can also be used to dismantle outmoded organizational hierarchies. Cross-functional teams can facilitate communication between branches of the company that traditionally do not have very much interaction with one another, and create a more integrated organizational atmosphere in general. GM has been criticized in the past for being excessively hierarchical and during a major organizational overhaul, creating an organization that integrates, for example, marketing analysis of consumer desires with restructuring operational functions might prevent bad decisions being made in the future by specific departments.

However, “is not easy, pulling a group of diverse individuals together to work as a team. Barriers abound, in the form of fierce territoriality, incentive systems that reward individual rather than collective achievement, and mistrust spawned by an acquisition, merger, or major internal restructuring. Yet at a time when companies are increasingly relying on cross-functional teams at every level to generate innovative ideas, it’s more crucial than ever to tap the fresh thinking that teams can provide” (Johnson, 2005).Teams are usually rewarded collectively, which can make creating a cohesive unit between individuals from different organizational difficult — the challenges of a crisis and pressure to complete a daunting task, such as a major restructuring, in a tight time frame could be counterproductive because of hostility and unfamiliarity.

Thus, the advantages of cross-functional teams are as thus:

Multiple perspectives on the same problem

New ideas through clashing multiple perspectives

Doing away with organizational hierarchies and/or outmoded ways of thinking through enhanced communication

The disadvantages:

Lack of team cohesiveness in a crisis situation

Difficulty of overcoming organizational territories

Increased risk of personality conflicts during an organizational crisis

Overall, the benefits seem to outweigh the potential disadvantages, and if territories and barriers can be overcome, the organization will emerge stronger as a result. But it must be stressed that problems must be anticipated, and not be assumed to evaporate, merely because all team members are ultimately embarked upon the same goal of positive change.

Works Cited

Einstein, Paul. (19 Aug 2002). “Transformation at General Motors.” Car Connection.

Retrieved 12 Jun 2007 at http://www.thecarconnection.com/Auto_News/Daily_Auto_News/Transformation_at_General_Motors.S173.A5203.html

Johnson, Lauren Keller. (21 Oct 2005). “Overcoming Barriers that Destroy Teams.”

Retrieved 12 Jun 2007 at http://hbswk.hbs.edu/archive/5068.html

Kotelnikov, Vadim. (2007) “Cross Functional Teams.” Ten3 Business e-COACH.

1000 ventures.com Retrieved 12 Jun 2007 at http://www.1000ventures.com/business_guide/crosscuttings/cross-functional_teams.html