During a surface interval between two dives along the shores of a remote eastern Indonesian island is the last spot on earth I expected to be confronted with the question of whether global matrix virtual teams are here to stay.   Yet, it happened.  As we were both letting our nitrogen champagne quietly bubble in our bloodstreams, the senior sales director of a western European multinational popped a question that immediately brought my head back to semi-work mode.

After a momentary regret for earlier letting out my carefully guarded little secret on what I do for a living, I was intrigued by our impromptu debate on one of the hottest corporate workplace topics today – matrix management.  I’m sure numerous theses and studies have been conjured up by more prominent scholars on the subject, but I can guarantee not many have been professed under more ‘real-world’ circumstances.

Chris fired his first salvo at the faulty cost analysis when multinationals move their operations from developed-country home-bases to emerging markets:

“We built manufacturing plants in countries like China and India because it’s cheaper to operate.  However, the challenges we had to manage to get these operations up to speed took inordinate amounts of time and effort.”

His second salvo landed on the vast underestimation of transaction costs in the global matrix virtual teams he had to lead as a project manager prior to his current role:

“I wish someone would do a full-cost analysis of all these global matrix virtual teams!  So much time was wasted on travel, emails, meetings and conference calls.  I’m not sure if these structures are really the best.”   Chris’s last comment was a committed proclamation:  “I think soon everyone will realize this global matrix virtual working structure is not efficient and we’ll all go back to the good old days!”

The button was pushed.  By this point, I couldn’t help but get fully seduced into this conversation.  Not surprisingly, Chris is not the first person whom I’ve come across lately who’s challenged the sanity of a complex global matrix structure in their organizations.  This highly polarizing topic is one of the hottest conversation pieces in contemporary corporate lunch rooms.

In each of these conversations, I think the facts are clear but the conclusions are suspect.  Yes, the gap of cost benefits between developed and developing markets is closing more and more.  Yes, it is indeed difficult and frustrating to work in a global matrix virtual structure.  But no, I don’t think the past is the way for the future.

Leaders in companies do not make decisions to build their organization capabilities in other markets beyond their home-base purely because of financials.  The money factor might be the short-term impetus.  Other criteria often carry this consideration into a feasible commitment.  Innovation has to come from full-fledge involvement in a product’s life-cycle; customers demanding speedy resolutions require immediate attention; regulatory variations increase the need for tailoring and customization; market access politics mandates local content.  These are but a few of the reasons why companies establish local operations beyond just cheap operating cost.

The choice to be an integrated global entity is no more a choice.  It is an imperative.  Therefore, we will continue to see global companies put operational capabilities into more and more markets.  The type of capabilities might shift over time with social economics, but the trend of a more integrated global business however will not reverse.

On the other hand, ignoring or low-balling the transaction costs is indeed a common pitfall when organizations transition from a traditional silo structure into a global matrix virtual organization.  Companies are pushed by market dynamics to pursue a strategy – and consequently set up a structure – as a complex matrix.  They often neglect the tremendous alignment that is needed on their systems and skill-sets in order for them to deliver the promise of their strategy and structure.

This is the frustrating gap that’s commonly the complaint of individuals.  Leaders or team members alike are left to navigate the global matrix virtual team structures at their own peril.  Even well-tested leadership and management instincts often spawn inefficient practices in the new world, resulting in unintended inefficiencies in communication and cooperation.  It increases the transaction costs working in this new environment.

As our conversation waned, Chris and I began to converge on two ideas:  One, the global matrix virtual way of working is here to stay.  It is a fact of life for the world we live in, and will be living in the foreseeable future.  There’s little chance of going back.  Two, the transaction costs of operating in this new world are not acceptable if left unmanaged.  Leaders need to be fully aware of the total cost of this new way of working, and provide adequate attention and resources to the development of systems and skills-sets so individuals can achieve a level of productivity in their work place that is sustainable in the long run.

A sense of closure arrived just in time as one of our dive computers beeped to let us know it was safe to commence our second dive.   In diving, as in most things in life, safety is not always going back to what you used to do.  We can’t go back when we can’t control the environment.  No one can re-live exactly the same dives they’ve done before.  However, to plunge into new depths without equipping yourself with the right skill-set to handle a new set of reality is just asking for trouble.

(You can read a related article “In Pursuit of Nissan, A Jobs Lesson for the Tech Industry?” published under The iEconomy in the Business Day section of the New York Times on Aug 4, 2012)

About the author:

THOng An expert practitioner in organizational effectiveness, change management, performance management, leadership development and employee training, TH Ong is Global Integration's Vice President for the Americas and is spearheading the company's Asian expansion. Company profile: TH Ong.

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