When organizations introduce matrix management, they are usually trying to create a more integrated and connected business. It starts with strategy and structure, then moves onto aligning systems and skills to this more horizontal way of working.
In systems, many organizations introduce some kind of ERP (enterprise resource planning) software to make the organization more seamlessly connected. The major suppliers in these areas include Oracle, SNP and Microsoft.
Over the past four years Panorama Research (an independent ERP consultancy) has been surveying companies implementing ERP systems. Their survey was mainly of small and mid-sized organizations – 84% of them have less than 1,000 regular users (note this is not the same as the number of employees, but the regular users of the system) and half had revenue of less than $50 million.
Findings from the survey included:
- the average cost of implementations has been $7.3 million over the past four years (It’s not clear, but this probably excludes internal costs such as in company time put into the implementation.);
- the average duration is 16.6 months;
- 59% of projects exceeded their planned budgets;
- 53% of projects took longer than planned;
- 56% of organizations received less than 50% of the benefits they anticipated from the initiative;
- average payback of the investment was 25 months.
On Wikipedia, it is estimated that “for a Fortune 500 company, software, hardware, and consulting costs can easily exceed $100 million (around $50 million to $500 million). Large companies can also spend $50 million to $100 million on upgrades. Full implementation of all modules can take years,” Midsized companies (fewer than 1,000 employees) are more likely to spend around $10 million to $20 million.
So we’ve established that the software and systems needed to create a more integrated business are expensive and take a long time to implement, with a significant risk that they won’t deliver the benefits anticipated.
Skills and culture
When we turn to changing the skills and corporate culture of the organization to make it more integrated, the story is often very different.
Most organizations will do some strategic communication around the new structure. Some will offer specific skill training to people new to matrix management and matrix working, but many do not.
Changing skills and attitudes is much harder than changing software. Yet we often think people will just “work it out for themselves.”
Matrix management isn’t just a matter of changing your people competencies and telling people about structural change – it’s a major people change activity.
Just one example – matrix management can lead to a big increase in the number of face-to-face and online meetings. In one sense, it’s what we want – to create more connection across the organization. However, this often leads to an increase in poor quality collaboration.
It’s not enough however to address this by offering training or (even worse) just by sending an e-mail about meeting guidelines. We have to change our assumptions about collaboration. We have to provide communications technology infrastructure and training, and we also need to enable people with the skills to manage remotely, to get things done without face-to-face contact, and, with that, decision processes in an environment where not everyone can be involved in everything.
Once we have understood that collaboration is different across distance, time zones, cultures, technology and organization complexity we have to embed this understanding into all of our leadership, collaboration, ‘high potentials’ and transition training programs.
If we continue to value and celebrate people who jump on an airplane at the drop of a hat to solve a crisis, perhaps we will undervalue the people who work quietly and effectively and never have a crisis in the first place!
This is just one small example from the area of collaboration.
We need to align all of our people processes and capabilities to a more horizontal way of working, where multiple bosses, accountability without control and influence without authority become the norm.
For many HR professionals, the idea of looking for a budget of millions of dollars to support such a change would be difficult to sell. But we routinely spend 10 or more times this amount on software changes, which we know will eventually work – because it works in other companies.
I believe we need a mindset change in how we introduce new ways of working. They don’t come for free, and in the absence of a systematic change people will tend to default back to their legacy way of working. You don’t enact major change with a workshop alone.