Building the Velcro Organization

Kevan Hall reviews “Building the Velcro organization: creating value through integration and maintaining organization wide efficiency” by Joseph L. Bower.

The article is based around the metaphor of a flexible business being like Velcro, cohesive when in place, but capable of being easily rearranged when circumstances and strategy calls for it. However, it also proposes that this requires a high level of mastery of the basics.

The article describes an environment of focused strategic business units and country organization to manage operating activities, but combined with an increasing need to cooperate across operating units through ‘vertical’ links among related businesses in order to apply leverage and seize opportunities – a familiar story for most large businesses today.

It identifies a common challenge: managers of the individual business units had limited incentive to cooperate and were rewarded on their individual unit objectives. In our experience it is very common in the early stage of a matrix for incentives and rewards to be misaligned:we ask people to think globally, but reward local behaviours.

The paper makes the point that quality improvement tools and processes tend to focus on the operating unit, although since 2003 (the date Of the original paper) I think these improvements have increasingly become based around business processes that cut across the organization such as the supply chain, not just around the level of the plant or the country.

The paper brings some useful examples from companies like Viacom and WPP, and identifies the usual challenges in making the matrix work.

Bowers idea of ‘The Velcro Organization’ is based largely on high levels of understanding and awareness, skills and values in the minds of the managers, together with a very flexible management system that allows us to reconfigure the data and always offer a consistent message. In effect, he is describing something which is today often referred to as a ‘network organization’.

The challenge with this level of flexibility may well be in the way people work together and how incentives are aligned. We find, even in the most flexible matrix, people do want to be clear about “who does the leadership stuff?”.

This doesn’t necessarily mean having multiple bosses, but it does mean a clear allocation of who drives the objective setting process, appraisal and career development. People seem usually to be highly uncomfortable with ambiguity in these specific areas.

The article ends by stressing the primacy of compensation as a success factor and some recommendations on performance management.

Because priorities change rapidly in a complex, multidimensional organization, I don’t think we should be thinking about ripping the organization apart and reforming it constantly every time these change. We need to provide some continuity of the networks and communities (the article gives an example of a McKinsey overlay of knowledge communities) that we need to be flexible in how we manage our activity. Formal structural changes are a very slow and an ineffective way of doing this, so we need to focus on the behaviours and ways of working that allow us to balance the daily dilemmas of working in a complex environment and flex within a matrix to do what’s necessary.

Article reviewed – source: Bower, Joseph L. “Building the Velcro Organization: Creating Value Through Integration and Maintaining Organization-Wide Efficiency.” Ivey Business Journal (Online) (November/December 2003).

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