Is it worth the trouble? One organization famous for this kind of practice is India’s Tata Group, a global conglomerate made up of 100 companies, 300 subsidiaries, and 40 diverse business units. Tata’s broad range of business lines includes automobile manufacturing, chemicals, insurance, electric power generation, publishing, tea, and engineering services, which all fit together (as Gurnek Bains notes) in achieving the common core purpose of building “what India needs next.” Chairman and CEO Ratan Tata is known for selecting and fostering internal boards for the group’s many subsidiaries. The boards are not caretakers; they are expected to make strategic decisions, and their leaders coalesce to coordinate major decisions for the Tata Group as a whole. The boards are also expected to create managerial bonds among Tata’s businesses while maintaining their independence.
Through their actions, leaders have a great deal of influence over an organization’s culture, but very little of that influence is direct. They can’t make a team more skilled or committed through directives alone; requirements mean very little if they cannot be translated into specific behavior changes. We’ve learned this at Booz Allen through our own work on building organizational capabilities for change, and in particular through the body of practice known as organizational DNA. By changing the reporting relationships and structures, the networks through which people exchange information, the motivators and incentives, and the decision rights in an organization, organizations can shift their capabilities and motivate people to act in sync with the organization’s purpose.
These four “building blocks” (as organizational DNA theorists Gary Neilson and Bruce Pasternack call them) are not the only factors that leaders can use to influence organizations. Indeed, management literature is rife with levers for change, ranging from new information technology to new human resources practices. They all have one thing in common: Unless they are explicitly aligned with the purpose and strategy of a company, they will tend to forestall and undermine the desired strategic direction.
Consider the short time frame of executive assignments in many American and European companies. Brand managers in consumer products and pharmaceutical companies, for example, are accustomed to rotating positions every 18 to 24 months. This means they often escape dealing with the consequences of their decisions, and they are unwilling to make investments (such as in developing innovative new products) that will outlast their tenure. But companies that try to counter this by making assignments last longer, as Japanese companies do, risk losing talented people who assume, “I’m a high-potential person, and therefore I should be moving.”
To deal with this dilemma, a series of interventions may be needed, depending on the purpose of the company and the nature of its industry. For example, if the company is focused on what Nikos Mourkogiannis calls “discovery” (the continual search for new ways to do business and learn about the world), it may be possible to keep a brand manager in place by building the capacity for continual invention. This might mean using informal networks — arranging regular calls and meetings, for example, between marketing and R&D. It might mean giving people more opportunities to take courses or collaborate with others outside the company. A company interested in altruistic goals, like service, could offer very different incentives (such as a more flexible schedule that allowed employees more control over their time) or more formal links between marketing and customer service.
The Right Questions
An immense body of literature already exists on each of the four areas highlighted in this article: purpose, the top management team, organizational capabilities, and strategic initiatives. But research in the strategic leadership field is so fragmented, unreliable, and obscure that many designers of strategic leadership initiatives base their approach on only a small fraction of the knowledge that exists.