organizational design

Why reducing corporate overhead costs is not a ‘Get Out of Jail Free card’

Dirk VerburgLeave a comment

It is tempting for CEOs to try to appease their shareholders by reducing corporate overhead costs. It seems to be the corporate equivalent of a ‘Get Out of Jail Free card’ in Monopoly: it is free and can get a CEO out of a tricky situation.

The reason is that everyone loves the notion of lowering corporate overhead costs, and especially reducing the number of people in corporate roles.

Whereas the supervisory board occasionally might call for caution, you will never hear shareholders or analysts complain and Business Unit leaders usually love the perspective of lower corporate charges and more independence. Most often, corporate functions cannot count on a lot of sympathy from the rest of the workforce either. They are seen as overpaid ‘bureaucrats’, ‘paper pushers’, and ‘PowerPoint wizards’ in ‘back-office’ roles.

Reducing overhead is also not very difficult. Usually, there are plenty of young runners-up in large organizations dying to prove themselves to corporate leaders. If not, consulting firms are happy to line up for beauty parades to show off their capabilities in this area.

It is also not that hard – at least, I have never seen a corporate cost savings initiative not achieving its short-term financial objectives.

So eliminating or reducing these corporate functions is a great idea, right?

Unfortunately, it depends…

Eliminating or reducing corporate functions poses risks for CEOs in three areas:

  • Compliance
  • Shareholder activism
  • Boardroom dynamics
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Church Politics: The three organizational challenges congregational churches face

Dirk VerburgLeave a comment

Applying Mintzberg’s concept of Community Ships

Recently I interviewed Henry Mintzberg about his latest book ‘Understanding Organizations…Finally!: Structuring in Sevens’. Central in Henry Mintzberg’s work about organizations is the question how they organize themselves to get work done.

Although his research and examples largely originate from organizations in the private and public sector, in his latest book he also describes a special kind of organization that does not fit into one of these categories: ‘The Community Ship’.

According to Mintzberg, Community Ships have the following characteristics:

  • Their culture forces the community to pull together
  • Members of the community are considered to be more than employees
  • The community is tightly knit and operates differently from other organizations in their environment (like a ship at sea).
  • The community closes ranks to protect itself from influences from the outside world, or use its position for evangelism (‘to launch missives at whatever they want to change on shore’.)

Congregational church communities as Community Ships

In this post I apply Mintzberg’s concept of ‘Community Ships’ to congregational church communities.

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Organization structures matter: how much ambiguity costs can your business afford?

Dirk VerburgLeave a comment

Everyone who ever worked in a large organization, can probably relate to at least one of the following examples of conflicts that regularly occur in organizations:

  • A sales leader wants to close a deal with a low margin to meet her targets and to safeguard the relationship with the customer. The product manager does not want to sign off on the deal, because she wants to protect the margin of the product in the longer term
  • A business leader wants to hire a star performer working for another company, and is prepared to pay her more than the maximum of the corporate salary band for these types of roles. The HR Business Partner tries to prevent this because he does not want to create a precedent that can create upward pressure on the salary costs of the company
  • The head of a shared service department wants to hire an independent contractor for a project for USD 1.200 a day. The Purchasing department forces him to work with a consultant from a well-established firm on the preferred supplier list, for a fee rate that is 3 times as high as the one of the independent contractor

These, and other types of conflicts, seem to be an inevitable part of life in large organizations. The question is: why we have those types of conflicts, and if and how we can prevent them?

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