perspectives

The last frontier: Maximizing organizational synergies

By Larry Senn, Senn Delaney chairman

June 25, 2009
At a time when organizations have to perform at their best, and all the low-hanging fruit has been picked, how do you improve the bottom line and top line of your organization? One answer lies in gaining maximum organizational synergies, something most organizations fail to accomplish.

Very few holding companies with totally disconnected businesses exist today. It is also rare to find organizations with product and geographic diversification that are fully integrated. Most companies operate somewhere in between. They have business units, product or customer segments as well as geographic units. Somehow, all these elements need to work together.

How do you best utilize the functions or centers of excellence? How do you maximize shared services? How do you serve customers more seamlessly? Answering these questions can be worth billions of dollars to Fortune 500 companies and tens if not hundreds of millions to smaller ones. We have learned from our work with leaders that the real challenge is not about changing the structure or the reporting relationships. It is about changing the culture, beginning with the mindset of the senior team.

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Here is an example of how one of our client CEOs succeeded

When one of our clients moved from one company to become CEO of an international diversified company, he inherited a classic holding company. There were three businesses with three CEOs working in related areas but with very little apparent overlap. The CEO decided he wanted an allied business model, not a holding company. He wanted to find out what that white space between units was. He defined that as the potential from overlap or sharing. He challenged his team to explore how that overlap could contribute to profit or sales.

The challenge turned out to be more cultural than structural. While he did create a new senior team with a new charter, it took a culture-change process to create the shift in mindset needed for people to begin to explore potential opportunities. Once that began to happen, the synergies and cost-saving opportunities showed up in many ways, including shared procurement, shared call centers, shared customer lists, shared best practices and shared talent management. Within a few years, the CEO was able to add hundreds of millions of dollars to the bottom line.

Similar potential exists in many organizations where people are making decisions for their own business unit or function's best interest rather than in the best interest of the total organization.  Four CEOs discuss the challenges and successes in our recent round table article, Improving Performance Through a Shared Business Model.

Shadow of the Leaders plays a pivotal role

From our experience in guiding leaders to create shared business models, we have determined that the lever to drive the change is the functioning of the senior team: the CEO and direct reports. A set of behaviors needs to be in place at this level.

If you want to know if your culture best supports a healthy, high-performance, shared business model, just answer the following questions:

  • Do people make decisions in the best interests of the overall organization or in the interest of their segment of the business?

  • Is there a high level of openness and lack of hidden agendas at the senior team level? Do people trust and support one another?

  • Do senior team members fully support decisions of the senior team once they are made, or is there backdoor lobbying to the CEO or apparent agreement without commitment or action from senior team members?

  • Do people speak up and openly share their points of view in meetings or do the real conversations take place after the meeting?

  • Is the senior team what we would call a team together-team apart? By that, we mean do they align and support one another when they are together and remain just as supportive and aligned when questioned about a teammate back in their own area?

If you can answer yes to most if not all these questions, you can operate a healthy shared business model. All it might take is some conversations to agree on what that means for your organization and a little coaching of one another to ensure it takes place.

On the other hand, if you came up short on any of these questions, then it doesn't matter how you try to organize or reorganize, the probability of getting true synergies in your organization is low.

So, what then is the last frontier for major organizational improvements? We believe it's in a healthy culture with an aligned senior team committing to decisions for the greater good in whatever form they take.

For more information about what it takes to shift your organization to a healthy, high-performance shared business model, contact us in the U.S. at (562) 426-5400 or in London at +44 (0)20 7647 6060.