Integrating the Enterprise

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A fundamental management challenge, particularly in large, diversified global enterprises, is the tension between subunit autonomy and companywide cohesion. New research uncovers several ways top companies balance that tension.

In the last decade, performance criteria often ignored how managers of subunits contributed to companywide performance. Empowerment efforts improved unit competitiveness but left knowledge sharing behind. Today (because customers' needs span internal boundaries and because technology has changed the way innovation gets managed) managers are recognizing the need to address the integration side of the tension.

At one company, BP, CEO John Browne created a peer-assist process to help his business-unit leaders integrate horizontally. Managers who ran similar businesses were assigned to help one another improve both individual and collective performance. As the culture evolved and managers successfully handled ever tougher endeavors, both entrepreneurship and mutual trust were strengthened.

Executives who want to build horizontal integration without disrupting entrepreneurship must allow time for persistent action and reinforcement to take hold. Although they have to be relentless in driving the process, they must be patient about results. Such leaders will reap enhanced organizational capability and sustainable improvement of business performance.

Sumantra Ghoshal is a professor of strategic leadership at London Business School, where Lynda Gratton is an associate professor of organizational behavior. Contact them at sghoshal@london.edu and lgratton@london.edu.

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