One of the most fundamental and enduring tensions in all but very small companies is between subunit autonomy and empowerment on the one hand and overall organizational integration and cohesion on the other.1 The tensions grow with increasing organizational complexity and assume the most intensity in large, diversified global companies.2 In our research with such organizations, we have seen that it is possible to balance those tensions successfully by implementing four kinds of horizontal integration for achieving cohesion without hierarchy.
Over the last decade, many large companies around the world focused on creating relatively autonomous subunits and empowered managers by breaking up their organizational behemoths into small, entrepreneurial units. Some, though not all, achieved significant benefits from such restructuring.3 Freed from bureaucratic central controls, the empowered units improved both the speed and the quality of responsiveness to market demands — and fostered increased innovation. Companies were able to reduce their corporate-level overhead and make internal-governance processes more disciplined and transparent.
However, the empowerment of subunits also led to fragmentation and to deficiencies in internal integration. The autonomous managers of subunits saw few incentives to share knowledge or other resources, particularly when evaluation of their performance focused primarily on how their own unit was doing, rather than on how the unit contributed to the company’s overall performance.
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