The four types of corporate management

Created by Kudernatsch Consulting

Organizational structures in transition

When I look back on my twenty years of consulting experience, I see different emphases in corporate management, but especially in today’s times, different intentions with regard to massive changes in organizational structures.

Control company: But what are the general patterns here?

The four dimensions of economically active enterprises

Basically, all economically active organisations can be described in terms of control and management by means of four dimensions, which in turn are characterised by two axes:

  • I describe the horizontal axis with the two dimensions “inside” and “outside”.
  • The vertical axis I call stability and flexibility.

This results in four fields in which companies can be classified in different ways.

1.
Hierarchy

strongly inward directed and high stability

In traditional companies we find a strong internal view combined with high stability. Corporate management takes place via the classic hierarchy. There is a high level of internal bureaucracy, often with defined rules and full process documentation. Efficiency and productivity goals are the top priority and shape day-to-day operations. Classic target agreement processes à la MbO (Management by Objectives) are also administered by HR departments in particular.

The focus is on control and results orientation.

2.
Market

strongly outward directed and high stability

And, of course, all companies operate in the market. Here, however, it is noticeable that the view to the “outside” has massively increased in recent years. Almost every company talks about “service and customer orientation” or “customer added value” – at least these buzzwords or let’s call them declarations of intent can be read in vision and mission statements as well as in strategic pamphlets throughout. One tries to position oneself in the market by differentiation and to generate corresponding growth.

3.
Public good

strongly inward looking and high flexibility

In recent years, and especially since Corona, I have experienced that more and more companies are actively promoting “flexibilisation”, i.e. moving away from traditionally too rigid corporate structures. The value for the individual and the community play an increasingly important role: the team idea, the common good and above all “work-life balance” are being pushed by the employee market more than ever. Employers will have to differentiate themselves in the future as a result. Extrinsic motivation will play a marginal role. The actual meaning and purpose of the work as well as the transfer of responsibility (“empowerment”) are much more the driving factors for the desire and motivation for the job.

4.
Adaptation

Strong outward orientation and high flexibility

However, flexibility also means having a high degree of ability to adapt quickly to changes in the market and thus to position oneself decisively in the competitive environment. It is not only innovative strength that is becoming a differentiating factor, but in particular the speed with which new products, services and business models can be successfully launched on the market. Agility, the “entrepreneur in the enterprise” as well as distinctive creative thinking are the future success factors.

But the important thing is:

We don’t paint in black and white here! No company will ever be based in just one of the four quadrants. There will always be mixed forms, but in the most varied forms. So my recommendation is that companies need to find a balance, which may vary depending on the organization’s business model, e.g. some need to focus more on product innovation, others more on cost reduction.

Interestingly, all companies operate with the same or similar management systems. The only question is how they use them. For example, if you bring Hoshin Kanri or OKR (Objectives & Key Results) to a control-oriented company, they will use it as a control tool. When they bring these systems into an organization that is focused on flexibility and has a strong internal focus, it is used for employee development and consensus building.

I just recently had a conversation with Jeff Liker about this. He said that Toyota has found a balance that is rather balanced. In the third quadrant “Community”, however, an overall stronger expression can be seen.

The philosophy at Toyota is one of taking responsibility and learning. Toyota wants employees at all levels to have a clearly defined challenge that is aligned with the company’s goals, and they want those people to be accountable for their challenge. It is important to them that the employees themselves find out how they can achieve these challenges and that they also learn from the whole Hoshin Kanri process.

So top management doesn’t have to do all the thinking. While business leaders should think about what the company needs, they don’t have to figure out all the ways. Because these ways are found out by the employees distributed over the entire organization – not only in the phase of goal planning, but throughout the year in the context of the CIP process.

Now my question to you:
Where do you place your company?

I look forward to your feedback at info@kudernatsch.com

Yours Daniela Kudernatsch