In an early stage venture, one person performs more than one function, and the talents of all of the players are clearly visible to everybody. In a large corporation, there are usually many people in one function. Large corporations may have lots of talented people, and may claim that “their people are their most important asset.” However, tracking where the talent is across divisions, departments, and geographies in large companies can be a very difficult task.
Large corporations have complex structures that consist of holding companies, strategic business units, business lines, market segments, and product lines. They also have large administrative functions such as Legal, Finance, Human Resources, and Information Technology, which can be highly centralized or semi-decentralized. Multinational corporations have added challenges because of local laws that sometimes require a physical presence of some functions in the country, and cultural differences. They also consist of hundreds of legal entities around the world that require their own governance structures. The organizational structures are pyramids, with one executive having many senior managers, that in turn have middle managers, that in turn have junior managers, supervisors, and so on.
There is often very little cross-functional/organizational cooperation in such enterprises, that leads to “vertical” control, as opposed to “vertical and lateral relationships.” Hence in the 1990′s, the term “silo” was used to describe these vertical organizations. Silos are popular on farms in the Mid-West for storing agricultural products. The term was coined during the time the quality movement was gaining momentum – Six Sigma, Baldrige, and all that. So to get to a more cross-functional team culture, the silos had to be “busted.”
The relationships both between and within the silos can be very political. This is because in pyramid structures there’s always competition for the next level up. At the top of the pyramid, the executives think that everything is fine. However, they are often shielded from information because the middle layers block it. The people at the bottom are usually the “front line” who have customer contact. For example, bank tellers. Quite often, the CEO is the last to know what’s going on. Savvy executives will build lines of communication directly to the front line by-passing the middle management. This is one reason why big corporations are heavy users of consultants, because they can bypass the management structure entirely. Likewise, information is blocked going down the organization. Knowledge is power, so that last thing that a middle manager wants is for those below them to have information because the subordinates could overthrow the manager.
To make matters worse, the administrative functions, such as Finance and Human Resources can impose huge bureaucracy on the operational functions in order to maintain their power. If a centralized Human Resources function tracks the talent, it can become lost in the bureaucracy; if the function is decentralized, the talent gets lost in the depths of the organization.
Bright people become trapped within their own silos because there is very little cross-functional sharing. The middle management doesn’t want to give control or good people. In fact, large corporations can be about as bureaucratic as government. Admittedly, job posting systems can help match talent with positions across the corporation. However, these systems often become political, not beneficial, because a “preferred internal candidate” is often waiting in the wings.
Always be wary of the phrase that is commonly heard within large corporations, when they start a new strategic project, “we put our best people on it.” Usually that means that the functions sourced the worst people for the project because they usually want the project to fail if it has anything to do with change in their areas. Change is the last thing that anybody wants in a big corporation, because then the power base gets upstaged, which can affect jobs, compensation, reporting lines, etc.
This is one reason why when acquiring an entrepreneurial company, a large corporation should always be “arms length” from the acquiree.
For a large corporation to maximize its talent pool and to truly take advantage of people as assets, the CEO must personally ensure that the process for matching best talent to opportunities is effective.