Posted by: Arun Gupta
Cost center, Matrix organizations, Profit center
Not too long ago there was a CIO who was involved in a cultural clash upwards and sideways in a matrix organization. He supported multiple diverse business units across multiple geographies; the business units had CIOs reporting into the respective CEOs, they had limited accountability to the CIO. The CIO reported to the Group CFO locally and the regional CIO functionally; the corporate IT function under the leadership of the CIO supported all the business units across the geographies.
The CIO had taken over a team of submissive staff who never challenged the business CIO demands for fear of conflict. While the overall matrix was a bit complex with differing size and profitability of business entities, the equilibrium was largely maintained with some give and take between the business units and corporate functions. Chargeback was based on revenue as well as headcount; there was occasional rumbling and murmuring which was subdued before it could raise an ugly head.
So when the CIO met the business units CXOs he was surprised at their aggression and attitudes; it was justified that the business team will generate the demand and the corporate will take care of the supply. Corporate IT was expected to take orders based on what the business had decided as the direction and strategy to deliver the systems and technology. It would have worked well except that the timelines were rarely reasonable even when Corporate IT tried very hard.
Corporate IT was also responsible for BAU systems, the data centre, applications and networking. The divide reached morbid peaks during budget discussions; your cost is too high, business cannot afford to pay increases every year; find efficiency was the mandate. Scraping the bottom did not reveal much and that was unacceptable to the business. If business is not growing, how can the expense grow? Fair point as any was, with business seeing a downturn, it is imperative to cut cost.
The difference was that the business IT budgets grew while the cut was imposed on CIT budgets. This led to frustration and thus the CIO sought arbitration from his boss the Group CFO. That is when things started going out of hand; Business CIOs along with their CEOs represented that we are a Profit Centre while you are a Cost Centre; we pay for your existence and thus have the right to determine how you work while you cannot challenge how we allocate resources. Ouch!
Determined not to lose his temper the CIO silently looked at the CFO who gravely looked at his phone avoiding eye contact. With no help available, the CIO took the challenge head-on and suggested open book costing to get constructive feedback on what can be optimized. This was rejected upfront that it was not for business to run operational systems. Smiling the CIO offered a handover of all BAU systems to respective business units to run and transfer resources too.
Taken aback the group looked at each other; the CFO rose from his slumber to pacify and resolve; he suggested that the groups step down from their positions and create a working model that does not create conflict. The open book model was agreed to with benchmarks with the external world. This was deemed an acceptable compromise. His words on being a team and the need to work in harmony appeared hollow to everyone, which he too realized.
This is not a normal scenario in every matrix organization but some parts play out in every company. It is difficult to align direction when measurement criteria are disjointed. The open acknowledgement of team work towards success ensures that producers and consumers do not see each other that way; rather they work to create an ecosystem that motivates progress. Having been part of a few matrix structures, I believe that finally the culture of the company (read CEO/Head) will determine success.
If you have been a part of a matrix and have stories to share, I would love to hear them.