Organizational structures and incentives support specific targets: they determine why people do what they do, rationally. Leaders hence need to ensure that these organizational structures support the right targets and behaviours.
A specialty logistics provider with annual sales of €300M and approximately 3,000 employees across six European countries. The client was the subsidiary of a significantly larger general logistics company.
Key source of business were national transports for mid-sized customers (95% share of total business). However, market growth stemmed from international specialty transports for large customers.
The company had faced a series of failures in developing competitive offers for international transports, let alone in winning them. Their prices were consistently above competitor levels, and offers were not defined and submitted to prospective customers quickly enough.
A root cause for this history of failure and loss was the lack of collaboration and mutual support of individual country affiliates.
A structured analysis of the organizational setup and incentive system of the management team and key employees in each of the six countries provided the fact base for gap analysis and discussion.
Each manager at country level was reporting solid line to his Country Head, and was incentivized only by his country’s target and budget achievement. Hence win rates for international transports, which involved significant cross-charging amongst the six affiliates, were much less relevant that a strong win rate for national transports within the manager’s own perimeter.
Together, LWC and the client designed a new organizational structure and operating model. The new organization followed a functional rather than a geographic design principle. The organization was structured by international franchises, with country resources reporting vertically within their franchise team. Each team was led by a competence center that was anchored in a key market, depending on available capabilities.
Visualizing which—entirely rational—behaviours the old organizational setup drove across its affiliates helped the client’s HQ management team realize the counter-productive nature of the existing model. The new model was designed to be fully aligned with the company’s strategic objectives, and supported by the company’s key leaders who had contributed hands-on to design it.
Implementation took eight months to make sure the future operating model was defined in detail, tested and refined where required. Shortly after, the company started on a path to continued double-digit growth, through international transports.