A Brief Introduction
We discussed an interesting case just yesterday on Tetra Pak CT written by Prof. Lars Lindkvist, Linkoping University. The case did appear to be a bit difficult. But the group presenting their analysis did a brilliant analysis. Their analysis led to some key issues which I have summarized after the succeeding paragraphs .
Tetra Pak (CT) was a R&D unit within Tetra Pak, a leading company worldwide in developing and producing process, packaging and distribution system for liquid food. CT was established in 1989 but by the beginning of the 90s demand for its services diminished.
At that time, CT had a traditional line-of-command structure organized along functional units, which were subdivided into smaller, technical specialist departments. Line managers tended to focus more on their line duties than on project goals. This led to a reinforcement of their technical character while downplaying customer focus. As a result, project leaders were accountable, but had little authority, and individual project members felt torn between the demands of the line organization and the project they were engaged in.
The new MD and a team of top managers decided to conduct a SWOT analysis. The SWOT lead to a major decision – restructuring. The former matrix organization dominated by the functional units was abolished, and instead a purely project-based organization was introduced. The revolutionary change efforts were successful. As a result the organization was no longer on the edge of survival and demand for its services increased manifold. Between 1994 and 1999 demand doubled several times over. So also the number of patents increased.
Character of the new CT structure promoted the picture of a very flat decentralized system. It was loosely coupled, dispersed yet integrated enough to produce valuable services. CT carried out its operations in projects that were largely self-organized within goals set for quality, cost and time.
What were the main reasons for success in the reorganization initiative?
Some of the key issues are given below:
(a) The challenge was to develop CT as customer focused and move out of their inward focus. For this a project-based organization was considered necessary. This will enable a team-based structure with minimal hierarchy levels.
(b) A functional organizational structure has the advantage of increasing specialization and expertise. It also creates accountability and pride in ones function. On the other hand it suffers from lesser inter-functional coordination due to ‘silo’ mentality. Here Jack Welch’s teaching on creating ‘boundarylessness’ helps in introducing structural mechanisms that improve cross-functional relationships greatly. The overall organizational effectiveness improves.
(c) A change in focus inwards towards the customer will need a change in the mindset of the people. Structure alone is a blunt weapon it cannot create such a change by itself. A lot will depend upon the depth and vision of the change initiative. Communication the message of change with awareness is important.
(d) Self-motivation can emerge only if a spirit of entrepreneurship is made to prevail. Insecurity must be allayed specially in the people who may not be in a position to rely on authority of position and technical expertise.
(e) A question that may arise is that why can a similar change be achieved in their earlier functional organization? Yes it can for a manufacturing organization but for a purely researched-based organization a project form is most suitable.
(f) CT needs to emphasize a global vision that is sensitive to cultural diversity. This will enable alignment to customer preferences in packaging needs. The challenge is to move from an ethnocentric approach to one that is geocentric.
(g) CT in its vision could give importance for research to develop biodegradable material as a replacement to plastic. The recycling support presently being given in some cities is appreciated by the customers.
Note: As suggested by Raju in his comment below I am inserting a link for the case abstract by the author of the case study. The full text is not available on-line.