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Organizing R&D Organizations for Success
Posted on December 12th, 2016 by Stephen Toton in Chemical R&D
Many corporations continue to organize their business units into global organizations to meet the needs of growing economies in many regions. And we continue to see divestitures and acquisitions in industrial companies to increase revenue and earnings, as well as reduce cost and leverage assets and talent. Recognizing these dynamics, I often get asked about the most efficient way to organize R&D in a way that can maximize growth. Fundamentally there a three ways to organize: Functional, Matrix, and Hybrid.
In this case, you can have all the R&D resources reporting to one leader and function within a business unit. The advantages are that project prioritization, resources allocation, time reporting, talent acquisition, budgeting and career development are all simplified.
The disadvantages are that unless you have a strong portfolio management process with a well-balanced long vs. short term allocation of projects, you may become very short term focused. Other concerns, would be ineffective leverage of key competencies within the corporation and limiting the career growth of key talent with the potential of losing them to the competition.
There are cases where strong functional reporting makes sense, particularly when starting a new venture within a corporation. You want everyone on the team to be very focused on the goals and milestones to make the venture a success.
Another example is applications development – having a dedicated team focused on meeting the application needs of key customers in a region. So if the responsibilities and goals of a group are super focused, it may make sense to organize functionally.
With that said, I think it is important to consider other models.
In this case, you have competency groups reporting to functional leaders, being leveraged across a variety of projects. I define a competency as a unique set of talent that distinguishes your company vs. the competition. So it could be groups of science and technology developing intellectual property that are unique to your business. E.g. Formulation scientists, biotechnologists, agronomists, process engineering, polymer scientists, semiconductor engineers.
It can also be a select group of marketing talent that’s focused on generating growth through innovation. The point is that that you’ve identified the key competencies in your corporation and are organizing them to gain the maximum leverage for identifying and commercializing growth projects.
The key to making a matrix organization work, however, is to develop a strong competency in Project Leadership. Project Leadership – not to be confused with Project Management – are individuals who possess the skill to lead innovation projects from Stage 1 to commercialization with resources allocated to the team from a matrix organization.
Project Leaders are experienced in all multifunctional aspects of commercializing a project, and understand the importance of working with a multifunctional team through the Stage Gate process. In my experience, more the 50% of project failures are attributed to non-technical issues. Most could have been identified early with an experienced Project Leader at the helm.
These individuals are good communicators, negotiators, and know how to manage conflict. They know the importance of communicating with key stakeholders, especially when risks and obstacles are identified and resources are needed to overcome problems. Good Project Leaders know how to motivate the team, and know when it’s appropriate to reward and recognize milestone achievement. They may have certifications in Six Sigma or the PMI (Project Management Institute), but this isn’t a must. Just be sure to address ongoing training and development needs.
To develop a competency in Project Leadership, the corporation needs to invest in the right HR mechanisms to attract and retain this talent. Many corporations are set up only to advance functional or business leadership talent. It’s important that the Project Leadership role is leveled properly to have the right compensation and career path. After all, these people become invaluable in commercializing new products and should aspire to higher level positions within the corporation.
When a Project Leadership competency is developed, there needs to be a strong network to allow them to share experiences, best practices and develop their skills.
Depending on the size of your growth projects, Project Leaders can manage up to three projects, all similar in application or technology. However, large growth projects may take full dedication. I don’t recommend functional leaders being part-time Project Leaders. I understand this may be a way to get started in developing a Project Leadership competency, but it’s not sustainable.
Recognizing it may be difficult to adopt either pure functional or matrix model, I could imagine an R&D organization where only certain competency groups are leveraged and others are functional. But I would still recommend developing a Project Leadership competency. The return on this investment will be high.
Regardless of which model you chose, it’s imperative to identify and develop your key competencies and consider developing a strong Project Leadership competency.
All opinions shared in this post are the author’s own.
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