How can corporate management be organized effectively and efficiently today? Frank Ahlrichs addresses this question in his contribution to the second anthology on the Enterprise Transformation Cycle "The transformation of corporate management in increasingly decentralized companies". In an interview with the TCI editorial team, he describes the most important developments and trends.

Frank Ahlrichs: "Corporate management is becoming more interactive"

BG: Hello Mr. Ahlrichs, thank you very much for taking the time for an interview. In recent decades, more and more different concepts have been developed and promoted as to how corporate management should best look. In your opinion, what are the most important trends and what should it "really" look like?

FA: Above all, corporate management is becoming more interactive. Stakeholder involvement changes many things. If we see our customers only as a sales market and our suppliers only as a procurement market, we will primarily set our goals within our company and delimit them against interest groups. The increasing speed and dynamism of the markets will mean that we will have to set more common goals and work together to achieve them.

This control will be decentralized. Hierarchical structures will be significantly reduced. The traditional role of a controller as a business service provider for management will change. Controlling will support value creation at the point where it happens: In the specialist teams, on the front line.

BG: What is the current trend and what do you think are the main factors behind this change?

FA: The key factor influencing change is its speed. This will continue to increase. This can be explained by various factors, including mechanization and digitalization. Moore's Law has been intact since the 1960s and will bring us gigantic increases in computing power and memory. This will bring three major changes for corporate management:

1. The objective is incremental. It will no longer be possible to set fixed goals for a long period of time, but instead concrete goals will be set at short intervals, for example quarterly, based on a common strategy. A good method for this is Objectives & Key Results (OKR).
2. Decisions are decentralized. Decisions on measures to achieve these goals are no longer made via an "official channel" by a manager who is not operationally familiar with the problem. Only measures with an impact on the entire company are still taken centrally.
3. Structural change makes comparability difficult. The comparisons with previous periods that are typical for controlling will hardly take place because structural changes have often occurred since the previous year and the figures are no longer comparable.

Overall, corporate management will be more strongly influenced by a modern type of opportunity and risk management. The "minutiae" of budget tracking at the level of cost types per cost center will disappear.

Corporate management: faster, more flexible, more agile

BG: To what extent can the transformation of corporate management - from previously centralized management to a decentralized structure - help to take these influences into account?

FA: Corporate management is becoming faster and thus reacting to the increased speed of the environment. And corporate management is becoming more agile, more flexible. Changing direction quickly, steering towards new goals, will increase competitiveness. However, this is actually a transformation, a paradigm shift and not just a new method. A lot has to change in many people's minds.

BG: What challenges does this pose for the people in the company - management, executives and employees alike?

FA: In his book XL8 ("Accelerate"), John Kotter described a much-cited dichotomy of the organization, a stable disciplinary and an agile professional one. Traditional management will focus primarily on the disciplinary organization. Here, the classic PDCA (Plan-Do-Check-Act) control cycle can continue to function and controllers will prepare the decisions for the managers. In the specialist organization, which handles day-to-day business in cross-functional teams, there will have to be real leaders, inspiring managers who are not superiors but enablers for their colleagues and employees. Here, management happens in teams and the focus is much more on market objectives than on internal company objectives.

And employees need a basic entrepreneurial attitude that allows them to implement the management as entrepreneurs in the company. There is then no longer a boss to whom decisions can be escalated. The employee is responsible for their management decisions.

BG: To return to the keyword "companycontrol to come back: How does this change the process of decisions made in/for the company?

FA: It is interesting to note that there is less and less of a predefined process, i.e. a clear rule. Instead of rules, systemic organizational design speaks of principles, which are general rules that guide all employees when making decisions. For example, a principle could be: "When in doubt, we pay more attention to speed than to cost efficiency".

Then you don't need clear processes, but shared values. However, this changeover is part of the transformation described above and will not happen overnight.

BG: Mr. Ahlrichs, thank you very much for the interview and your time.

The interview with Frank Ahlrichs was conducted by Beate Greisel for the TCI editorial team.

"Mastering transformation projects with the Enterprise Transformation Cycle" - published August 2020

The Transformation Consulting International has been supporting national and international transformation projects in companies for many years. Based on this extensive wealth of experience in practical implementation, the second volume, entitled "The Enterprise Transformation Cycle", has been published after the first. "Mastering transformation projects with the Enterprise Transformation Cycle: successfully planning, implementing and completing projects" published by the renowned Springer-Verlag. As a continuation of the first volume, this one takes into account further wishes and suggestions from readers and presents concrete transformation projects and action situations of TCI experts in their daily application of the ETC. The editors of this 500-page volume are Mario A. Pfannstiel and Peter F.-J. Steinhoff. You will find numerous theoretical and conceptual contributions as well as practical case studies on the "Enterprise Transformation Cycle".

Source cover image: © Seventyfour | Adobe Stock