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Beyond Specialisation: How Businesses Benefit When Opposites Attract Published : November 23, 2011 in Knowledge@Australian School of Business

Beyond Specialisation: How Businesses Benefit When Opposites Attract Since the early 1900s, HSBC – formerly known as the Hongkong and Shanghai Banking Corporation – has employed and trained a certain type of senior manager. For more than a century, the global financial institution's international management program has developed managers who are not only highly skilled in a portfolio of global management and banking technical areas, but who are also flexible and creative enough to be dropped into any territory or culture. The expectation is that they will cope with culture-specific challenges and develop their own and others' talents, while also growing the business's product quality, staff engagement, customer service and loyalty. This capacity to look inwards and outwards is like a corporate glue that engages the organisation's employees, reinforcing its values and culture.

Few companies manage to master seemingly contrasting skillsets at the same time – for example, staff focus and customer focus, being strategic and analytical, excelling at sales and service, or execution and innovation. But some organisations, such as HSBC, have discovered benefits from embracing opposites and becoming experts in all fields.

The HSBC group operates in more than 80 countries. To be successful in these markets the banking giant must be rigorous in its understanding of – and compliance with – regulations. But it must also be adaptable and flexible to respond to cultural and regulatory differences, as well as the varying maturity of each market, whether developed – as in the United Kingdom – or emerging, such as in Indonesia. All must align within a globally consistent operational and risk framework.

"True ambidexterity is about having the people within the organisation who have the mindset, skills and maturity to respond positively to different circumstances," asserts Michael Fraccaro, head of learning, talent, resourcing & organisation development at HSBC Asia-Pacific. "They align their behaviours to the group's core values and business principles which, above all else, are about acting with courageous integrity. This is critical when you have operations around the globe with over 300,000 employees – you want people who have a sense of empowerment, but also accountability."

Recently the banking group has been increasing its focus on building a diverse, inclusive culture. There is a strong commercial case for this, Fraccaro argues. "It goes beyond just having the right ethnic or gender mix. At a deeper level, it is about valuing different views and building teams with different, but complementary, skills, experiences and viewpoints or opinions. This difference can yield better outcomes for the organisation and its customers."

Valuing Contradictions

Judith MacCormick, a post-doctoral research fellow at the Australian School of Business, has been studying ambidexterity in businesses around the world since 1998. In times of rapid change, companies embracing the opposites are proving to be the most innovative and flexible and therefore successful, she says.

"Particularly over the past five years, recruiters have recognised that it's vital to hire people who are comfortable with complexity, and that's where it begins for an organisation," MacCormick explains. "People can still focus on their specialisation but there must be diversity within the group. This includes being good at a number of things at once, even if those things appear contradictory."

As a consultant to businesses throughout Asia, MacCormick found managers would regularly talk about the stages they had worked through with their companies. "They'd tell me that they'd been through an 'employees-first' stage, then moved into a 'customers-first' stage, for instance," she says. "They would have achieved both at different times. But as both business capabilities are seen as opposites, the companies would not do both at once. This sequential replacement of one fad for the next best thing was having some positive effect, but the impact was incremental."

Consecutive shifts in emphasis would result in employees tiring quickly of yet another change, MacCormick observed. Why can't contrasting capabilities coexist? she wondered.

"If they both add value, why not embed and leverage them together, flexibly drawing on multiple capabilities. The answer is not just innovation, or just execution. It is both. A big issue for organisations struggling with this is the old silo mentality, which prevents a great deal of innovation. Businesses that break down the silo walls realise their marketing departments, for instance, can teach other departments a great deal about productive and positive ways to use ideas familiar in one domain and apply them in unexpected ways in a new domain. An accounts department could teach another department about how to use data in new and different ways to approach and enter new markets. Innovation can be inspired from the fringe or from right there within your organisation. Businesses that are comfortable with complexity recognise the value of a very broadly defined diversity of structure and process and they use it."

When staffed with diverse, flexible thinkers, departments become better able to cope with change, to innovate and perform in any environment and under any challenge, MacCormick believes. Instead, innovation becomes everybody's job and the resulting highly engaging work environment inspires all employees to give their best. The organisation moves comfortably with standardisation and controls to deliver high levels of efficiency and effectiveness, and at the same time adapts, innovates and engages. The former is not restricted to manufacturing or the latter to research and development – both capabilities can exist in all business units, MacCormick points out. These capabilities – such as the need for compliance and performance in tandem – are drawn on as required within the firm and in response to changes in the external environment, such as the fallout from the global financial crisis and the rise of Asia.

Importantly, organisations that achieve true ambidexterity engage all stakeholders, from staff to customers, to suppliers and partners. A research study recently completed by MacCormick and Sharon Parker from the University of Western Australia supports this argument.

"This research highlights the importance of transcending a binary, either/or view of the work context," the pair report in their paper, A multiple climates approach to understanding business unit effectiveness. "Rather than emphasising one climate over others, managers are encouraged to foster systems and processes that encourage behaviours that demonstrate the capacity to look outward and inward at the same time, as well as enabling flexibility within boundaries ... Recognising that a source of innovation is often found in tension, rather than trying to eliminate the seeming differences, managers are encouraged to identify ways to accommodate the tension and use it constructively."

Previous research has ascribed the success of Japanese carmaker Toyota, as much to the company's ability to embrace contradictions such as being "stable and paranoid, systematic and experimental, formal and frank" as to its manufacturing prowess, Parker and MacCormick point out. "The organisation built routines and processes to achieve these goals."

Climate Over Culture

Within an organisation there may be a single culture, but there could (and should) be various climates within that culture, according to MacCormick. Her study with Parker demonstrated the importance of multiple climates that together influence effectiveness. Evidence that organisations have shown it's possible to accommodate multiple climates that are sometimes contradictory – such as control and flexibility – meant the researchers were able to support emerging theory that shifts organisational and management focus from a trade-off ("we can only be good at one or the other") to a paradoxical way of thinking ("we can be good at both").

From MacCormick's and Parker's study of hundreds of firms globally, they found business units that produced positive outcomes for key stakeholders had climates for internal control, external control, internal flexibility and external flexibility. Contrary to traditional literature on ambidexterity, which says organisations must manage conflicting demands by putting in place dual structures, meaning certain business units focus on flexibility while others focus on alignment through control mechanisms, the research showed that effective business units can emphasise both control and flexibility, as well as focusing inwards and outwards at the same time. Emphasising and promoting such climates provides a pathway to effectiveness.

"An effective organisation is perceived by its employees to value and act on their input (climate for internal flexibility), within a framework of clear expectations (climate for internal control), derived from an effectively communicated mission (climate for external control), while being open and responsive to customers and the opportunities that reside in the fast-changing world (climate for external flexibility)," MacCormick outlines.

Think of the late Steve Jobs and Apple, MacCormick says. The organisation was able to become stronger than others because expertise was encouraged in all areas, whether the areas were contradictory or not. Marketing and manufacturing, sales and service, function and form, strategy and micro-management – the business very publicly expected its staff across all areas of expertise, to innovate, not just in the R&D department. Opening Apple stores is a prime example of an innovative approach at a time when other retail stores were closing or going online.

"Case studies of successful organisations suggest that they have a climate for internal flexibility (practices such as teamwork and involvement in decision-making), a climate for internal control (such as close focus on standardised systems in which everyone operates to a strict set of agreed systems), and a climate for external control (clearly communicated mission and feedback) at the same time," write MacCormick and Parker.

In the cockpit of aircraft and for certain medical practices, there are systems for employees to bypass protocols if they judge this is best, demonstrating both control and flexibility, the researchers note. The increasing use of technology-enabled knowledge management systems demonstrates how analytics can be used to ensure alignment and consistency, at the same time as exploring unexploited opportunities both inside and beyond the organisation.

"Using metrics in this way could serve as a vehicle that demonstrates the mindset of accommodating contrasting climates," claim MacCormick and Parker. "Managers can put in place other systems – for example, performance management and reward systems – that encourage practices that reflect all four climates, as well serving as good examples, modelling the practices implied by all four climates."

Defining Ambidextrous Attributes

Three years ago executives at Challenger, the Sydney-based publicly listed investment management firm, decided to explore different approaches to leadership development. There was an anxiety at the senior level about the effectiveness of off-the-shelf development programs, so the decision was made to custom-build their own.

"(Challenger has) a fairly flat structure, a top-heavy specialist skill structure, so leadership from our perspective was a word that sparked a degree of anxiety because it had the connotation of leading a huge army of people," says Jennifer Wheatley, executive general manager of human resources for Challenger."But we were actually coming at it from the perspective of thought leadership and being entrepreneurial within a larger organisation."

Ambidexterity came into play. "We spent a lot of time with the CEO and his direct reports talking about the core skills and capabilities that had helped people to succeed at Challenger," says Wheatley. "That was an easy piece of work and there was almost unanimous agreement in the answer. The reason we had been successful was not because we valued one business capability over another. It was because we recognised that people had different skills and capabilities and we are highly collaborative – we bring all of those skills together at the right time."

Challenger worked with Judith MacCormick to develop a leadership program to be delivered to 25 to 30 staff at a time. The company employs about 500 people. The new leadership program became a formal way of introducing and recognising the company's ambidexterity. People knew that ambidexterity happened inadvertently within Challenger, Wheatley insists, but the program put structure around it and identified it as critical to future success.

"We expect that not only will participants identify the skills and attributes within themselves that relate to leadership in Challenger, but they will also learn about others and their differences. They will not only develop an individual understanding but will broaden their horizons in terms of people they would not necessarily work with everyday, but whom they will come across in Challenger. Once they have knowledge of what the different skills and attributes might be within other sections and departments, or even in their own department, they can begin to pair themselves up over time and really innovate."

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