Specialist units are the key to innovation

The news that GlaxoSmithkline (GSK) is restructuring its research
capabilities is very interesting from an organisational and HR point of view.

The decision to arrange its applied research into separate departments, each
focusing on different therapeutic areas, is a fundamental readjustment. The
move is reminiscent of BP’s decision in the 1990s to break its exploration
division into about 50 separate business units, each responsible for a
different field of oil or gas.

GSK’s restructure is an effort to create more output and a stronger pipeline
from its research facilities. The underlying rationale is that the best way to
develop new pharmaceutical products is by fostering specialist skills in small,
dedicated units. Each will have clear targets and accountabilities, with the
autonomy to decide how best to deliver.

For specialist units to thrive, they must either be arranged independently,
or at least have sufficient flexibility within the corporate set-up. There is
often a danger of suppressing or damaging activities if they fall outside the
mainstream corporate culture. Flexing corporate policies and procedures and
giving specialist units certain unique powers offers a degree of protection
against this problem.

But while separate or autonomous units have the potential to create improved
business results and return on investment, undoubtedly they also present
certain difficulties for HR in terms of common policies, training and
development, and co-ordination with other sections of the company.

The flip-side of specialisation is that synergy and co-ordination benefits
can be lost.

The challenge for HR practitioners is to develop policies and activities
that can be implemented across the whole organisation – but only if they do not
constrain the separate specialised units.

There is nearly always a trade-off between the need for specialisation and
co-ordination within the boundaries of a corporation.

In the 1980s, IBM successfully established a separate PC division away from
the main corporate centre. When faced with performance problems in the 1990s,
commentators said IBM should split the whole company into separate units, based
on the 1980s solution. But Lou Gerstner recognised IBM’s future lay in
providing integrated customer solutions. Thus a combination of specialisation
in product divisions and co-ordination through global sales and services became
the key to the company’s present success.

Companies need a clear framework with which to assess the difficult
trade-offs between specialisation and co-ordination. Sometimes, a more
‘boundaryless’ organisation, with closer co-ordination and collaboration is
needed. But often, a more ‘boundary-full’ organisation, with separated units
protected from corporate influence – such as GSK’s research function – is the

In either case, there are important implications for HR professionals
concerning how to implement and communicate changes in policies, procedures and
working practices, and in guiding appropriate relationships between the units.

By Michael Goold, Director, Ashridge Strategic Management Centre

Micheal Goold is co-author of Designing Effective Organisations (Campbell
& Goold. John Wiley & Sons, 2002)

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