For centuries, organisations have grappled with the strategic dilemma of whether they want to be an Elephant or a Cheetah. The animal analogy is quite representative of two contrasting approaches to organisational design.
When an organisation decides to be an Elephant, it gears itself for mass production with little scope for customisation. The key is to harness ‘economies of scale’ through structures and processes that are monolithic and will not dance to the tunes of the market.
The Cheetah organisation is agile and fast, one that can react quickly to market changes, in hours or days, rather than months and beyond.
To me, an elephant represents a rigid organisation – one who has a massive size, scale of operations, well-defined process, standards, compliance norms, but very difficult to move, very difficult to change the direction under changing environments- whereas, a cheetah represents a completely flexible organisation – the organisation which can adapt to changing business needs in all aspects, and adopt news directions, new techniques to cope up with these changing need
Thinking, Fast and Slow is a best-selling 2011 book by Nobel Memorial Prize in Economics winner Daniel Kahneman which summarizes research that he conducted over decades,
Is your decision making – structure more alike to an elephant or cheetah
Is it a giant monolithic structure where everything has to be reviewed up and down the control hierarchy before anyone says, “Okay, pivot”!!
Smaller firms may have an advantage in that regard. Like the cheetah, they’re thin and lithe, while their Fortune 500 competitors more closely resemble an elephant: big and ponderous.
Take the case of recruitment in an Elephant firm. So maybe they will want everyone in their system to talk to a prospective candidate before signing on the dotted lines and rolling out the offer letters. But much as it happens so often, the scheduling of those multiple conversations across the hierarchy takes quite some time. By the time, they are actually able to decide, the candidate has already joined a different company.
A Cheetah firm will have a senior guy talk to a candidate, make a quick assessment and basis a few rounds of interaction close out on the decision.
Well, the drawback in the Cheetah or System 2 approach is that this quick decision making can probably be more effective in a company with day-to-day involvement of the owner. He eventually takes a call, based on a curious and uniquely mix of logic and instincts that gets into the DNA of entrepreneurs. When everyone in the decision making chain is an employee, the process might get more consultative in nature because everyone will want to have a scapegoat to save their backs if the decision misfires.
FMCG companies always need to decide between in-house and contract manufacturing, a classic trade-off between deploying fixed costs and paying profit margins to a contractor for doing work which you yourself could have done, had demand been more predictable.
Let’s us consider another classic example which comes to my mind.
Companies will never know for certainty their hiring volumes for the year.
Consider a pharma/FMCG company. Suddenly ‘red flags’ would be raised on the US FDA regulatory approvals, on the profit margins front. As an instant reaction, hiring will be frozen till the external climate improves.
Consider a professional services firm. When a partner jumps ships, he/she takes along the entire team and suddenly you have vacancies across the board.
Consider a start-up where suddenly recruitment freezes because of impasse on the funding front.
Now what does that mean for the HR team in charge of talent acquisition?
It needs to choose between an in-house Talent Acquisition team and employing an external agency.
In case of in-house team, be it employees or RPO, it can sweat those resources to recruit en-masse and thus derive economies of scale. But this comes with the fixed cost rider. Maybe you might not be able to utilize those assets because of the recruitment freeze and thus the costs become a pain for the system. You can’t lay off employees. You can’t bid Adieu to the RPO till the contract expires. They might as well ‘come, sit and go’ to draw pay-checks at the month-end
If the company opts for flexibility, it can engage an external agency to whom it can comfortably shut doors as and when it so desires. Superb, but when sudden demand surges, it will need to pay 8.33% of CTC for every successful hire. The costs can be humungous in case hiring volumes cross a threshold and thus will be highlighted as a painful vendor cost.
Let us consider the ‘dual supply chain’ model employed by the iconic Benetton. During the 1980s and early 1990s, Benetton was the world leader in the casual apparel market with stores spread across the world.
By the late 1990s, Benetton could not compete with the fast fashion retailers which were launching several collections a year, as against only two collections brought out by Benetton.
In order to meet the changing demands of the customers, Benetton revamped its supply chain, and opted for a Dual Supply Chain system. It adopted this famous “Postponement Strategy’, as an adaptive strategy where you delay point of commitment of work in progress inventory into final product and thus gain control of effective asset utilisation in a dynamic and uncertain world.
The company essentially postponed the dyeing of the garment till the colors in vogue for the season were identified
In this system, production was carried out in Asian and European countries, depending on the time required to market the product. The dual supply chain focused both on pull as well as push based demand. After implementing the new supply chain system, Benetton was able to launch five collections in each season, with some of the collections incorporating the latest trends.
This was a classic example of combining the Elephant and the Cheetah
Or maybe coaching the Elephant to play like a Cheetah
Having the elephants and the cheetahs comes with their own set of challenges,
Elephants live together, eat all day long, destroying their environment in the process, but only digest about 40% of what they eat, meaning that they “aren’t very efficient. They can’t sustain themselves. They are going extinct.”
However, cheetahs also have their issues: They can go from 0-60 in 3 seconds but “aren’t very smart.” To catch prey, they have to “trip up the animal.” Then, they take 30 minutes to recover. They are also going extinct
It would be quite an instructive case study to understand how some of the challenges are being addressed.
You see, both these animals (the elephant and the cheetah) are going to compete for the same organizational resources (forget the difference in diet for a moment), compete for spotlight and probably, the elephant would complain that the cheetah gets most of the attention while it does all the heavy lifting.
It is a classic trade-off decision that can have you keep guessing. Own a car and drive it to office or remain at the mercy of an Ola/Uber. The matter may go for surge pricing at its own whims and fancies.
Case in point could be the in-house employee complaining that he/she does all the running around while the recruitment agency bills 3 times his/her salary on the company in an year
So what are your thoughts? Can the elephant and the cheetah coexist and complement each other without creating too much of a mess?
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