Can a company grow too big to manage?
Based in India, Tata Consultancy Services (TCS) has about 285,000 employees and $11.6 billion in annual revenue. Its CEO, Natarajan Chandrasekaran, faces a daunting challenge: maintaining the firm’s fast growth without letting it balloon into a bloated mess.
Since becoming CEO of the software services provider in 2009, it has almost doubled sales. And it has a compound annual growth rate of 21% amid a slowdown in its main markets of North America and Europe.
To manage such a massive organization, Chandrasekaran set up an internal “CEO factory.” He split the company into 60 business units—each with 3,000-5,000 employees and maximum revenues of $250 million.
The heads of these decentralized units wield wide-ranging autonomy. They can negotiate their own vendor contracts and make speedy decisions to accommodate customers without seeking approval.
Thanks to this new structure, customers report the company is less bureaucratic and more responsive to their needs. Better yet, Chandrasekaran now has more time to focus on long-range strategy because he’s no longer pulled into day-to-day operational issues.
When a unit’s sales exceed $250 million, it gets carved into two smaller chunks. Executives can run as many as three units at a time.
As a result, Chandrasekaran creates opportunities for high-potential leaders to prove themselves. His replacement will probably emerge from this group.
— Adapted from Scaling Up Excellence, Robert Sutton and Huggy Rao, Crown Business.