Another way of overcoming some of the difficulties that can arise with the SBU organisational structure is for R&D to be outside the business tube, acting as a contractor to the business unit. This can be described as "insourcing" as opposed to outsourcing In this case, R&D retains its functional independence, contracting out its services to the business unit, paid for on an "as needs" basis. The work is carried out physically within R&D laboratories on behalf of the business unit. This is illustrated in Figure B5.
Management of R&D is now off-line to the SBU units and responds directly to a mentor on the Executive, who ensures that innovation stays on the company's agenda. The R&D Manager is responsible for generating sufficient contracts, or Service Level Agreements, with the SBU managers to cover the overall annual costs of running group, which have been agreed with the executive. The day to day manage ment of the staff, covering recruitment, professional development, training, career planning and reward remains in the hands of the R&D Manager.
This system makes it possible for the R&D Manager to overcome the critical mass problem, outlined in Section B, 1.1.2. Some specialised skills and competencies can be retained and developed, that could not be justified by a smaller group within an SBU.
For instance, a business wishes to undertake a specific development, which requires a polymer chemist to meet the technical needs of the programme. It is envisaged that the programme will last for less than one year. At the end of this programme there will not be any further work for the polymer chemist within the business unit. This programme would therefore be difficult to undertake within a small business unit. Operating in the contract mode, R&D supplies this resource from the pool of technical skills available within the group. The programme of work is then undertaken within R&D, in collaboration with the business unit. Once the contracted work is completed, it is the responsibility of the R&D Manager to place the polymer chemist in another programme.
Carrying out a limited amount of more speculative work in R&D is still the problem. If R&D is doing a good job in getting support in its contracting role, it is possible for it to seek financial support for some more speculative or strategic research directly from its sponsor on the Executive of the Company.
There are dangers for R&D in this contractor role, especially if the business unit management do not feel any ongoing responsibility or commitment to the people or the even the resource. Business managers may only want to place one off contracts to
meet specific needs, wishing to turn R&D support, and its associated costs, on and off in response to short term budgetary controls or difficulties. To avoid this happening the R&D Manager needs to work hard in ensuring that most, if nor all, the annual agreements are based on a rolling programme of projects into the future. R&D has to be seen as having an essential place in the strategic plan of the business unit. In this system of managing and organising the R&D resource the benefits significantly outweigh the disadvantages and it has found favour with many chemical companies.
R&D staff also face problems in this contractor role, which are not insignificant. The main one is the uncertainty over the continuance of a contract and what will happen to them when a contract comes to an end. Reassurance and support from the R&D Manager is essential for the morale, not only of the individual but also of the total group. There is in addition the problem of staff seeming to have two bosses during the term of the contract, something that also occurs more obviously in a matrix organisation, and this is the next topic to be considered.
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What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.