Is Reorganization Your Right Solution?
Updated: Jan 23, 2019
The Big Question – is it worth it?
Here is the big question - Is it worth all of the work involved, the uncertainty felt by your employees, the almost certain drop in productivity and loss of engagement to conduct your next reorganization?
Data varies but you can be sure you have less than a 50% chance of seeing the improvements you hope to gain through reorganizing your company, function or department. And this is nothing new. A 2010 Forbes article cites a Bain and Company study where less than 1/3 of reorganizations produced any meaningful improvement in performance. A 2012 BCG article cited their research where 90% of executives surveyed had recently completed a reorganization, yet less than half of those reorganizations where considered a success. A 2016 McKinsey podcast cited their research where approximately 23% of reorganizations were considered successful.
Beyond the data, let’s face it, reorganizations are messy things. And it is hard to know the best way to do them. At the heart of reorganization may be a layoff. What is the best way to do that? Quickly on a Friday, or let staff know ahead of time? There is always the work of moving the people and their reporting relationships. This is essentially moving the boxes and lines on the org chart. But keep in mind; it is the relationships that matter, not the boxes and lines.
And after that, is it done? It is not. There is quite a bit more to accomplish.
Staff may have to be upskilled. As people are brought together in their new working relationships, they have to figure out how to work in this new model. All of this (layoffs, reporting relationships, education, training, new operating model and more) need to happen before the organization can begin to realize the expected improvements.
And underneath it all is the question – is it worth it?
Reorganizations are a lot of work and there is a serious risk of dismal results. Some argue that these poor results are due to reorganizations done incorrectly, that if the reorganizations were carried out properly, the results would be better. I believe that is true. And I believe there is more to it than just process. I believe a major driver for this poor performance is that the majority of internal reorganizations are not required at all. Reorganizations are used as a tool to fix a problem, but often they are the wrong tool to use to get the benefit that leadership is looking to achieve.
In this series we’ll dive a little deeper into both root causes, the process of reorganizing and alternatives to reorganizing your organization.
Process of Reorganizing – Making the decision
The decision to reorganize is a big decision. It is interesting to me that so many managers and executives feel the need to reorganize their teams. It is so prevalent that it comes as a concern that staff have when a new leader comes on board. “How are they going to change things? Is there going to be a reorg? Is there going to be a layoff?"
Before the new leader makes that kind of decision, among the dozens of other priority decisions that they have to make, they need to understand the organization and the strategy of the organization. The single best reason to reorganize a group is to align the structure of the organization with the strategy of the organization.
Look no further than Jay Galbraith (STAR model) or McKinsey (7S model) to understand that aligning strategy and structure is a big deal – it is what makes an organization make sense and operate smoothly. It is worthy of generating a major change. But once you move away from strategy as a driver, it begins to make less and less sense to reorganize.
Here are other reasons that drive reorganizations, of which the top 3 would be legitimate strategic reasons to consider reorganizing:
· Mergers and Acquisitions
· Downsizing / Decrease debt
· Focus on products, service, technology
· Shake up the culture
· New leadership
· Customer satisfaction
Prior to making the decision to reorganize, consider if your strategy is driving the change or is it something else. If it is not strategy, take a deeper look before pulling the trigger on reorganizing your staff.
Coming next in the series- Okay, you’ve made the decision to reorganize, now what?
Is there anything you would like to add? Please leave your thoughts and comments below.