Is A Reorganization Your Right Solution?
Reorganizations Part 1 : This is the first of a four part series on reorganizations. This article provides success rate data and discusses what is behind the decision to reorganize. Part 2 covers key roles and process steps involved in a reorganization. Part 3 discusses best practices for conducting a reorganization. Part 4 discusses alternatives to reorganizing your staff. Each article is short and intended to provide you with information you can bring into your current thinking on your organization’s design and development.
One Big Question — is it worth it?
Is your next reorganization worth the unrecoverable hours spent in planning and execution, the uncertainty felt by your employees, the almost certain drop in productivity and loss of staff engagement? Some data suggests it may not.
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.
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 and probably what most people have in mind when thinking about a reorganization. But keep in mind; it is the relationships that matter. After you’ve moved the boxes and lines, there’s much more work to be done.
Staff taking on new roles or responsibilities will have to be trained on technical and soft skills. As people are brought together in their new working relationships, they need to figure out how to work in the new model.
“Who do I report to? Who else is in my group? How do I get them information? How do I get the information I need from them? Are they a friend or foe? How do I handle my new boss? How do I handle my new staff?”
All of this (understanding reporting relationships, education/ training, new operating model and more) needs to happen before the organization can begin to realize the expected improvements.
And underneath it all is the question — is it worth it?
Obviously, reorganizations are a lot of work and research suggests there is a serious risk of less than stellar 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.
The decision to reorganize — What is the problem we are trying to solve?
The decision to reorganize is a big step. It is interesting that so many managers and executives feel the need to reorganize their teams. It is so commonplace that the topic could be added to an FAQ for newly on-boarded leaders! “How are they going to change things? Is there going to be a reorganization? Is there going to be a layoff?”
Before a new leader makes that kind of decision, they will want to understand the organization and the direction or strategy of the organization. When considering this kind of organizational change, a good starting question to ask is “What is the problem we are trying to solve?”
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 part of 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 might be considered as legitimate strategic drivers:
· Mergers and Acquisitions
· Shift in focus to products, service, technology
· New leadership
· Shake up the culture
· Customer satisfaction
Hiring a new leader often raises the concern that a group will be reorganized. Again, it comes down to “What is the problem we are trying to solve?” If the new leader is hired to execute on a new strategy for her organization, that solution may necessitate some level of reorganizing departments and staff.
If the new leader thinks he has a performance problem, that requires a different set of solutions. Perhaps the organization has the wrong person in a key role. That person isn’t performing and needs to be managed differently, or managed out. Another potential cause of low performance is training — perhaps the staff is inadequately trained on tools or process and just can’t perform based on their current knowledge or skillset. Basic expectation setting is another common cause of poor performance. Are expectations clear and enforced on performance, roles and responsibilites?
Any and all of these may be causes of poor performance and yet none of these require a staff reorganization in order to solve the problem.
Prior to making the decision to reorganize, consider the problem you are trying to solve. Is your strategy driving the need to change or is it something else? If it is not strategy, take a deeper look before pulling the trigger on reorganizing your staff.
Coming up next - You’ve decided to reorganize, what are the key steps you need to take?