If you’re thinking about embarking on a company reorganisation, it’s worth bearing in mind that 80% of them fail to meet their objectives in the time planned. In fact, 10% of them do significant damage. Writing for Harvard Business Review, Stephen Heidari-Robinson and Suzanne Heywood offer a systematic process to make ‘reorgs’ work.
One research finding quoted by the authors is that reorganisations cause more anxiety and stress than redundancies, resulting in lower productivity in around 60% of companies.
More positively, two thirds of them do improve performance to some extent. The former chief operating officer of professional services firm Ernst & Young, John Ferraro, is quoted as saying: “Every company today is being disrupted and so must reorganise to keep up with the incredible pace of change. Those that can do this well will thrive in the current environment and be tomorrow’s winners.”
Based on their own extensive experience and analysis, Heidari-Robinson and Heywood believe the pitfalls in reorganisation are commonly repeated and easy to predict. They conclude: “How you go about your reorg is as important as – and sometimes more important than – what you do.”
This has led them to develop a five-step process for getting it right.
1) Develop a profit and loss statement
As in any other business development, begin by setting out the benefits, costs and delivery period. Include the human costs and the expenses related to disruption.
McKinsey research suggests that only 15% of executives define business objectives in this situation. A surprising 17% of reorganisations result from an executive’s whim, or because leaders feel a shake-up is needed.
You should aim for a logical, fair and transparent process. This is better for your employees, and helps in gaining their support and contribution of ideas.
2) Understand current weaknesses and strengths
Overlooking this step, as many companies do, not only reduces the positive effects of reorganisation but may actually diminish the value of the things you already do well.
When gathering information on strengths and weaknesses, don’t just talk to your senior executives. An electronic company-wide survey is a good way of drawing a wide range of input.
Look at the differences that emerge between different levels, locations, departments and teams. If some are more successful than others, look for reasons.
3) Consider multiple options
There are two broad categories of approach: changing the whole model of your organisation; and changing only the bits that need to be changed.
It’s rare that a business is totally broken, but a complete rebuild may be needed if your current model no longer fits today’s radically altered market. If most things are working well, it’s better to fix only the aspects that need fixing. Steps 1 and 2 will help you decide which approach is needed, and if there is any doubt you should go for the second option.
Remember to consider more than the organisational structure itself. Think about how it will actually work in terms of management, processes, systems, staff numbers, and the abilities, behaviours and culture of your workforce. Those factors tend to be have more influence than, for example, the reporting structure.
Set out a range of options and demonstrate, overtly, that you are carefully considering their pros and cons. Make sure you cover every issue at this stage, as modifications of your model made late in the day will be less successful.
4) Get the plumbing and wiring right
This step is frequently handled badly. Fundamentally, you need to have identified exactly what changes are needed. The trick is then to plan their implementation in the right order.
Before you can appoint people to new jobs, for instance, you need to have prepared new job descriptions. Before you can deal with cost and revenue allocations, you must decide on your profit and loss management strategy. Then you will be in a position to plan, test and introduce the necessary IT changes. Again, thinking about any element too late will lessen the benefits of your reorganisation.
5) Launch, learn and course correct
Not everything will run smoothly. The CEO of information services company Wolters Kluwer, Nancy McKinstry says: “You have to live with and digest it, and rapidly course correct when you find issues.”
Encourage feedback on emerging problems, discuss them openly and – without straying too far from your overall plan, fix them quickly.
In addition to presenting their five-step process, Heidari-Robinson and Heywood stress the need for good communication to engage the support of your staff. In particular, they advise you to:
- Plan communications across all five steps
- Focus your communications on topics relevant to your staff, not just yourself
- Avoid relying on email cascades, and instead communicate in person
- Ensure communication is two-way
Given that so many reorganisations fail, and that so much can go wrong, it makes sense to learn from others’ mistakes and follow a systematic process. The outcome should be better decision-making, greater staff engagement and a more positive impact.