Reorganizing? Think Again


If you ask managers to name their favorite sport, you’ll hear a wide variety of answers: Football, baseball, tennis… But what they won’t tell you is the one sport that all managers play the most: The Game of Reorganization.

Managers love to reorganize at almost every level. Whether triggered by a leadership transition, a fundamental change in the business, an acquisition, or poor performance; lines, boxes, and people tend to move around. In fact it’s highly unusual to find an organization that has not shifted its structure in some way within the previous six months.

But while managers love to engineer reorganizations, most managers (and their people) hate to be reorganized. Much like musical chairs structural changes provoke anxiety, since people know that the “new and improved” design will often have fewer chairs (i.e., jobs). More problematic is the fact that a functional organizational is only partly determined by structure. Equally important is the web of relationships that people develop over time to get things done. Reorganizations disrupt those relationships, hindering productivity until connections can be rebuilt within the new structure. As one senior executive said to me, “Every time we reorganized, we lost at least a year of innovation.”

Despite the downsides, managers will continue to reorganize, since it is one of the most available levers to solve problems. It also creates the appearance of decisive action and buys time until other actions can be taken. And of course they like playing the game.

So before you pull the reorganization lever, it will be helpful to ask yourself two questions:

What’s the problem you’re trying to solve? Before redrawing your organization chart, make sure you know why you’re doing it. Are you trying to create a sharper focus on customers? Do you want to reduce costs? Are you struggling with performance issues? Do you have too many direct reports to give them sufficient attention? Has the structure become overly complex such that accountability is diffused? Do your people need a wake-up call?

These (and many more) might be good reasons to reorganize — but all too often managers leap into a reorganization without being clear about how it will make things better. And without clarifying that basic question, you can’t address the next one.

Is reorganization the only possible solution? Reorganization might solve many problems — but it’s hardly ever the only solution. But because it takes little effort to redraw boxes and lines, it’s often the knee-jerk response. For example, the head of a large commercial organization wanted his people to become more focused on targeted customer segments as a way of improving revenue. To solve that problem, he divided up the resources from the various functions (sales, marketing, finance, product management, HR) and created a series of business units. A year later a different manager came in and decided that costs were too high — so she blew up the business units and re-consolidated the functions. In the end, neither manager succeeded because the disruptions and loss of key talent overshadowed any positive results.

What’s striking with this case is that reorganization may not have been needed at all. The first manager could have changed incentives for the sales teams, created cross-functional segment teams, or refocused marketing efforts. The second manager could have reduced costs through a more rigorous performance management process, more stringent budget goals, or by asking business units to share certain services with each other. In other words, in many situations reorganization may not necessarily be needed — and may cost more than it’s worth.

Given the popularity of the reorganization game, it’s always going to be a favorite part of the manager’s toolkit. And in many cases it may be an appropriate and effective action to take. But to avoid the downside of reorganizations, it’s important to determine what problem is being solved and whether there are less disruptive ways to do so.

In your experience with reorganizations, when have they created value — and when have they destroyed it?


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