There’s no denying that reorganisations, or reorgs as they are colloquially known, are messy affairs. But they might be necessary to meet either short or long-term challenges. Perhaps the environment around the business has been disrupted by new technology, and existing products and services are no longer profitable.
Said Paul Mackler1, CEO of Cygus Business Media:
Reorgs can have a direct impact on revenue generation if done for the right reason and if they are executed well.
Or, the cost of raw materials has gone up and the business needs to establish cost-cutting measures. One organisation I worked for was facing a labour crunch because too many of its employees were hitting their retirement age at the same time. The excuses for reorg are often underpinned by the fact that something urgent needs to be done…now.
But there are compelling reasons not to leap into the reorg bandwagon without first understanding the process. Stephen Heidari-Robinson recommends 5 key steps2 in the reorg process:
- Consider Costs and Benefits
- Understand Current Capabilities
- Consider Multiple Options
- Stay Enganged
- Implement and Evaluate
1. Consider Costs and Benefits
Reorgs do not happen in a vacuum, and should be recognised as a business function. Hence, clear objectives need to be set from the beginning. Although it’s common sense, too many reorgs happen because of a leader’s whimsical decision to reverse everything that the predecessor had done, or implement change just to make his or her CV look good at the end of their terms.
Increasing revenue by a certain margin is often a clear objective to set. However, for companies that deliver services, a clear objective might be efficiency, where cost savings are realised by doing more with less resources. This does not mean overworking existing employees to death, but securing efficiency gains from either process improvements or automation.
All actions taken in the name of reorgs incur costs, and need to be considered too. These costs may sometimes be intangible and hard to detect, such as the human cost of change and disruption, but they are integral. Frank E. P. Dievernich3 wrote:
Change management without people is unthinkable. Human beings stand at its core as both the subjects and the objects of change.
2. Understand Current Capabilities
Organisations hire people with a diverse range of capabilities. Often, capabilities are nurtured either through experience accumulated on-the-job or new skills obtained through formal training. Considerable investment has been put into growing and developing employees into their roles. Sudden change, like a reorg, can cause permanent damage if they undermine current capabilities.
Hence, a period of reflection and self-diagnosis is needed, where the organisation has the opportunity to take stock of not only its current strengths, but also its weaknesses.
Self-diagnosis can be tricky, but the most important aspect of it is a focus on people, and their attitudes towards the organisation’s goals. A simple instrument to draw this out is a variation of the Activity Card Sort, which is a unique assessment tool for measuring adult human occupation and level of activity4.
To adapt the tool to our needs, we may list an organisation’s existing values into these eponymous cards- such as customer-centricity, compliance, and responsiveness– and invite employees to sort them into categories of importance, ranging from high to none. The sorting procedure allows employees to describe how he or she is involved in, or even understand, the various organisational values.
Very quickly, self-diagnosis can help organisations identify key gaps like whether employees are suited for their roles, or more crucially, how well have core values been communicated up and down the organisation.
3. Consider Multiple Options
In a volatile world, organisational design has become a daily task for executives. Organisational design5 is defined as:
…the complete specification of strategy, structure, processes, people, coordination and control, and incentive components of the firm.
The whole purpose for designing organisations is to increase both its efficiency and effectiveness. Often, it is not necessary to revamp an entire organisational model, but to focus on elements that are not working. Organisational design is not about how the organisation will look like in terms of hierarchy and reporting lines, but how all the different elements of strategy, incentive, systems, staff policy, processes and structure are going to work cohesively with one another.
It’s a great feeling to get a brand-spanking new reorganization chart done and then present it in all its unsoiled glory to the entire company. Unfortunately, that gleaming chart with all its little color-coded boxes lined up with precision has little to do with making a reorganization successful6.
Globalisation and the general loosening of regulations drive a constant reassessment of the organisation as a living, dynamic entity. Today, executives can pick from a wide range of organisational models like virtual, learning, modular, cellular, network, alliance, or spaghetti.
Some models challenge traditional ways of thinking about organisational design, but that does not obviate the need to make an explicit choice in a model. All organisations need formal designs to be efficient and effective.
4. Stay Engaged
In most organisations, executives only involve themselves in setting the strategy and direction of the reorg exercise, and leave the operational and implementation details to their teams. This is the wrong approach. Leaders need to stay engaged to carry out and manage the change. Stephen Heidari-Robinson argues, for example, that new job descriptions still need to be written, key resources like manpower and money re-channeled to other focus areas, and buy-in secured from every level of staff.
A lot of organisations fail in reorgs because they don’t pay attention to this step. In a worst-case scenario, this leads to a mis-alignment between strategic goals and the goals of every employee working for the organisation. That is why CEOs are increasingly seen as Chief Engagement Officers, rather than just being the Chief Executive. At the CEO’s level, for example, rapid commitments need be made on these fronts7:
- Increased operating margins
- Quicker execution of company strategy
- A more rapid adaptation to change and the need for change
- Increased employee motivation and consequently a decrease in employee turnover
- The exposure of duplicate or redundant business initiatives
- The integration of business initiatives across departments
- Immediate correction of problems related to quality, timeliness, and inefficiencies
Moreover, because digital communication and globalisation has accelerated the pace and complexity of organisational change, Human Resources (HR) play an increasingly important role in promoting new values and installing a more flexible culture8.
5. Implement and Evaluate
Experienced project managers know that all improvement initiatives are experimental in nature, and will remain an iterative process for a very long time. It doesn’t matter how much thought and preparation went into implementing a reorg exercise; it will not be perfect.
This iterative approach of implementing a solution, assessing its outcome, and closing a gap that’s been identified strongly implies a culture of organisational learning. Though most learning organisations have mastered single-loop learning, where the organisation learns from within the existing mindset9; it is the organisation’s potential for double-loop learning that may determine how quickly an organisation reaps the success of its reorg.
In double-loop learning, organisations devote a lot of time in first ensuring that its employees are given critical thinking skills, then providing platforms from which they can share their opinions. In a reorg exercise, this approach encourages discussion and debate, and channels people’s attention towards the shared destination of improving on the initial reorg plans.
Reorgs are essential for survival, especially in a knowledge-based economy, where fast-paced ideas have replaced traditional products as commodities. Because reorg impacts people more than anything else, it can often be a difficult, emotional and lengthy process that requires skillful planning and compromise. A positive approach is all about communicating, engaging and ultimately activating employees within the reorg process, rather than throwing out resources after the reorg has happened.
- Do Reorgs Really Work? Five Chief Executives Weigh In. (2005). Folio: The Magazine for Magazine Management, 34(2), 7. ↩
- Heidari-Robinson, S., & Heywood, S. (2016, 11). Getting reorgs right. Harvard Business Review, , 1. Retrieved from https://hbr.org/2016/11/getting-reorgs-right ↩
- At the Heart: Human Beings in Organizations. (2014). Change Management and the Human Factor ↩
- Sachs, D. (2003). The Activity Card Sort: A Factor Analysis. OTJR: Occupation, Participation and Health, 23(4), 165. doi:10.1177 ↩
- Burton, R., Obel, B., & DeSanctis, G. (2011). Define the scope of the organization and assess its goals. In Organizational Design: A Step-by-Step Approach (pp. 3-20). Cambridge: Cambridge University Press. doi:10.1017/CBO9780511894961.005 ↩
- 45 things: Why reorganizations fail — and how to get them right (2016). Chatham: Newstex. ↩
- Liebowitz, B. (2010). Succeeding at the top: A self paced workbook for newly appointed CEOs and executives. New York: Business Expert Press. ↩
- Barratt-Pugh, L., & Bahn, S. (2015). HR strategy during culture change: Building change agency. Journal of Management and Organization, 21(6), 741-754. doi:http://dx.doi.org.libproxy1.nus.edu.sg/10.1017/jmo.2014.95 ↩
- Örtenblad, A. (Eds.). (20132013). Handbook of Research on the Learning Organization: Adaptation and Context. . Cheltenham, UK: Edward Elgar Publishing ↩