6 Real-World Examples of Company Reorgs Done Right
Organizations reorganize for a variety of reasons. Sometimes, they are compelled to do so by evolving markets that require a different approach to product and service delivery. At other times, a reorganization is required for growth. One thing is for sure: All company reorganizations bring about change, often transforming jobs and the people in them. Although some research has shown that 80 percent of reorgs fail to deliver their desired value, some company reorganizations succeed. Here are some recent success stories of company reorganization done right:
When Facebook announced its first reorganization in 2011, the reasons included a desire to accommodate growth and streamline the company’s product development process. By that point, Facebook had already become the world’s second most visited website, bested only by Google. The company’s reorganization proved to be fruitful, as Facebook went on to achieve worldwide success and a steadily rising number of users of its services.
In 2018, Facebook announced another reorganization, at the same time that the company has been under scrutiny for its handling of cybersecurity attacks related to the 2016 U.S. presidential election. Although Facebook says its decision to restructure is unrelated to security and data privacy issues, it has announced a reorganization around three key product areas instead of five. The reorganization brings new leaders to Facebook’s existing product suite and fledgling product lines such as blockchain technology. Time will tell how successful this latest reorganization will prove to be, but if the past offers any indication of what the future holds for Facebook, greater growth may be coming.
Manufacturer of electric cars, solar-powered batteries, and spaceships, Tesla has earned a reputation for innovation and rapid growth since its founding in 2003. Tesla’s CEO, Elon Musk, recently announced a major reorganization and cost-cutting initiative, citing the need to achieve a flatter organizational structure and improve communication between teams. Facing pressure from investors to increase cash flow and speed up new car production, Tesla also laid off 3,000 employees, or 9 percent of its workforce, as part of the reorganization. Most of the individuals affected were salaried, rather than production workers, illustrating the company’s willingness to make cuts in areas other than frontline production.
Conducting layoffs is often difficult and sometimes a necessary part of restructuring. In Tesla’s case, early signs suggest that the company’s reorganization is paying off. Its share price is recovering, with market analysts now predicting the company will soon meet production and cash flow goals.
The Wall Street Journal
In early 2017, Dow Jones announced plans to reorganize its flagship publication, The Wall Street Journal, saying that it would help the company shift toward a more digital strategy. Dubbed WSJ2020, the reorganization was announced as a plan to move away from outdated editorial processes and shift the focus from print to digital. The company also announced the creation of new job categories and alignment of journalist positions with a more technology-driven vision.
Some employee positions have already been cut in the WSJ Asia and Europe bureaus, but in the U.S., WSJ plans a reorganization of existing staff rather than a series of layoffs or position eliminations. According to the Editor-in-Chief, the company plans to keep the WSJ headcount of 1,300 roughly flat. The plan is to avoid mass layoffs by reallocating employees into new roles, for which existing employees must self-select and apply. Although such a strategy can seem like a veiled attempt to cut jobs, having employees apply for new positions could help the publication identify internal candidates for roles rather than having to do layoffs and subsequently recruit from the outside.
Hulu recently announced a company reorganization to accommodate company growth and further enhance and expand its streaming content for customers. In the new structure, the company will be organized around four strategic priorities, resulting in both the elimination of key management positions, as well as the hiring of a new Chief Technology Officer (CTO) and Chief Data Officer (CDO). Since announcing its reorganization, Hulu has taken steps to streamline and consolidate smaller offices, and says it plans to add at least 200 tech and product employees through 2018.
In Hulu’s case, its reorganization and growth may make it more attractive to potential buyers. Hulu is jointly owned by several media companies, including Disney, Fox, and Comcast, and is widely considered the valuable prize in Disney’s current bid to purchase 21st Century Fox. Hulu has built up over 20 million subscribers to date, and with its recent reorganization (and possibly a new parent), it may be well poised to continue its growth in profitable areas such as original programming.
In 2015, Google announced a reorganization and the creation of its Alphabet holding company to solidify its lead as one of the world’s most successful tech innovators and expand into new industries. The reorganization named a new CEO and also provided Google’s two cofounders more time to focus on exploring new business opportunities.
Since reorganizing, Google has continued its growth trajectory. After two years of operating under the new structure, the company announced some of the positive outcomes of its reorganization, including:
- The separation of its traditional business from speculative ventures has offered greater transparency for investors.
- Each business unit has its own CEO and greater autonomy in day-to-day operations.
- Alphabet’s speculative “moonshot” business units have controlled spending and are working toward becoming profitable.
- The company’s leadership team has become more diverse, with more women on its senior executive team (six out of 13) than any other tech company in the Fortune 100.
Disney has grown exponentially since Walt Disney created the company’s first org chart, which featured a mass of arrows pointing in every direction. Most recently, Disney announced a corporate restructuring to help it capitalize on U.S. and international growth opportunities. Under the new structure, the company will be organized into four key business segments, a move that is intended to position the company for global expansion, more technological innovation, and the creation of more diverse content for its audiences.
Disney creates theme park magic and movies that captivate both young and old, and it is also taking steps to compete with the likes of Netflix and Amazon in direct-to-consumer streaming. The recent reorganization consolidates certain business units and expands responsibilities for certain individuals on the management team. In addition, CEO Bob Iger has committed to delaying his planned retirement from 2019 to 2021, evidence of flexibility in the company’s succession and workforce planning as it continues to grow.
At the heart of any successful reorganization is a well-thought-out and well-executed plan that considers a range of industry, customer, and employee implications. Although companies are reorganizing all the time, those who find success take their reorganization in stride and continue to grow and compete. As some of the recent reorganizations demonstrate, restructuring can lead to the redundancy of certain positions and layoffs, but it can also expand individual responsibilities and may even create jobs. No one knows what the future holds, but these real-world examples prove that reorganizations work and can help companies achieve their long-range strategic goals.