How The Most Successful Companies Plan and Implement A Reorg
Why The Reorg?
I stumbled upon an older study from 2010 that caught my eye. It was authored by McKinsey & Company to determine the benefits, if any, of a corporate reorganization. Corporate reorgs are common these days. With so many start-ups, particularly in technology software and applications, more established companies can find it challenging to keep up. Additionally, many companies are growing quickly and their original organizational structures are no longer supporting the rapid expansion.
One of the first things many consider is a reorganization. They believe by redesigning the org chart, they can tighten up processes, reduce costs, become more efficient, bring better products and services to market, and ultimately be more competitive. Change may not be loved, but it can breathe new life into a static company in need of a jump start.
McKinsey Global Survey Results
While the study may be a bit older, I am curious as to whether anything has changed. Let me go over some of the more interesting results and findings. The survey asked executives at publicly traded companies why they redesigned to begin with, what challenges they encountered along the way, what tactics they used for implementation, and how the redesign and its delivery affected employee morale and shareholder value. Here’s what the McKinsey found from the companies who had the most successful reorgs:
The top strategies and procedures used by “successful” organizations to reorganize:
- 66% developed a clear communication plan for all internal and external stakeholders
- 55% used their reorganization as an opportunity to change mindsets and behaviors in the workforce
- 41% focused as much on how the new organizational model would work as on what it looks like
- 38% accelerated the pace of implementation to make the new model deliver value as soon as possible
- 38% ensured that IT, financial, human resources, and other systems were updated to support the new organizational model
Here are some additional points to discuss:
“Though a majority of respondents say their redesigns increased shareholder value, only 8 percent of those say their efforts added value, were completed on time and fully met their business objectives.”
This is interesting because a reorg is no small endeavor. A reorg can take months, if not years, to plan. It requires input and participation from dozens of people. It adds costs. It adds frustration. And as we all know, change isn’t always immediately appreciated by many (most). All of the hopes and dreams an executive team may have when they choose to reorganize seem, at least from this survey, to be dashed. Is it worth it?
Well, it depends. Many of the respondents believe success comes down to planning.
“Their redesign strategies focused on changing mindsets and on how the new organizational model would work, not just how it would look, and they report implementation procedures including a clear communication plan and efforts to ensure that support systems reflect the changes.”
There’s that word again – “change.” If a reorg is going to work, there must be a commitment to change people’s mindsets. People are resistant creatures of habit. We like the processes and tools we’ve become accustomed to. Don’t ask us to learn something new or behave differently. That takes time and patience, neither of which are in abundance. But change is inevitable and it’s up to the enterprise to convince their employees that change is worth it – not just for the shareholders or the brand, but for the individual employee.
The results also show the importance of looking beyond a basic organizational chart and figuring out how changes to that chart will actually work. It’s one thing to map it out on paper. It’s quite another to see it work as smoothly in reality. Are there adequate support systems (i.e. resources) in place before, during, and after the reorg? Is there a proper communication plan to relay information, value props, instructions, and training? Is there a feedback mechanism?
“These respondents are also much likelier than others to say the redesign improved morale, even in the short term, which indicates that these tactics helped their organization overcome employee distraction and demoralization, two of the most frequently cited challenges to successful change.”
Communication. It’s an amazing thing. Good communication has the power to change mindsets. It has the power to keep people focused on an end goal. It can boost morale. If your company is considering a reorg, communication should be at the top of your list, perhaps number one. Without an effective communication plan, your reorg will inevitably fail. With it, however, you just might make this thing work.
“At the most successful organizations, respondents far more often say the redesign involved the entire organization, not just one or a few business units.”
It’s really difficult to treat one part of the organization without treating the whole entity. It’s sort of like fertilizing half of your yard and allowing the rest to be taken over by weeds. If you want to get the most out of your reorg, chances are the entire organization needs the overhaul. You don’t want one division operating under new best practices and the rest of the organization using the same old processes, tools, and behaviors. It won’t work. Things will be disjointed and you’ll be adding more complexity. You may need to focus more on one area than another, but the entire organization should likely undergo the same reorganization if you want to get the full impact of your efforts.
“The best success rates were reported by respondents whose companies set time frames either under 3 months or over 18 months.”
A reorganization isn’t fun so why drag it out longer than it needs to be? If you’re wondering how anyone can restructure their organization in only 3 months, it’s likely because they did plenty of planning ahead of time with the key stakeholders. Change champions were elected. The communication strategy was locked down. Key decisions are made before the reorg is implemented so there are limited bottlenecks and surprises, including talent-management changes. The reorg runs like a well-oiled machine. That’s how a reorg is done.
The report summarizes the findings in two well-conceived points I couldn’t say any better:
“The tactics used most by the most successful organizations suggest that all organizations implementing a redesign would benefit from explaining to employees how the new design works, ensuring that systems and process support it, and winning hearts and minds.”
“The results also undercut the common perception that a staged, evolutionary process leads to more successful change. Indeed, a much better approach seems to consist of taking quick, decisive action and then aligning people behind the change.”