Corporate reorganizations happen frequently. Not only do they occur with regularity, technology news, disruption, and the pace of change can cause them to become even more frequent going forward.
Yet despite their frequency, they are often not viewed as successful in their organizations once completed. A recent Harvard Business Review piece notes that just 16% of respondents believed reorganization in their organizations had actually met expectations and created value. That’s a small percentage.
How to Create Success
The article observes that metrics are needed as an integral part of any reorganization. Those responsible for business strategy need to specify the reasons for the reorganization and how its success will be measured.
With a strong metric structure behind the reorganization, it is easier for business leaders to tweak the reorganization subsequent to its completion. Was it intended to streamline operations, but unanticipated events necessitated another layer? Perhaps another solution is needed.
Here are some examples of performance objectives.
What goals or targets is the reorganization designed to foster?
1) Increased growth or performance
2) Financial targets across the board (increasing growth by x% or paring headcount by x%
3) Individual unit financial targets (revenues or costs
How will these be measured?
1) Financial and operational results of intracompany units compared
2) Benchmarking against competitor companies<
3) Internal cost or headcount benchmarking between similar intracompany units
4) Management interviews
5) Workforce surveys
6) Workshops or focus groups
Which of the areas are included in the reorganization?
- The entire organization
- Number of people in unit
- Skill sets and job descriptions
- Compensation and benefits
- Need for new training
- New behaviors
- Profit and loss centers
- Business process design
- IT systems
Which implementation plan was used?
- No specific plan; implementation had no specific milestone
- Detailed plan with 10 to 20 activities to implement change, frequent milestones to be met
- One overall milestone with deadlines
Alternatives to Reorganization
It is also possible to rethink reorganization. A company considering a geographic reorganization, in an attempt to improve sales and communication, may choose to begin with horizontal process changes intended to better them in an incremental, targeted way.
Geographic reorganizations are particularly notorious for hitting the shoals of cultural conflict and challenges that may not, initially, be fully penetrable to headquarters.
Monitor and benchmark the process changes. Are they improving the metrics? Leading to no change? Are their specific problem areas? Both improvement and problem areas provide extremely valuable data. As in a reorganization, management can continue to tweak the processes until they are either satisfied with the result or have more information on the type of targeted reorganization needed.
Once more information is in hand, a reorganization arising out of successful process changes can be implemented with more chances of success and a clearer path.
Reorganizations can be difficult to implement and are not always perceived as providing value. Setting metrics and benchmarks from the beginning is the best strategy. In addition, company leadership might try targeted change to get data before a full reorganization is attempted.