Five Big Mistakes in Reorganizations
Image by Bram Janssens
An executive’s skills come to the fore in a reorganization. While they make take on new responsibilities themselves, they face critical needs for leadership from those they serve. Boston Consulting Group surveyed 1600 executives from 35 countries, reflecting on reorganizations their companies enacted. Only forty-eight percent deemed their companies successful in their reorganization efforts. Here is a link to their findings and recommendations:
I have worked in corporations that had write-offs for reorganizations almost every year. Investors looked at my company as if it were Bullwinkle trying again to pull a rabbit out of his hat: “This time for sure!” They were not buying it. Instead of the bump in stock price often associated with the announcement of a reorganization, the downward spiral would accelerate.
As I researched the determinants of success or failure in reorganizations, it was clear that the focus has been on the front end rather than what happens when the reality of the chance sets in. Maybe this is appropriate, and my research is far less extensive than BCG's, but I want to suggest 5 mistakes the companies and leaders routinely make in execution that can lead to failed reorganizations.
1. The focus is on the “what” rather than the “how.”
OK, this is a not a specific feature of execution, but an overall statement of where attention is placed. Over 90% of the literature on reorganizations will be on conceptualizing the change. And a main takeaway is that it doesn’t start with an org chart. Craig Espelien recently wrote me about “a process that defines and aligns: current state, desired future state and how the work will flow. Once this is done, then an org structure will emerge.” Craig’s right. Structure should follow strategy.
There’s another part to reorganizations that gets little attention. These involve big changes, but the usual components of change management are not always applied. It is like using an award-winning architect and then hiring a discount contractor. Planning is important. Thinking through consequences and getting the plumbing right is vital. I’ll take good execution over great strategy any day.
2. The urge for secrecy means that the people who know how things get done are not consulted.
Why do we keep this secret? Because some people might get hurt by the outcomes, so we revert to behavior we learned in high school about breaking up with a sweetheart. Give out hints that something is amiss, send out a text saying, “It’s over!” and become invisible when they are around. In this way, leadership feels the least amount of discomfort.
Yes, some people inevitably lose their jobs in reorgs. News flash: the people who are told, “It’s over!” are often the lucky ones. They may feel hurt for a little while. But, usually, they receive a severance package. They find employment in a company that doesn’t have the problems that led to your reorganization. They get to choose what they do next, instead of being told what box they will fill.
How much does this hurt? Ask Steve Pearce. In late June of 2018 he was traded by the Toronto Blue Jays for a minor league player, after seeing limited action this year. That may have been a blow to his ego, but how bad is it to be traded to the Red Sox, where he hit 3 home runs in his team’s final two World Series wins, getting a championship ring in the process?
Back to why openness trumps secrecy… What is the harm in telling people that, because of a need for greater efficiency or to prepare for future growth, you need to look at structure and processes? Share with stakeholders the rationale for a reorganization and solicit input on the details of that desired future state and how to get there. More people will feel like they were part of the process, or at least that they were heard. You will get a better plan, greater alignment and a higher likelihood of a successfully executed integration.
3. The social aspect is overlooked.
This may be the single most underrated factor in determining success or failure of a reorganization. While efficiency is not the main goal of every reorganization, the net result is that some people will lose their jobs and other people will be moved into unfamiliar roles.
Consider that those who remain suffer from PTSD. They feel the loss of friends who are no longer with them on a daily basis. And they may feel a lack of competence in their new roles, and that takes a toll on their self-esteem. One of the key contributors to employee engagement is feeling that you work with your best friend. In reorganizations, these relationships can be sundered. The survivors will not be happy. Some will let you know it. Others will be more passive-aggressive.
It’s OK to acknowledge their hurt and to point out the sacrifices everybody has to make to eventually get to a better place. And it helps to give people some time to find their footing. Nobody in Cubeland is celebrating the day after the reorganization takes place. A big part of the healing, though, comes from people turning their attention to their new work and to the new social connections they need to make for that work to get done. Much of this will happen organically, but it helps to kick-start these new connections through facilitated sessions on any new processes, roles and responsibilities.
A leader's responsibilities might change as a result of a reorganization. You may have new direct reports and new teams that are uncertain about their relationship with you. It's important for you to connect with them. Tell them about yourself, what's important to you and how they fit into the picture. Be authentic; people are on high alert for BS.
4. Endings are not considered
In a poorly planned reorganization, those who remain inherit the work of those who left. Unless consideration was given to the nature of the work post-reorganization, the survivors end up with more work on their plates and no increase in compensation. That’s how you get the numbers to work. However, the change in the employment value equation turns those valuable people you want to keep into flight risks.
Why this oversight? Because nobody gave thought to what work needs to stop in order to create capacity for the fewer people who will be employed. Most companies are notoriously bad at endings, to declare what is no longer a priority or somebody’s responsibility. If you can let go of things that are not mission critical, you can find a lot of coins in the couch.
Columbia University’s Willie Pieterson and others have defined strategy as the art of sacrifice. Considering what not to do, even ceding business to competitors to focus on where you excel, can be a powerful precursor to any reorganizational design. There are few things more liberating for an organization.
5. Once the announcement is made, the communication is finished
Do people see evidence that the organization’s leadership supports the change? Is it enough to tell people the objectives of the organization at the time it’s announced, or do you need to reinforce the rationale?
People want to know why things are happening, what will happen and when. They need to know how they are impacted individually. They should be reassured of what will not change, like the corporate mission and values. And success will come when they are inspired to get behind the change.
If there ever were a time to manage by walking around, it’s when your people are trying to figure out their new reality. Corporate communications are important; personal communications equally so. There is no such thing as overcommunications at this critical stage.
Remember that communications are two-way. Stop talking long enough to listen. How do employees view the reorganization being executed? If problems surface, they can be addressed by providing additional attention, training or resources. Mid-course corrections are common, and the solutions are usually found in the people on the front line.
To close, as a leader in an organization, you make be closely involved in the development of a reorganization plan. For that reorganization to have a chance of succeeding, you have to be just as involved and even more visible in the hard work of implementation.
Executive Springboard President Steve Moss shares learning from years as an executive and a mentor.