Five Critical Considerations for a Reorg

We try to dissuade clients from starting the change process with a reorg—it’s a common “silver bullet,” but just 16% of reorgs accomplish all their goals on time, while 10% actively harm the business. Instead, we focus on process first, as many “structural” problems actually come down to how work gets done and the resources dedicated to them. But what if, after improving your process, you still need to reorganize—or even realize that, thanks to those improvements, a different structure will better serve the organization? Before embarking on a reorg, gather your team and consider:

  • Is it worth it? Thoroughly evaluate the benefits and costs. Will the reorg increase revenue, or simply reduce headcount? How will it impact personnel and productivity? If you don’t clearly define this upfront, it will be difficult to accurately evaluate the reorg at the end.

  • How quickly can we change? Even in the best circumstances, reorgs are painful, and the longer they go, the worse morale gets. Dedicate the resources and bandwidth to complete a reorg in three to nine months.

  • Should we restructure or reconfigure? Restructuring is a shift in the archetype that your organization is based on—for example, from a function-based company to a business-line one. Reconfiguring adds, removes, recombines, or otherwise modifies units without changing the underlying archetype. Restructure when there is a fundamental shift in the market or if the business is fundamentally broken; reconfigure to stay on top of changing conditions in fast-moving markets.

  • What do we want to excel at? To be the best at what you do, you must focus—so organize units accordingly. If your teams must be experts at serving customers, organize around customers. If regional knowledge is most important, structure by region. No structure is “better” than the other; it's simply a matter of what best serves your strategy.

    • If possible, avoid matrix structures by thinking in terms of bosses and customers. Who should a team report to, and who do they serve? This can help clarify relationships while reducing reporting confusion.

  • Have we built internal tensions into the structure? Avoid future pain by reviewing reporting lines for conflict. For instance, departments focused on the short-term should report to departments focused on the long-term, and never vice versa: if Sales (with its quarterly quotas) were in charge of Marketing (responsible for the brand), the brand would be chipped away with discounts as Sales’ demands dominate. Similarly, efficiency-based units should report to effectiveness-based units.

 
 

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