Overcoming the Abysmal Reorganizing and Restructuring Failure Rates

To deal with all the tumultuous change swirling around us today many executives rearrange their organizational structure. This seems to be an especially favorite approach of a new executive taking over a division, department, or organization. It’s almost routine when there’s been a major organization financial failure or big public blunder.

But as with all organization change efforts the failure rate is 50 – 70 percent. A recent survey of 1,600 executives in 35 countries conducted by The Boston Consulting Group found that over 90 percent of companies with more than 1,000 employees had recently changed their organization structure.

Less than half were considered successful by the executives in a cross-analysis of quantitative performance data. The study’s authors call this:

“an alarming statistic, and one with perilous implications. Apart from the high costs and squandered opportunity, a failed reorganization can leave an enterprise even worse off than it was before, with lost productivity, a weakened market position, and a disengaged workforce, among other impacts.”

BCG’s study identified six critical factors that cause reorganization and restructuring efforts to succeed or fail:

  • Synchronize Design with Strategy
  • Clarify Roles and Responsibilities
  • Deploy the Right Leaders and Capabilities
  • Design Layer by Layer
  • De-risk Execution
  • Don’t Wait for a Crisis

“For organizations with only one success factor in place, the rate of success was 32 percent. But with each additional factor, the success rate jumped proportionately; 88 percent of organizations that had five or more elements in place reported complete success.”

This resonates very strongly with our Client experiences. What’s amazingly common and incredibly idiotic is how often senior executives impose reorganization and restructuring from the top down. A major theme woven throughout this study is the power of involving middle managers and key support staff in the change analysis, planning, and implementation process and cascading that throughout the organization.

This all starts with the fundamental premise that “form follows function.” Change slam-dunked from the top down often comes from executives who don’t have what the quality guru W. Edwards Deming called “profound knowledge” of how processes and systems currently work in their organization. Effectively engaging middle managers and key support staff brings that forward. This can then be overlaid on the executives’ vision, values-based culture, and change strategies. Now we can collectively redesign the organization so that we’re more likely to build the correct structure and the critical ownership in making it work.

This spirit of participation and involvement extends on through clarifying roles and responsibilities and designing the organization layer by layer. Successful organizational change efforts don’t do it to people they do it with people. This springs from a deep underlying set of beliefs that either values people as human beings and partners with them or sees people as “human capital” — assets with skin to be moved around on organizational charts like pawns in a chess game.

To read the BCG study, go to Flipping the Odds for Successful Reorganization. As the authors conclude:

“Reorganization should not be viewed as an ad hoc endeavor, but rather as part of the continuous process of transformation — of constant improvement, innovation, and adaptation — that every enterprise must engage in. At a time when unceasing volatility and accelerating competitive forces have become the new normal, reorganization will, by necessity, become more frequent, more fundamental, and faster.

 

For over 30 years, Jim Clemmer’s practical leadership approaches have been inspiring action and achieving results. He has delivered thousands of keynote presentations, workshops, and management team retreats to hundreds of organizations around the globe moving his audiences from inspiration to application. He’s listed in the World’s Top 30 Most Influential Leadership Gurus based on research with 22,000 global business people, consultants, academics and MBAs. His website is www.JimClemmer.com.

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