By Grant Freeland
They’re announced sporadically, and individually, so you don’t always pay that much attention, unless you’re an employee, supplier, customer or investor, or have some other special reason to care. But on any given day of any given year dozens of prominent companies are in the throes of reorganizations of one sort or another. Most of these efforts will produce underwhelming results. I’m being kind.
When I began writing this I did a quick Google search, which identified a virtual Who‘s Who of companies that are currently rearranging their deck chairs. Some of the best-known include Bayer, Citigroup, FTD, MillerCoors, Novo Nordisk, Starbucks, Tesla, and Uniserve.
Companies are not the only ones. The American Bar Association and the Gates Foundation also have announced reorganization plans. The White House has introduced a plan to reorganize the federal government. And Asa Hutchinson, governor of Arkansas, wants to reorganize his state agencies as well. The list goes on.
In other words, this is big stuff; everybody’s doing it. But why, given that many such efforts prove unsuccessful?
Let’s start there, with my conclusion: that reorganizations typically don’t produce the desired results. We didn’t make this up; we know it for a fact because business leaders confessed as much to us when we surveyed them a few years ago. When asked, “Overall, how successful was your company in its reorganization efforts?”, 52% of the more than 1,040 respondents reported that their reorganizations were either “unsuccessful” or produced “mixed” results. That’s hardly a ringing endorsement for such activities, which inevitably are time consuming and costly and distract from other possible uses of time and resources.
Yet, month after month, year after year, leaders continue to jump in, feet first, hoping that their reorganization will be different.
Part of it, of course, is for show: Many of those entrusted with leadership responsibilities feel a need to demonstrate that they’re “doing something.” Political leaders typically demonstrate this by holding hearings or establishing commissions to focus on specific problems (and then, just as typically, ignore the findings and recommendations). Business leaders pull out the organizational chart, pull together their closest and most trusted associates and advisers, and move the boxes around and redirect the lines.
The efforts fail more often than not because they violate some of the cardinal rules of business and management: first, that structure needs to follow strategy, not the other way around, and second, that communication and “buy in” are necessary for success.
Instead, in many reorganizations the reverse seems to take place: a small coterie of insiders redesigns the organization behind closed doors, obsessing about the ideal architecture while paying far too little attention to the strategy it’s intended to serve and all but ignoring the fact that what they’re doing has stirred up the rumor mill and is causing great concern and angst both within and outside the company.
Besides, why such narrow (and narrow-minded) focus on design? In truth, while there are clearly wrong designs, there are almost always several right ones as well. But there is no perfect design; they all have weaknesses. The secret to a successful organization is understanding this and identifying and compensating for the weaknesses.
You do that by focusing less on structure and more on what makes the organization tick: developing a clear-headed understanding of goals and strategy and aligning the structure and leadership with that; getting the right people with the right capabilities in the right roles; developing the culture that’s in sync with it all. This can’t be done in isolation, behind closed doors. And you’re not likely to accomplish it in one bold stroke either.
So what’s the best way to proceed? Let’s assume the idea of a reorganization has merit; it may even be precisely the tonic a company needs. In many instances this is not the case; but we’ll assume here that it is.
Based on my experience with many companies, the best way to move forward is incrementally, in a layered, cascading manner. I’ll explain.
First, understand that the structure—all those lines and boxes in the organizational chart—is just a blueprint, a skeleton. All the “other stuff”—culture, decision rights, and so forth—are the muscles and tissue that hold it together and make it work. For a reorganization to succeed, then, that other stuff has to be in place, which requires involving more than just a handful of people in the process.
But you can’t bring all of them into the conversation at once. That’s a formula for confusion, if not chaos. So you involve them in layers, in a cascading fashion. A small group necessarily develops the blueprint, but you empower the lower levels to design many of the details. After three or four such cycles, each one delving deeper into specific details, you not only have a solid design, you have buy-in: a team that feels part of and committed to both the organization and the process.
Follow such a pattern and your reorganization has a solid chance of accomplishing its objectives. Use the top-down approach, designing everything in the C Suite, and you’re more likely to be one of the 52%.