All organizational structures have a shelf life as internal and external conditions evolve – is yours in need of a refresh? First, it’s important to clarify that restructuring your business isn’t the same thing as reducing your workforce. In fact, smart organizations regularly analyze and proactively adjust their structure to take advantage of new trends and opportunities – it shouldn’t be a last-ditch effort to save a business.
Restructuring aligns different parts of the organization to ensure performance can be realized. A restructure can reap a number of positive rewards, such as improved financial performance, the ability to more effectively leverage supplier relationships, easier recruitment of talent to meet changing needs, improved diversity, a better utilization of resources, an enhanced culture, and many more.
Here are six tell-tale signs it’s time to consider a new organizational structure:
- Your market or sales are experiencing significant growth or shrinkage.
Anytime an organization sees dramatic shifts in business volume or marketplace changes, it’s time to proactively consider restructuring. This might mean changing strategic focus on products or services or adding or reducing your workforce to better match your capacity to demand. - You want to make a culture change.
Shaping a new culture often requires changes to how work is conducted and by whom. Often, reporting relationships can reflect an organization’s priorities, focus, strategic goals and, most importantly, values. Perhaps a company wants to become a LEAN organization to minimize waste. This change in focus would require leaders to structure their teams such that the process improvement and strategic planning departments aligned and reported to the same leader. Or say a company wants to increase its focus on customer experience. While many customer relations departments report through marketing or operations, if customer service is an integral part of a business’s strategy, the CEO might need to be involved. - You want to make a strategic shift.
A strategic shift could involve growing into a new market or producing a new product – both scenarios often mean a new business model is needed. As we’ve seen with COVID-19, many businesses shifted from brick and mortar stores to delivery or virtual models that were better suited to the changing conditions. - You’re having difficulty coordinating people and processes or are seeing conflict between groups.
Interpersonal conflict can be the result of an ill-suited structure. People might be unclear of their roles and responsibilities or unable to clearly define how a process should work. By restructuring, you can clarify these areas to minimize conflict and enable better coordination between departments. - You’re experiencing a lot of operational challenges.
Operational challenges could include the misuse of resources, an overlap between roles or departments, a breakdown in communications or workflow snags – these are all signs that it may be time for a restructure. Addressing these challenges through a new restructure can improve efficiencies, support cost reductions and enable greater innovation. - Performance is suffering in one or multiple areas of the organization
There are a number of reasons performance might be off. Sometimes, this is the result of interpersonal problems or poor leadership, but it could also be an indication that your structure is wrong. You might ask yourself, have I added to many responsibilities to a single leader for them to be successful? Is there span of control too large? Would a different level of support make the team more efficient? Do I have the right talent and competency for a given department? Or is the chain of command functioning as desired to achieve results? Considering a redesign when workload changes is helpful to ensure success.
Avoid These Restructuring Mistakes
Organizations often engage in the redesign process incorrectly, inadvertently causing a number of negative issues. A foundational mistake is when leaders fail to align the restructure to solid strategic objectives or consider future goals at the beginning of the process but forget about them somewhere along the way. Keeping the big picture in mind and evaluating multiple options against the criteria is a critical factor for success.
An organizational restructure is a huge change initiative, and many companies make the fatal error of not involving the right people in the process, allowing only a small group of leaders to participate in the ideation and design. Without careful consideration of the broader variables at play in the environment, the larger company culture and how all stakeholders and employees will feel about the changes, leaders often miss the mark. They end up with a new structure that does nothing to address the organization’s specific challenges. Instead, leaders must present a clear vision and regularly obtain and integrate feedback from employees. Doing this will minimize resistance and get greater buy-in from your teams.
Communication is another area where leaders fall short during restructuring. People often conflate a restructure with layoffs, so it’s vital that leaders communicate clearly, early and often. Everyone affected – from top talent on down – needs to understand why the restructure is occurring and what they can expect from the process. Transparency is key – the worst thing you can do is try to hide the fact that changes are on the horizon. When people do not have information, they will make up stories to fill in the gaps; these assumptions are often incorrect and worse than reality.
The world is always changing, and companies that survive and thrive long into the future must learn to shift with the times. By proactively considering whether a restructure is needed, companies can achieve greater efficiencies and healthier cultures while staying abreast of changing market needs and trends.
Commentary by Dr. Laurie Cure, Ph.D. Here’s what you’ve missed?
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