For global businesses, the past two years have been a period of turbulence. Amid substantial global uncertainty – speculation around the impact of Brexit, the recent US presidential election and heightened trade regulations in some countries, many businesses are facing poor organic growth prospects and considering a major restructuring. But is major restructuring the right move?
Although organisations must constantly change with the time to survive, often times a major change is not necessary. Focusing only on a particular area of the business or flexing the existing model can be sufficient.
The 2017 HRD Summit Europe brought about a fascinating round table on the topic ‘do you really need to restructure?’ Participants from a wide range of industries shared their views and business stories around restructuring.
What kinds of challenges really require a major restructuring?
The kinds of challenges that were brought up in the round table varied: a luxury goods maker is under pressure to accelerate its business from a seasonal cycle of activity to a monthly pulse, affecting everyone from design to supply chain to marketing, and even to HR and Finance; a national broadcaster is planning to digitise its entire business from advertising through to back office systems. From this discussion, we agreed on four main conditions that make up a strong case for a major restructuring:
- Fundamental change in the value chain
- Fundamental changes in roles and the activities per role
- Switch from modes of organising: e.g. from geographical to functional or client segment
- And when organisational needs are blocked by human inability to change: location, skills, ways of working, or to achieve the sheer speed required
What kinds of challenges can be handled without a major restructuring?
Since major restructuring is messy, hard and disruptive, unless the case for it is overwhelming, focus only on redesigning a particular area of the business. Below are types of challenges that could be handled without major restructuring; businesses could cope by flexing within their existing structure:
- When the issue is failure to deliver against existing roles and specifications, rather than a need to change the roles and specifications
- When changes in scale alone are required
- When no fundamental change in the business model is needed
When have you seen a restructuring deliver value (and why did it work)?
Below are some interesting examples of when restructuring has delivered value to the organisation:
- Aviva*: 12,000 integrated headcount reshaped to 9,000 on time, and on budget
- Shell-BG: delivered integration synergies up to $4.5bn vs expected $3.5bn per year
- Hospitals in Atul Gawande’s Checklist Manifesto: clear metric in patient mortality
*OrgVue project. We have more case studies on organisational transformation here
What are your top tips for success when undertaking a major restructuring project?
Major restructuring is risky with many hidden traps along the journey. Examples include strong personalities and ego, budget constraints, and lack of alignment which can lead to restructuring around individuals, restructuring the top level to assert executive power, and ‘rightsizing’ the workforce in an unfair manner. Below are some tips for success to consider during both design and delivery phases.
In the design phase, it’s crucial to establish:
- Clarity on overall purpose
- Clear design criteria
- Aligned metrics for success
- Clear case for change
And then in the delivery, identify who will do what, where, when and the cost and headcount impact. For example, what are the benefits of getting clear responsibilities? What is the benefit of delivering one month faster? This means you will need:
- Good data management to track progress
- A solid plan to deliver the implementation, not just the design (‘Make it Real’)
- Ways to measure and track impact
Finally, I want to reinforce that major restructuring is a tough journey. Organisations need a clear case for change to make it worthwhile. If not, it’s better to consider the improvements you can make within your existing structures, such as by working to achieve clarity on headcount, costs, responsibilities and deliverables.
These topics are all covered in depth in my colleague Rupert Morrison’s book ‘Data-driven Organization Design’.
Download ‘The Data Goldmine’ free chapter
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Image credit: Jakub Szepietowski