Companies are responding to current unpredictable and turbulent market conditions by reorganising. But unless the reorganisation is focused on what outcomes you require, it can lead to confusion, inefficiency and demoralisation, says Mark
Goodridge
“We trained hard, but it seemed that every time we were beginning to form into teams, we would be reorganised. I was to learn later in life that we tend to meet any new situation by reorganising, and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency and demoralisation.”
Roman writer Caius Petronius (AD 66)
Tough economic climates need tough action. The flattening off of performance coupled with dire predictions of a downturn have caused many organisations to become more cost conscious lately. And many are considering reorganisation to bring back into balance costs with anticipated revenues.
So reorganisation has become attractive once more. After all, it not only helps businesses slim down, but enables them to explore whether they have the best people in place to take the business forward through difficult economic conditions. But often reorganisation, especially when it’s not focused enough on the specific outcomes that are required, can lead to confusion, inefficiency and demoralisation. And, in the words of Caius Petronius, reorganisation can be a wonderful method for creating the illusion of progress in response to a difficult set of market conditions. So how and why does reorganisation often lead to confusion, inefficiency and demoralisation?
Confusion: Changing people’s jobs changes working habits and often the competencies needed to perform them. I recently attended a staff conference of a consulting firm (you might have thought they knew better, but sadly no) – where after a number of insipid speeches from those in charge, a new organization was announced. A new organisation chart was placed on each set of delegates’ tables for them to identify their name and their new reporting relationship. This was the first they had heard about it. With 200 people in the room you might assume that there are better ways of communicating this news to staff. The immediate response from everyone I spoke to was “how is this supposed to work?” Organisation charts are a particularly poor way of demonstrating how a new organisation is to work. Usually confusion reigns, and still does in this particular business.
Inefficiency: Every reorganisation I have been involved with (at least 50) has resulted in a performance dip. So the immediate consequence of an act designed to increase performance has the opposite effect. Good organisation change minimizes this period of a performance dip. The dip is caused by a loss of focus. People understandably are worrying about how they can maximise their chances of keeping their job rather than keeping the customer happy. Secondly, new skills have to be learnt, new relationships built and the old knowledge base of the business reconstructed. This all takes time. With a good new design and much effort put into rebuilding the organisation’s effectiveness, the dip can be short and performance grown rapidly to the level intended.
Demoralisation: Reorganisation often creates uncertainty. The period of time between when first staff hears of the dreaded “reorganisation/restructuring/ downsizing/rightsizing” words and their being assured of a specific role in the new structure is crucial. From the first announcement the CVs get polished and the headhunters start calling. If this period is too long then it’s usually the best people that go and the benefits of reorganisation become diminished (that is the opportunity to say goodbye to the poorer performers) because the best people find new jobs more easily.
Effective approaches
There are many different ways of approaching reorganisation that can avoid the confusion, inefficiency and demoralisation observed 2000 years ago by Caius Petronius, and every year since. But how can we go about reorganisation to deliver the benefits and minimise the downsides? We at ER Consultants believe there are effective approaches to tackling reorganisation without the mayhem that usually accompanies it and various ways of implementing them successfully.
The four approaches to tackling the downsizing and restructuring of a business successfully, include:
- Changing what the business does directly itself is the make or buy question. Can we outsource some of our processes such that we can reduce costs or avoid the cost of restructuring?
- Change how we configure our people and resources to get the job done. This will often involve redesigning work, amalgamating tasks, making better use of information systems and reducing duplication. This might be the application of business process reengineering or applying more overarching principles around aligning organisation to a new strategy.
- We can keep the current organisation configuration and seek to reduce the number of people undertaking each task. This is the simplest approach but one that is less likely to deliver the greatest savings.
- Finally, beloved of the pubic sector, is the “ask for volunteers” route. This scores high on staff acceptability and low on demoralisation, but high on confusion and inefficiency. As pension provisions become less generous (except in the public sector) early retirement has become less attractive, so volunteering for redundancy becomes most attractive to the better people who can be sure of getting another job. This is high on confusion as it is often quite random as to which positions go vacant and the steps to cover that job are low on any rationale and high on expediency. The organisation then gets redesigned through a series of uncoordinated incremental steps.
Implementing reorganization
There are also various ways you can implement your chosen approach to reorganisation. Let’s look at two dimensions – rigour and participation or engagement.
Rigour is the degree to which a precise methodology is used to increase performance (see diagram below).
Many business process re-engineering projects are rigorous. They take lots of time and lots of resources to get right, however, few such programmes fully deliver the objectives they start out with. Similarly, many of the programmes that are currently being presented under the ‘Lean’ banner have a series of rigorous tools and techniques that are applied to making work more effective. On the other hand, telling each department to reduce their budget by 20% has little rigour, but if time is short and few resources are available, it can be a crude yet effective way of cutting out the fat (see diagram 2 below).
The second dimension concerns the degree to which we engage and involve staff in the way in which work will be carried out in the future. Here we have a difficult dilemma. Most of us will accept that the greater the degree of engagement staff have in the changes to the work they are to carry out in the future, the better. But there are two drawbacks. The first is time. It may just take too long and our performance pressures can’t wait that long. The second is that if significant cost reductions are required, how likely is it that staff will engage in eliminating their own job and that of their colleagues. At a ‘Lean’ conference I was talking at recently, the question was asked about how compatible ‘Lean’ methodologies are with staff reduction. We had the same challenge with the TQM movement. Lots of companies are using these techniques but because change is often incremental, the pace of change is slow and unlikely to result in staff reductions. And the degree to which staff participate in designing and implementing the changes is likely to be compromised.
So how do we choose between these different architectures of change? There is no right answer. It all depends on the situation you face and the risks you are prepared to take for the benefits you seek. All four options can be reasonably adopted in different circumstances. If you have little time then staff participation is likely to be compromised. If you have little resources to invest in your reorganisation then rigour will be compromised. The greater the change you seek, the more challenging it will be to get staff on board and engaged.
Good reorganisation is about understanding these dilemmas and mitigating these risks and the unintended consequences of:
• loss of expertise;
• demoralisation;
• losing the people you want to keep;
• damage to business as usual;
• the performance dip.
Whether you use consultants or not, be clear about not only what you want to achieve, but which path is best for you. And remember Caius Petronius’ words, some confusion, inefficiency and demoralisation is inevitable. Work on it, manage it, and by adopting the right reorganisation approach the business will not only be stronger and able to tackle any turbulence that crosses its path, but perform better as a result.
Tips for Managing an Effective Reorganisation
• Focus on keeping the best people.
• Reduce the period of uncertainty.
• One big cut is better than 1000 cuts.
• Get the new top team in place fi rst.
• Ensure the management information systems can cope.
• Keep focusing on the customer when all the attention is internal.
• Don’t destabilise more than you have to.
• Build up the new organisation assertively.
• Spend 50% of your available resource on implementation.
For more information, contact:
Mark.Goodridge@erconsultants.co.uk
© er consultants Topics Issue 2, 2008
