Reorganizing Your Organization

Volatile market conditions may force you to reorganize your company. So, do you require a new structure or must you tweak the existing one?
When organizations have to reorganize, leaders are left weighing options large and small. Often conflicting advice and opinions leave them grappling with questions of whether or not to reorganize, and if they must – what, when, and how to reorg!
The term reorganization encompasses two distinct processes, restructuring and reconfiguration. Restructuring essentially calls for altering the structural archetype around which resources are allocated and mobilized, and activities are coordinated. Organizations coordinate around business lines, customer segments, technology platforms, or a combination of these. In 2013, Microsoft shifted its business-line-focused org chart to one that pivots around functions, including Business Development and Evangelism, and Advanced Strategy and Research. Reconfiguration, on the other hand, does not alter the company’s underlying/existing structure, but proceeds to combine, split, transfer, or even dissolve business units, making concurrent changes. Novartis, for instance, reconfigured four global businesses into five in 2016, splitting the Pharmaceuticals division into Oncology and Pharmaceuticals.
Interestingly, the objectives of both remain the same – promoting innovation, galvanizing business, and boosting financial performance. And to do this effectively, companies must shake up their structures from time to time, so as not to let inertia of routines to settle deep. Not
changing strategic direction in the face of industry transformation is a recipe for disaster. Without choosing between evolution and revolution, both should be considered in the appropriate way and at opportune periods, employing the four-part framework as below.
Consider the circumstances: To determine whether your organization would benefit from restructuring or reconfiguring, two factors may be considered: turbulence in the industry and the urgency for strategic reorientation. In fast moving markets reconfigurations, involving rapid
small-scale changes and seizing fleeting opportunities, work well. Dynamic industries like banking, retail, or technology are more amenable to reconfigurations and promptly develop operational modes and patterns to manage such changes effectively. On the other hand, when the industry is in turmoil and the company must withstand the churn, piecemeal reconfigurations may not suffice and restructuring may be the answer. John Chambers, executive chairman of Cisco, among others, firmly believed that only a radical holistic change in an organization can bring about true transformation. IBM tried to navigate the dynamism of its industry, in the first decade of this millennium, by relying on reconfigurations. Now CEO Ginni Rommetty is driving a restructuring initiative – pursuing a strategic reorientation towards cognitive computing technologies with
focus on the ‘Internet of Things’ (IoT).
Pace yourself: Major change or restructuring not only brings stress and agony, it takes time to execute, bear fruit, and bring profits. Until fully in place, confusion may also reign among the workforce with the constant back-and-forth between old and new archetypes to get the company
going. So, the leadership must make its mind up whether to proceed on an overhaul of systems and practices, or the organization is better off with reconfiguration, where the rhythm is largely a balancing act.
Too few changes may not bring in desired outcomes, especially when the world is moving fast, and again frequent ones may result in hasty decision-making, flawed actions, erroneous measurement of outcomes, change fatigue and employee disengagement. Play to your strengths: Whichever path you choose, how you allocate and mobilize resources and design your activities must draw on your strengths and differentiate your organization from others. While this seems elementary, not all companies have accurate understanding of what suits the situation best or the discipline to follow this through. A company is best served restructuring when it reinforces and builds on its unique points of differentiation instead of aping a competitors’ strategies that may not work for it. If we consider Citi and HSBC, two renowned global banks, we find Citi organizing activities by business lines and HSBC leveraging its three-dimensional (business-geography-functional shared services) matrix.
Yet another proven reconfiguration strategy is to put organically developed units together with acquired ones – ensuring that the combined unit has the twin merits of new blood and institutional DNA.
Determine what other systems need to change: A restructure calls for accompanying changes in the company too – from management processes and leadership styles, to IT systems, to the established work patterns, to the rewards and incentives. And these must happen quickly, if not in tandem, so as not to fall behind or lose steam. Restructuring in isolation can initiate a new chapter of misalignment that can trigger a downward spiral. In contrast, reconfiguration succeeds when changes are made in targeted units and continuity is maintained in other areas of the organization.
In the ultimate analysis, both restructuring and reconfiguring deliver value if the right choice is made and pursued appropriately. Restructurings require new systems, practices and processes – they must be done sparingly. Continuity and commonalities are preferable if we must reconfigure. Any reorganization drive must clearly define the scope and desired consequence of change. The transition in either case may not be smooth, but the guidelines will surely improve the odds of an effective outcome.

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Based on Harvard Business Review South Asia March – April 2017, ‘Restructure or Reconfigure?’ by Stephane J.G. Girod, professor of strategy and international Business at IMD, Lausanne and Samina Karim, associate professor of entrepreneurship and innovation at Northeastern University’s D’Amore-McKim School of Business, Boston. She is the chair of the Competitive Strategy Interest Group for the global Strategic Management Society.
Written by Aidias Consulting Group

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