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Reorganizations can be a powerful tool to solve business problems. While they always cause short-term disruption, they can lead to longer-term cohesion and performance—when done well. True reorgs are less about moving people around and more about organizational transformation.
Former IBM CEO Lou Gerstner didn’t even like to use the word “reorganization” because of the former connotation. “Reorganization to me is shuffling boxes, moving boxes around. Transformation means that you’re really, fundamentally changing the way the organization thinks, the way it responds, the way it leads. It’s a lot more than just playing with boxes,” Gerstner once said. I concur.
But at what point in an organization’s life cycle is a reorganization necessary, and how should leaders roll out a reorg that actually leads to transformation?
When it’s time
The best (and only) use case for a reorganization is to solve a specific business problem. Typically, problems that a reorganization can fix are those related to information-sharing, collaboration and communication.
Several years ago, our business was broken up into a variety of smaller data and technology practice areas. As we grew, it became clear that our clients needed more complex, more collaborative solutions, across everything we could bring to the table. But our structure fundamentally wasn’t set up for that. Unintentionally, we acted in silos and clients got only a piece of us.
To solve our collaboration conundrum, we reorganized into a matrix structure. This way, to make any business activity or piece of client work successful, at least two parts of the organization would need to collaborate. In fact, I remember stating, “I want it to be impossible for someone to be successful at Resultant if they aren’t willing to collaborate.”
And it worked. We quickly began creating more complex, collaborative solutions and thinking about the business at a more holistic level. The structure made an individual’s day a bit more complex but dramatically improved our client solutions and helped us fuel the next stage of growth.
There’s no such thing as a perfect organizational structure. It doesn’t exist. Every structure will manage some things for you, by nature of its structure, but will also create new gaps and tension points you’ll have to manage in different ways. It’s important to be thoughtful about the problems a reorganization will solve and create on the other side. But in any reorganization, no matter the organization’s size, the most important aspect leaders must manage before, during and after is the human component.
How to get it right
Reorganizations cause fear and anxiety no matter what. In fact, research suggests that reorganizations cause employees more stress than layoffs. And in more than half of cases, this leads to a noticeable drop in productivity. For a reorganization to solve more problems than it creates, leaders must take great care in how the change is rolled out to employees.
1. Communicate the “why.” To the executive team, the “why” driving a reorganization will be obvious. After all, the executive team would likely have been talking about it for months. As such, deeply and thoughtfully communicating the reason for a reorganization and cascading it down is a step a lot of leaders fail to do well or miss entirely. People need a clear understanding of the “why” driving the change, communicated to them well in advance of when the change will take place.
But an understanding of the global “why” will get you only halfway to your destination. People will always want to know how a change will affect them at a local level—and what they have to gain from it.
2. Figure out the details. The difficulty lies in the details—details about how teams operate and work gets done up and down the organization. Details about how individuals are impacted and the questions they will have. Details that are impossible for the executive team to grasp once an organization reaches a certain size.
Don’t assume the details will work themselves out. Instead, engage and equip managers to be both a sounding board and educator for their teams. The feedback loop between the idea of a reorganization and the reality of how it will be executed often impacts the overall approach and structure. It’s crucial to let leaders and managers, and often employees, participate in this process, as they are the ones with the details.
3. Let people feel their feelings. People inherently manage their lives through relationships. Most reorganizations fundamentally change how and when team members relate to one another. As such, reorganizations always cause strong emotions. Even positive reorganizations that everyone agrees with. Those emotions are real and valid. In some cases, they can even resemble a grief cycle.
That’s why it’s crucial to approach a reorganization from a place of compassion and empathy. Don’t try to minimize or talk people out of feeling a certain way. Instead, give people time, space and support to process their emotions. After all, the people who care the most are the ones you most want to hold onto.•
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Caswell is CEO of Resultant, an independent technology, data analytics and management consulting firm based in Indianapolis.
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