Fluctuating economic conditions and resulting impacts mean businesses need to carefully consider the option of a strategic restructure.
However, restructures are not without risks. Poorly designed restructuring initiatives often culminate in a slash-and-burn approach that compromises the organisation’s future growth prospects.
Such approaches may even result in what we call ‘deck chair reshuffling’ among leadership, creating the illusion of change while failing to yield any substantial improvement in performance.
Three key factors that drive successful organisational redesign include recognising the opportune moment to reorganise, restructuring to deliver tangible operational enhancements, and implementing changes to foster enduring impact.
Consider both operational and team structures
A common misconception is that restructuring teams and reporting structures alone can bring lasting value. if this is done without considering the overall operating model, the organisation often remains stuck in the same cycle.
At the same time, the process of restructuring can amplify the risk of employee disenchantment. Even the most well-executed initiatives can leave employees feeling insecure in their roles or uncertain about their accountabilities. It is crucial that the long-term value derived from the restructuring justifies the disruption it incurs.
Meaningful changes in the operating model usually come from strategic shifts driven by market changes, product or service portfolio adjustments, or re-evaluating how value is generated. When the operating model remains largely unchanged, reinforcing management practices that enhance performance tends to be more effective than mere structural adjustments.
Pinpointing the root causes of performance challenges
A holistic assessment of whether the organisation’s operating targets, processes, and capabilities support the execution of its strategy is essential. It is also imperative to evaluate whether the organisation has an appropriately sized, well-structured workforce with clearly delineated accountabilities to execute the operating model. Scrutinise whether the organisation’s internal management practices consistently drive it to meet its targets – this holds the key to identifying areas for improvement and determining the necessity of strategic restructuring.
Implementing restructuring for tangible operational enhancements
Navigating the intricate terrain of organisational redesign means avoiding common pitfalls.
Failing to establish a direct and tangible link between the new design and the overarching strategic trajectory can lead to undervaluing the existing assets and capabilities. It can be tempting to adopt a one-size-fits-all structural template, such as a functional, product-led, geographic, or customer segment-based approach; however, this can dilute the transformative impact of the restructuring process.
To navigate these challenges successfully, businesses should develop interconnected models that are directly tied to the strategic vision.
Optimising the operating model
Updating the operating model often requires significant improvements, such as achieving ‘more with less’ or ‘faster responses’. Turning these strategic targets into concrete operational goals is important in shaping the new model. Achieving these goals involves targeted changes to processes and capabilities, including automation, strategic partnerships, and technical upgrades.
For instance, a telecommunications company’s strategy focused on frequent product launches; this requires streamlined coordination among various functional experts, such as marketing, engineering, finance, product design, and channels. Clarifying the roles of these functions in decision-making processes is vital for successful strategy execution.
Driving lasting high performance
Fully realising the organisation’s potential requires updating old performance management systems to align with new targets and responsibilities. This involves strengthening new capabilities and instilling the necessary behaviours for the smooth functioning of the new model.
However, many leaders overlook this step, potentially missing opportunities for sustainable growth post-restructuring. Fostering a culture of continuous improvement through ambitious goal-setting and creating a pipeline of improvement ideas among leaders establishes a foundation for ongoing efficiency gains, reducing the need for repetitive disruptive restructuring.
Building the organisation to deliver
Clarity among divisions and individuals regarding their respective responsibilities serves to expedite decision-making processes and enhance their effectiveness. The key is to strike a balance between adhering to theoretically ‘correct’ organisational structures and accommodating market dynamics, such as skill shortages, or internal realities like the need to retain institutional knowledge. The process of organisational restructuring must be sufficiently iterative to instil confidence among leaders that they have assembled the most efficient teams—that is, teams capable of delivering on the organisational objectives through optimised resource allocation, clear accountabilities, and well-defined reporting lines.
Implementing for lasting impact
Effecting changes across core operational elements demands coordination and phased execution. Maintaining the discipline necessary to achieve sustainable high performance is paramount. This involves identifying changes and their connections while steadily advancing, ensuring the whole team remains engaged. Prioritising changes, delegating responsibilities to line leaders, and employing detailed plans for weekly progress tracking and risk management will keep plans on track. A comprehensive transition plan helps resolve any resource conflicts or obstacles.
Engaging stakeholders for lasting change
The success of any restructuring hinges on engaging stakeholders to understand the need for change, its benefits, and its impact on employees and others involved. Senior leaders should consistently demonstrate commitment through various communication channels like newsletters, town hall meetings, and social media.
Publicly reporting progress reinforces the need for change and ensures accountability. Investing in a lean Transformation Management Office (TMO) is advisable, as a small yet competent TMO adds more value than a larger, unwieldy one. Line managers need to take full ownership of the change process for sustainable restructuring.
The essential role of senior management
The successful redesign of the operating model and the accompanying organisational structure hinges on visible advocacy from senior management. Leadership is pivotal in setting the aspiration for change, steering the design process, and leading the implementation efforts. While this may demand a significant investment of time, it is an indispensable aspect of the organisational restructuring process and cannot be delegated to external consultants or middle management.
Organisational restructuring can be an incredibly useful mechanism to enhance operational efficiency and performance. However, the essence of this process lies in meticulously aligning the operating and performance models with the overarching business strategy to ensure success.