In my role as Business Consultant, I can think of a great number of companies that where or are being forced to different levels of re-organisational efforts at an accelerated pace, in response to the crisis brought about by the pandemic. When such a re-organisation is happening it is a very delicate period and all the research around the world indicate that on average 35% of such re-organisations fail, creating more damage to the company, while only around 10% succeed fully to deliver everything they aim to in the time planned.
Whether a reorganisation is motivated by cutting costs or by growth, here are some pointers at what companies can do to maximise their chances of delivering the intended outcome in the time planned while minimising disruption.
- Move quickly, but always with a plan.
Time is of the essence. As a rule of thumb, if a re-organisation process takes longer than 6 months, it is significantly more likely to fail. After all, the longer it takes, the more likely it is that the business context will have changed (especially in a rapidly developing crisis situation), making the new model irrelevant by the time it is completed. Of course, moving quickly does not mean rushing ahead without a plan. Research indicates that only a third of companies pursuing a a re-organisation develop a detailed plan another third have just one milestone that everyone needs to hit and a final third have no plan whatsoever. The data shows that the latter two cases have much lower success rates.
- Know your human capital.
Though we keep saying that the most important resource for our companies is our teams, the vast majority of companies’ human capital analysis capabilities are not nearly as substantial as their financial analysis. Hence when a re-organisations comes about companies do not have a clear outline and the the right data. Many times executives know they need to reduce headcount by a certain amount to cut costs, but they don’t really know where the inefficiencies are. This information should be always at hand.
3. Set differentiated targets and consider making focused investments.
Saving 20-30% across the board is not always the right answer — perhaps some organisational units should be cut by 50, 80 or even 100%, while others might need focused investment. Companies that are able to reinvest a portion of their cost savings into building up their internal capabilities are significantly more likely to succeed, even if this means cutting costs more deeply elsewhere to afford it. This may be intuitively obvious, but it is easily forgotten in a crisis.
- Involve your full leadership team.
How you decide on organisational change really matters — sometimes even more than the actual decision. Various research clearly indicates that the most successful reorganisations involve the whole leadership team in the decision-making process, often with some staff input as well. This is because the entire leadership team will need to support the execution of the plan, so they all need to be bought into it. Unfortunately, the reality on the ground shows that this approach is not very common. Instead, re-organisational efforts are most frequently designed by just the leader and a few of their most trusted colleagues. This is even worse than a single dictator deciding, because executives who feel excluded from the inner leadership circle are more likely to resist later.
- Allow some flexibility in how the new organisational model is implemented.
In 50% of cases, re-organisations fail to deliver as planned because managers resist the lack of flexibility. Companies that allow managers some flexibility in deciding how the changes are implemented — ideally based on a solid business rationale — are far more likely to succeed.
- Communicate the changes as quickly — and humanely — as possible.
In everyday reorganizations, face-to-face communication has a much greater correlation with success than communicating via email. However, during a re-organisation process that needs to be done swiftly to face a crisis, electronic communication is actually far more likely to correlate with success — probably because in a fast-moving situation, employees would rather receive news quickly than be left in the dark. Ultimately, the most important thing for leaders to remember is that re-organisational efforts are not only about numbers — they’re also about people. Friends and colleagues will lose their jobs. You have a duty to treat them fairly and sympathetically, and your remaining workforce will judge you on how you handle the situation. A better approach is to tell all employees what is happening and why, and then have managers or HR people who know the people affected speak to them directly. Even when changes happen quickly, employees need to understand why, when and how they will happen.
- Create a positive feedback loop.
It is unrealistic to expect a re-organised company to work perfectly from the beginning. You have to live with it and digest it and rapidly correct things when you find issues. Companies that have formal mechanisms for feedback (such as managers escalating issues, staff surveys, or a formal review 3-6 months after completion) are much more likely to be successful in their re-organisational efforts, as those re-organisational efforts without a clear processes for escalating issues are most likely to fail.
Delivering organisational change is never easy. Doing so in response to a crisis is even more difficult. The least you need to to fall in the above mentioned common pitfalls, to decrease further your chances of succeeding at any needed re-organisation of your business.
At EMCS we specialise in helping business clients have a professional review of their business to identify what structures, cultures and processes are helping them or hindering them, whilst working them to identify what changes are swiftly needed in their organisational setup. In many instances we end up managing the change process to have external discipline included to keep things on tracks. We sometimes also augment this with any needed training to give new perspectives and insights on what working methods and internal cultures need to change to have the company achieve a better performance and operational resilience. Malta Enterprise should should launch the much needed Business Re-Engineering Scheme to help finance any needed re-organisational efforts. Feel free to contact me on firstname.lastname@example.org for a chat.