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Jul 30
2010

Time for yet another reorg?

Posted by SherylNash01 in restructuringreorganizationcareer/management

SherylNash01

Four out of five organizations, mostly large corporations and some non profits and governments, have gone through some sort of redesign initiative over the past 12 months, according to a survey of more than 400 programs by 260 such organizations by the Corporate Executive Board. Trouble is, more than half of these organizations expect to go through another major redesign over the next 12 months.

While 90 percent of those organizations reported hitting the cost-cutting targets after one year, only 60 percent hit the employee performance targets for their redesign initiatives. As a consequence, many of the redesign efforts have led to unclear decision-making authority, reduced collaboration or poor alignment between employees' interests and their new jobs. As performance suffers, the benefits from the cost savings are likely to disappear over time.

A frequent culprit was a top-down approach to the process, according to Brian Kropp, managing director of The Corporate Leadership Council, part of the Corporate Executive Board.  "They missed an important thing - understanding the work flow, how work gets down, how it should get done, and how to get there," says Kropp.

Secondly, companies gave up too soon. "If they didn't get the results they wanted in three months, they had a knee jerk reaction," he adds. "You need breathing room."

One reason they do so is that the CFOs are content with short-term results, Kropp explains. "They pull costs out of system and celebrate when they see profits increase," he says. But he notes that such gains are short-lived if productivity doesn't increase. They can even backfire if they hurt customer service.

Unless companies are content with short-term profits regardless of the potential for longer-term harm-and why not if managers are likely to have moved on before they arrive-the obvious solution is to involve employees in the planning by running proposed changes by them and asking for feedback.

Reorgs that have a sound business purpose in mind are likely to produce better results than those fixated on costs, says Graham Chapman, new business director at  919 Marketing.

When the company grew concerned earlier this year about client churn, its CEO decided its resources were not allocated as well as possible. The problem was that each account had one account executive handling it, even though he or she had a different skill set than those handling others. So the reorg involved reassigning the accounts to teams, with one account executive who serves as day-to-day contact and idea generator, and two account coordinators, responsible for executing projects and tracking success.

Chapman says the new approach "expands our creativity and productivity."

As a result, client churn, during the little over a year that he has been there, has been reduced. In the second half of 2009, the firm was losing as many clients as it was adding. In 2010, it lost one and added nine.

Elsewhere, however, this structural approach to reorganizations is rare, says Rick Mauer of consulting firm Maurer & Associates. He cites the case of a telecom client that seems to go through major reorganizations every few months. There, Mauer says, when new management wasn't making changes just for changes sake, "leaders reorganized in order to address some short-term challenge or opportunity, without thinking about longer term implications."

And yet another thoughtless reorg will hardly be the solution.

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