Re-organising is never easy

Citation

(2004), "Re-organising is never easy", International Journal of Productivity and Performance Management, Vol. 53 No. 1. https://doi.org/10.1108/ijppm.2004.07953aaf.001

Re-organising is never easy

Re-organising is never easy

A recent survey from people management experts The Chartered Institute of Personnel and Development presents a unique picture of what business leaders have to say about why corporate reorganisations all too often fail. The survey also shows that reorganisation often sees simultaneous "hiring and firing". Over 85 per cent of reorganisations in the survey involve a reduction in the workforce, while nearly two-thirds of reorganisations lead to the recruitment of new employees. And organisations are failing to audit existing skills before making redundancies, with the respondents recognising that they are likely to be letting talent walk out the door.

The survey Reorganising for Success: CEOs' and HR Managers' Perceptions was based on the views of more than 800 executives – from private and public sector organisations and confirms that there is much room for improvement in the way organisations restructure.

Getting it wrong is common, with reorganisations failing to deliver real improvement in performance in 40 per cent of cases. And it is a regular feature of corporate life: the survey respondents report that they have experienced, on average, seven corporate-wide reorganisations over the past three years.

Richard Whittington, professor of Strategic Management at the Said Business School, which carried out the survey said: "The financial markets richly reward good organisational design – it is essential for survival and success. But all too often organisations find themselves in trouble because of poor management of the change process. In particular the change is piecemeal, doesn't have the buy in from employees and does not result in the necessary skills and capabilities for the new organisation to operate effectively."

The report cites high profile examples of success and failure. In February 2002, the reorganisation of the chemical company DuPont, was followed by a 12 per cent increase in stock price, taking the company's market value from $42 billion to $48 billion.

By way of contrast, in 1999, the new chief executive of Procter & Gamble, Durk Jager, launched "Organisation 2005". By the summer of 2000 the reorganisation was considered a failure and Durk Jager had lost his job (source: Chemical Market Reporter).

Key conclusions

Piecemeal change is common. The survey shows that organisations that deliver complementary changes in organisational structures and processes and employee behaviour report greater success. It is critical that such changes harmonise for the good of the whole. But the survey shows that during the re-organisation process, change is often piecemeal, with very little attention being paid to aligning changes.

For example, the survey suggests that while on the one hand the reorganisation process often means significant change for individuals in terms of responsibilities and job profile, very often there is no corollary change to career and reward structures.

There is scope to improve both project and people management in the reorganisation process. According to the survey, only 40 per cent of reorganisations are completed on time and 60 per cent within budget. Reorganisations rarely provide training or coaching for those managing the process or those affected by it. (Only 27 per cent of organisations offered training to those managing reorganisations.) Employees are rarely given the opportunity to participate in decisions about the reorganisation (41 per cent) and are even less likely to be involved in decisions about how the new organisation will be implemented (36 per cent).

Senior management attitude and experience is critical. One of the key influences on the outcome of reorganisation is, perhaps unsurprisingly, the experience of those in senior management – in both their current and previous enterprises. In about 70 per cent of cases respondents report that the attitudes, behaviours and capabilities of senior management are an enabler of change. One quarter report it as a constraint. The report challenges senior management to raise their competence in order to improve the success rate of reorganisations.

Reorganisations are insular. The rationale for, and management of, reorganisation is mainly the result of internal thinking and experiences. Very few organisations report the positive influence of consultants in reorganisations or ideas and models taken from training courses and seminars on their approach to reorganisation. However, the respondents do recognise that learning from outside is a critical lever for developing practice for future reorganisations. CEOs in particular report the importance of benchmarking with other organisations.

Professor Whittington concluded: "This survey shows that with much more attention to the management of organisation-wide change, reorganisation stands a much greater chance of success. At the moment there is still too much of a piecemeal approach – and this lack of cohesion is causing many reorganisations to fail. For more and more managers, reorganisation is an ongoing and critical part of their responsibilities. This survey provides an important agenda for action: in this fast changing world embedding the ability to reorganise quickly and effectively is imperative for organisations looking to build long term advantage."

For more, see www.cipd.co.uk/surveys