As a new CEO, a corporate restructure might seem like a wise first move. But what problem are you are trying to solve, and is a restructure the answer?
If you’ve just been appointed as CEO, or you’re a current CEO and performance is just not what it needs to be, a restructure – with the potential to appoint some new blood to the leadership ranks – is traditionally a method of first consideration. However, it is worthwhile pausing to understand just what problem you’re trying to solve, and to understand that you actually have a relatively broad range of options.
Organisations can never remain static because the world is simply moving too fast. Therefore the CEO regularly needs to consider incremental – and occasionally radical – changes. The forthright business philosopher, Nicolas Taleb, through his concept of the barbell strategy, shows us that we need both incremental and continuous changes to today’s business, and a series of more radical experiments that allow us to discover the business models of the future. The reasons for this dual approach are that the world is changing faster than it used to, and that changes are also harder to predict.
However, radical change doesn’t necessarily equate to a company restructure.
While restructures are an incredibly valuable management tool – they can align resources to need, clarify objectives, focus accountabilities, promote talent, and send important signals to your teams – they don’t always strike at the heart of the company’s problem.
Furthermore, even when restructures are necessary, they are usually not sufficient in and of themselves. For example, most restructures should be accompanied by process change to fix linkages broken during the restructure.
Let’s consider for a moment the way an organisation really delivers products and services, which all companies do to some extent. Most companies deliver through people or technologies, both of which are part of processes that tend to be clumsy if not well designed or if evolved in a haphazard manner. Additionally, people may not have been appropriately trained or accredited to be utilising the skills required of them. These same people may not have the right level of authority to make prompt and appropriate decisions, or have been set the appropriate targets. Moreover, your systems could be in a condition that no longer represents the real market standard, and you may not have the measures you need to really run the enterprise.
Therefore, even a quick inquiry into the elements of your operating model reveals that there are multiple influential factors when it comes to performance, not simply a company’s structure. While the importance of good organisational structure can’t be denied, there are rational reasons to be cautious. Even when well designed and implemented, a restructure can disrupt service delivery to customers, and the morale of staff – the two often being related.
The smartest course of action
To assess and subsequently implement the smartest course of action, you need to ask the right questions:
- How do we know there are problems?
- What are the causes of the problems?
- Even if we don’t know the precise solutions, what aspects of the operating model are we likely to change?
The evidence of a problem is usually present in performance metrics, however the problem’s causes are more difficult to grasp. To this end the wise approach is to speak to customers, analyse processes (but not agonise over them) and get some evidence of the root cause. When you have done this, you can ascertain which dimensions of the operating model might need to change – roles, processes, systems, accountabilities, metrics, rewards, culture, or management disciplines to name but a few. Only when you understand the cause of the problem can you consider pulling together a program with the right scope. Even then your instruction should be to test the solutions experimentally, often in a region or sub-market, before a broader deployment.
In closing, when it comes to restructuring your company, there are three main things to consider:
- The nature of the problem
- The numerous levers (dimensions of the operating model)
- Appreciating that trial before deployment can be a career saving device.
By Roger Perry – CEO Bevington Group