Why major re-orgs in big corporations tend to fail so painfully.
In the era of big and gigantic corporations, "re-org" is a pretty familiar term. In times of corporate crisis, re-org is probably the most used strategy. Re-org is also usually accompanied by layoff, which is probably the second most used.
There are many reasons why re-orgs can be useful and necessary. Organizations grow, environments change. There will always come a time when an organization realizes that how it used to work is no longer competitive in the market. To remain relevant, the organization has to refocus and renew itself. And when a new direction or vision surfaces, usually under the leadership of the chief executive, one of the most direct first steps for the organization to steer towards it is an internal restructuring.
In such a restructuring, departments that had charters that are no longer relevant are cut. Departments that had grew too big to be managed effectively are split. Departments that need to work together more closely and departments that were too loosely managed in the past are merged or centralized. It is like a self induced mutation of a bio-organism - an additional eye up here, a shorter tail at the back, more fingers and toes for dealing with new tools, etc. - an immense effort for the organization to become more efficient and to fight for its own survival.
But to have a happily ever after ending, even a temporarily happy one, is not without much challenges. Today I wish to point out two reasons why, for large and gigantic corporations, an re-organization meant to resolve problems often result in new problems.
First, the people on top who design the new organizational structure almost always do NOT understand how things are done at the tail levels. How is a project initiated? What steps, teams, and roles are involved in developing and shipping a product? What difficulties are the tail level contributors facing, and what changes can be made organizationally to help them work more efficiently and effectively? More often than not, the executives understand much less than they think they do!
Chief executives must get out of the boardrooms and talk to tail level contributors before, during, and after the re-org. These contributors form the majority of the organization. Most of the value creation work are carried out by these contributors. How can one re-design an organization without first listening to them? These people are most interested in getting things done, and they are usually most sensitive to organizational problems.
"Listen to your customers" - we are often told and reminded. To the executives, "listen to your employees" I say.
Next, a major re-organization usually happens and have to happen because senior leaders were ineffective in the past. While most of the actual value creation work are carried out by the tail level contributors, it is the authority and responsibility of the senior leaders to constantly monitor external and internal conditions. The state of the organization today is an aggregated result of these leaders' decisions and acts in the past. The reason why an drastic re-organizations is required is because these leaders have failed to carry out their jobs!
The second reason why successful re-orgs in large and gigantic organizations are usually less than successful is this: ineffective senior leaders usually remain in the leadership positions. There is no way the chief executive is going to design the new organization all the way to the tail levels. His or her control of the organizational structure dilutes as we move further and further down the organization. The chief executive usually decides the top three levels of the org., and expects his or her lieutenants to follow through his or her direction for the org. structure. But these senior leaders who are tasked to design the middle and tail levels of the organization have been part of the organization for too long. They are so used to the old way of doing things, in fact, they are the ones who designed the old ways of doing things. The decisions that they make in designing the organizational structure below them tend to be extremely biased, because
1) deep inside them, they do not believe in changing (changing implies admitting that their past decisions were wrong),
2) they do not have the ability to adapt to a new way of doing things, and
3) they have reached a stage in the organization and their career that they care more about their power in the organization than anything else.
Therefore, however brilliant the new organizational structure is meant to be, the chief executive's cleverness are filtered out by the layers of senior leaders in the organization. So my second message to chief executives is this: scrutinize every single senior leaders in the organization and their organizational plans. When their plans smell fishy or the structure seems overly complicated, do not just ask for his or her reasoning. These people did not rise to today's level based on plain honesty. Always get feedback from the leaf level contributors.
"Human resource is our greatest asset" - an often heard cliche. If you really think so, then ask yourself how much time do you spend on two-way communication with the majority of this asset. You know at which organizational level they can be found, don't you?
Angst of ReOrg
Originally uploaded by pchow98
There are many reasons why re-orgs can be useful and necessary. Organizations grow, environments change. There will always come a time when an organization realizes that how it used to work is no longer competitive in the market. To remain relevant, the organization has to refocus and renew itself. And when a new direction or vision surfaces, usually under the leadership of the chief executive, one of the most direct first steps for the organization to steer towards it is an internal restructuring.
In such a restructuring, departments that had charters that are no longer relevant are cut. Departments that had grew too big to be managed effectively are split. Departments that need to work together more closely and departments that were too loosely managed in the past are merged or centralized. It is like a self induced mutation of a bio-organism - an additional eye up here, a shorter tail at the back, more fingers and toes for dealing with new tools, etc. - an immense effort for the organization to become more efficient and to fight for its own survival.
But to have a happily ever after ending, even a temporarily happy one, is not without much challenges. Today I wish to point out two reasons why, for large and gigantic corporations, an re-organization meant to resolve problems often result in new problems.
First, the people on top who design the new organizational structure almost always do NOT understand how things are done at the tail levels. How is a project initiated? What steps, teams, and roles are involved in developing and shipping a product? What difficulties are the tail level contributors facing, and what changes can be made organizationally to help them work more efficiently and effectively? More often than not, the executives understand much less than they think they do!
Chief executives must get out of the boardrooms and talk to tail level contributors before, during, and after the re-org. These contributors form the majority of the organization. Most of the value creation work are carried out by these contributors. How can one re-design an organization without first listening to them? These people are most interested in getting things done, and they are usually most sensitive to organizational problems.
"Listen to your customers" - we are often told and reminded. To the executives, "listen to your employees" I say.
Next, a major re-organization usually happens and have to happen because senior leaders were ineffective in the past. While most of the actual value creation work are carried out by the tail level contributors, it is the authority and responsibility of the senior leaders to constantly monitor external and internal conditions. The state of the organization today is an aggregated result of these leaders' decisions and acts in the past. The reason why an drastic re-organizations is required is because these leaders have failed to carry out their jobs!
The second reason why successful re-orgs in large and gigantic organizations are usually less than successful is this: ineffective senior leaders usually remain in the leadership positions. There is no way the chief executive is going to design the new organization all the way to the tail levels. His or her control of the organizational structure dilutes as we move further and further down the organization. The chief executive usually decides the top three levels of the org., and expects his or her lieutenants to follow through his or her direction for the org. structure. But these senior leaders who are tasked to design the middle and tail levels of the organization have been part of the organization for too long. They are so used to the old way of doing things, in fact, they are the ones who designed the old ways of doing things. The decisions that they make in designing the organizational structure below them tend to be extremely biased, because
1) deep inside them, they do not believe in changing (changing implies admitting that their past decisions were wrong),
2) they do not have the ability to adapt to a new way of doing things, and
3) they have reached a stage in the organization and their career that they care more about their power in the organization than anything else.
Therefore, however brilliant the new organizational structure is meant to be, the chief executive's cleverness are filtered out by the layers of senior leaders in the organization. So my second message to chief executives is this: scrutinize every single senior leaders in the organization and their organizational plans. When their plans smell fishy or the structure seems overly complicated, do not just ask for his or her reasoning. These people did not rise to today's level based on plain honesty. Always get feedback from the leaf level contributors.
"Human resource is our greatest asset" - an often heard cliche. If you really think so, then ask yourself how much time do you spend on two-way communication with the majority of this asset. You know at which organizational level they can be found, don't you?
Angst of ReOrg
Originally uploaded by pchow98
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