Hay Group India Blog
India Inc. has got so used to dealing with uncertainty in the business environment – that we forget how recent some of these changes have been. Globalization has altered competitive landscapes across markets, restructured supply chains across industries, and redefined skill sets required of leaders to succeed. Despite these challenges, many companies are opting for Organizational Restructuring in a bid to position themselves for success.
What drives the need to reorganize work, jobs and structures? It could be a line manager, a middle manager or a CEO who recognizes that groups are not cohesive or engaged. Or, it might come from an external source—an upcoming M&A—or anticipated growth, a new management team with new strategies or regulatory changes that will seriously change how work is done. Working with organizations of varying sizes and scale, we have found that success in organization restructuring hinges on a few key factors.
A few years ago, a new CEO in a large utility company who, determined to cut costs, slashed the HR budget, thus eliminating services HR provided. Soon, organization charts were discarded because executives believed as long as everyone knew what they were doing the company would continue to travel the course. The reality was that job accountabilities were vague, and no one understood the structure. Inevitably, things began to slip. One executive described the situation as “5-year-olds playing soccer.” Clearly, this proved the basic need for articulating the challenges that restructuring is expected to solve.
Further, a key challenge is to focus on the new governance – how the enterprise is run and where key decisions are made. When a U.S. firm acquired a European competitor to gain access to international markets, we found that no unified sense of purpose existed. Between marketing and production, communication was about squabbling for resources. But after reorganizing into business units—each with globally unified product and market accountabilities—management was again focused on profitability. It became clear why roles existed, how they added value, how they could share data, what their common goals were, and why they had to work together for success.
It has been found that many CEOs use a top-down approach to redesigning – they restructure the top three levels and leave the cascade to middle-level managers. On the contrary, successful restructuring requires a step-by-step approach. It pays to have different teams anchoring different activities: Senior Team to provide direction and decision signoff; Design Team to conduct diagnosis, clarify the design intent, and develop structure; Action Group detail design work; and Implementation Team as the agent of change. This will also ensure that informal networks, which are a source for information flow and culture dissemination, are not forgotten during re-design.
With the structure in place, the onus is on job design, as the most direct way for managers to maximize organizational ROI on total rewards. Research has showed that when jobs have clear accountabilities, people take initiative and appropriate risks and they innovate, as they understand how their work relates to that of others in the organization. Moreover, organizations must take a pragmatic decision on the skills needed and if they can be acquired from the market; then focus on building the rest of them. For example, when an organization moves from a functional structure to a business unit structure, skills needed in the new organization are more about general management as opposed to functional expertise, making staffing for the new roles difficult.
Finally, the restructuring is woven together by the softer aspects – simply creating an environment in which everyone is able to perform to the best of their abilities can have a huge impact. Our research shows that climate improvement programs can translate into a 30 per cent improvement in profitability. Additionally, a collaborative approach to work and leadership is absolutely necessary to build endurance to see this through. For instance, our research on the Best Companies for Leadership 2010 found that Siemens has linked 20 per cent of its top executives’ discretionary bonus payments directly to collaboration, as part of its One Siemens approach.
Evidently, organizations today cannot operate from the rules of the past, which were largely around optimization and scale. Commitment to organizational restructuring has to increase steadily – as a testament to the growing intensity of the challenges every business faces. Organizations have to be dynamic, creative and networked – and the ones that get there faster than the rest will be the future icons of industry.
