Restructuring is not just about Organization

Written by Principal Henry Hwong: 

Having worked with and for several organizations that have undergone major restructuring, I’ve seen the same post-restructuring challenge that seems to linger long after the actual change has occurred. There is a certain slowness that the organization continues to feel, even though there was a lot of work to streamline the organization. You would think that fewer people would make for accelerated decision-making and alignment afterwards — that’s the reason for the reorganization, right?

But that’s not the case. Why is that?

A big part of the problem is that during a restructuring, the only focus is on the immediate cost, which usually means how many people can we eliminate and combine into a smaller number of organizations. What often is missed is the fact that the processes remain the same long after the people have gone. When I’m talking about process, I’m speaking of strategic planning, product R&D, procurement, time and expense policies, etc. Of course, processes are important in that they help a company scale, and usually fast growing companies don’t have enough process.

However, there is a right level of process for each size organization. The number and complexity of processes in a company should be aligned with the scale of the organization. When a company restructures for the main purposes of cost, 9 times out of 10, the processes are left with fewer people that struggle to maintain the integrity of the process that was designed for a larger company. Decision-making gets even slower — and before you know it, the remaining managers want to hire back those holes in the organization.

It leads to an ongoing cycle of layoffs, followed by a small number of hires, which leads to another round of layoffs because the efficiency gains aren’t there. It is painfully obvious with companies that have undergone a major reduction in staff in a relatively short period of time (over 30% in less than five years).

So, if you’re going to have to make your organization more lean, you also should look at simplifying your processes.

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