What are the top 5 factors you should consider before restructuring?

What are the top 5 factors you should consider before restructuring

Before embarking on organisational restructuring, it is important to pre-emptively address the most common challenges associated with restructuring, writes Peter Fuda

When most of us think about structure, we think about the hierarchical arrangement of lines of authority. Basically, we think about the ‘org chart.’ This is a simplistic and incomplete view of structure. Imagine if, starting today, the only way we could get work done in our organisation was through the formal lines of authority – what would happen? Nothing would happen.

We like to think of our organisation as a machine; something that can be pulled apart and put back together at will. The challenge, of course, is that every organisation is a living, breathing, ever-changing organism. As a result, there is no such thing as a perfect structure. All structures have imperfections and unintended consequences that must be managed – and this has important implications for organisational restructuring.

Changing reporting lines
Even the most rational structural change lands in a sea of human irrationality. Don’t believe me? If you want to see human beings lose their minds, just mess with their reporting lines!

The formal lines of authority are one important element of structure, but people have an exceptional ability to work around formal bureaucracies to get things done. We must also consider networks and relationships, as well as how people meet, how power and influence are distributed, how people communicate and how information flows.

Even when done well and for the right reasons, restructuring is usually demanding, disruptive and difficult for all concerned. Done poorly or for the wrong reasons, there is perhaps nothing more costly, debilitating or destructive to an organisation and its members.

We should only commence a process of restructuring if we are certain that it is needed, and that the rewards significantly outweigh the risks.

“If you want to see human beings lose their minds, just mess with their reporting lines!”

Behind the most common restructuring challenges
Unfortunately, this is not my experience of most structural changes. More often than not, restructuring is a solution looking for a problem; it’s applied too frequently and too arbitrarily, despite the best intentions of leaders. We often go through the pain, disruption and cost of restructuring, only to find that we are no better off.

When this happens, it’s usually because structure was neither the core issue, nor the right solution. Below are the five most common examples of this phenomenon:

  1. New leader: many of us have been trained to believe that structural change is inevitable and these beliefs are amplified when we find ourselves in a new role. As a result, structural change is often nothing more than a new leader, in a new role, believing that they should.
  2. Lack of strategic clarity: when people are not crystal clear on their organisation’s goals and strategy, they struggle to execute. This poor execution is misinterpreted as a structural problem. Structural change is made at great cost, only to find that execution remains poor.
  3. Ineffective leadership: leaders become frustrated with passive behaviors in their organisation – such as avoidance or dependency – without realizing that their autocratic leadership is the root cause. At the other end of the spectrum, leaders don’t make decisions, or confront poor performance. Needless to say, structural change only exacerbates these issues. All leaders get the team they deserve, whatever the structure.
  4. Poor standards: a leader desires collaboration among team members, but the historical norms of behavior encourage conflict and competition. A leader desires innovation, but the behavioral norms punish risk-taking. Rather than establish new standards of behavior and reinforce them, the leader makes structural change. Unfortunately, standards eat structure for breakfast, so the old behaviours persist.
  5. Overreacting to a specific issue of decision rights: a decision conflict arises between two functions, such as sales and marketing. This could be symptomatic of a larger issue justifying significant structural change, but very often this is not the case. The root cause could be a process breakdown, a misunderstanding of who has what authority, or a tension that is natural and even useful in the process of making good decisions.

The core purpose of an organisational structure is to enable our aspirations, by organising our people, resources, and decision-making authority. In simple terms, an effective structure is nothing more than the right people, making the right decisions, at the right time.

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