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Transitioning Corporate Organizations

20.08.2010

Why good organizations don’t guarantee success, and sub optimal organizations can still deliver….

In a previous post, I discussed the three basic organization structures for most companies, but I did not discuss how to change to a more optimal structure.  The bad news, is that the change is almost always more damaging than the improvement of a more optimal organization.

Almost every study on reorganization suggests that there is an efficiency loss for at least six month, and often well more than a year.  While you can evaluate how the transition is progressing relatively quickly, you cannot determine if the overall new structure is indeed superior to the former for more than a year.   Another note is that the reduced efficiency starts the moment that rumors of the change emerge and that the 6 month period needed for stabilization only starts when the org changes stop.  In far too many companies, managers hope to minimize the transition by announcing the plan well in advance.  They also hope to improve the results by making a “mid course correction”.  Both are hugely damaging since they extend the inefficiency window. As a result, a reorganization is a major commitment for several years to come and managers need to take into consideration their ability to provide this critical settling period before they even open the discussion of change.

From my perspective I see far too many reorganizations in times of crisis rather than in times of success.  Reorganizations will be more successful at times of company success because it is more likely that individuals will see new opportunities and not just problems in their new roles and identities.  Reorganizations during times of decline usually have the result of dis-empowering the entire organization at the exact time you want them to show initiative, energy, and responsibility.  Consequently, I see reorganizing at a time of decline as an act of desperation and is appropriate only for managers incapable of effecting ordinary company change or managers facing imminent total collapse.  Managers, resist the temptation to “shake things up” and focus on good, old fashioned management and leadership in these times of crisis:  Remove the weakest or poorly matched team members, demonstrate mutual sacrifice, keep testing new initiatives (not just cost cutting) with clear and achievable success criteria.

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