Question: Measuring effectiveness of a reorganization strategy

Our mid-sized manufacturing organization has been through several rounds of structural changes recently. Due to changes in ownership, and to find cost savings during the downturn.

Now we are going through another round: in being organized not by functions, but around business processes!

As a senior manager, though not directly involved in the decision, I feel such changes are useless. The reorg is seldom as rosy as it is presented, it creates new issues, and employee churn/ work disruption.

What is the proper due diligence before embarking on a reorganization, and how can we objectively measure success of a reorg?

6 Expert Insights

Change is difficult under the best of circumstances, much less when you have been subject to multiple "upheavals".  So I understand your wariness about experiencing one more change within your organization.  I suggest that you read any of John Kotter's books on change to help understand the process and how to implement successful change initiatives.

With this said, however, I would like to address your perspective as a "senior manager, though not directly involved in the decision".  It seems as if you are looking for "evidence" to show that this change will fail before it has even been launched.  As a senior manager, I believe your responsibility is to be part of a cohesive team in driving the change forward.  So, if you are not onboard, it is time to do some soul-searching.  What else is going on in the organization that drives your negativity?  It might be time to have a heart-to-heart with your boss that results in either a shared vision and your support of the change efforts or a decision that you must travel another path.  You are not benefitting yourself - or the organization - by "fighting" this change.  Life is too short.

Best of luck to you.

Dealing with multiple reorganizations is always difficult.  In fact studies show that 70% of change initiatives tend to fail.  The reason is that the case for change is often not communicated early along with a clear vision of the expected future.  It is also very important to secure buy-in from the key stakeholders.  There are ways that a change plan can work when a proven methodology is used.  If you use the following method you have a much greater chance of success.

1) Prepare the case for change and secure executive support
2) Create change roll-out plans, measure and communicate progress
3) Reinforce change by diagnosing issues the arise, rewarding success and celebrating intermediate wins.  Measurement should always be included in the process!  

Just remember change is a constant!

When business performance falls below expectations, it often seems the first reaction is for senior leadership to go off and rearrange the org chart. While there may appear to be potential for savings generated through 'rightsizing', those savings are often dwarfed by the costs of disrupting the business.

One reason restructuring fails is that organizations are much more than a structural system. There is also a work system (the core process of creating value for customers), information system (how do we know how we're doing), people system (how do we acquire, develop, and retain the talent we need), and a renewal system (how do we adapt to changes in our business environment). All of those systems represent choices made in relation to the vision, mission, values, and strategy of the organization. Changes in one system will affect all the others because they are interdependent. If org systems are not in alignment, org performance suffers.

The success of a reorg is the same as the success of the org: creating optimal value via the core process, developing committed and competent employees, delivering a superior customer experience, and producing top and bottom line financial performance. If the business results you are producing are great, don't change a thing. If they are not, don't just rearrange the deck chairs on the Titanic.

Within your question, I see two areas to address.

First, each of us has our own process we undertake when facing any type of change.  William Bridges talks about this in his change model and book, “Managing Transitions.” During any change effort, individuals go through three phases: Ending, Neutral, and Beginning.  Within each phase there are unique characteristics and behaviors individuals and organizations go through.  Each phase is necessary, normal & natural responses to change.  Based on your comments within the question, I would guess you are knee deep in the ending phase.  As a senior manager, your ability to engage and direct employees is imperative to not only your success but the organization’s as well.  I would suggest, as Ms. Bowen did, that you look at what is causing your turmoil over the situation and then discuss with your boss.

Second, there is concern for all the change that seems to be constantly occurring and ends with the desire to identify a way to “objectively measuring success of a reorg.” Within that question lies a multitude of lacking information.  I would first want to learn:

1. What measures the design team looked at that told them a reorganization was in need?
2. Were those measures being tracked prior to the reorg?
3. Have they presented each of these “structural changes” as separate initiatives or steps in a longer process to get to
        the ideal state?  
4. Have key stakeholders, outside the design team, been engaged in the rollout of the change?
5. How often has information been flowed out about the change?

Based on your question and the fact that you are in management, I gather that the design team has not done a good job at describing the What, How, Why, and When of the change.  The more employees understand what they are doing, why they are doing it, and what they can expect from the change, the more likely they will respond positively to it.
I hope this response gave you some insight and thought starters.

Reorganizations seldom provide the results defined on paper for the simple reason they usually focus on the symptoms and not the causes.

In my practice, I insist my clients organize their companies around the asset owned and/or controlled that provides the customer with a competitive advantage in the market in which the client operates. In other words, the asset is employed in a product/service that makes it usable to the customer, and it is the customer that gets the competitive advantage. Although every attention should paid to maximizing production efficiencies even more attention needs to paid to the value provided to customers. A customer value focused approach is much more robust and long lasting than most efficiencies. Consequently, fewer and shallower reorganizing cycles are required.

All businesses exist because they own and/or control an asset that can be used in a product or service that provides customers with a competitive advantage. That is, the asset somehow makes the customer's life easier or less uncertain in some way. the busy part of the business involves putting in place processes that make that asset usable to the customer, and managing the risks inherent in the business. The business survives when all this done and an excess of value of produced, otherwise known as profit, allowing the company to pay for the cost of capital, return money to investors and reinvest in its future.

A reorganization must focus on maximizing stakeholder satisfaction over a set period of time. It should be designed to measure and enhance the return on this asset and the competitive advantage provided to the customer over a given time horizon.