We Are Constantly Restructuring Our Organisation In An Attempt To Improve Performance
As any senior executive knows, when you are struggling with your company performance, the idea of restructuring is very tempting. It’s all too easy to be seduced by the idea that, with one little shuffle of your senior team, or a few changes in your management structure, you’ll solve all your problems.
It is true there are times when a restructure is called for; however, more often than not, when a company restructures, they’re headed towards a significant impact which often goes unseen until a few years later.
I’ve seen restructuring from all sides, including as an executive who was affected in the process. In that example, I was working in a company where they thought that, by restructuring their executives, their performance would improve.
At the time, however, nothing was really running optimally in the company. The decision was made to shift from managing sections according to industry stream to managing sections according to geography. As a Divisional General Manager at the time, it meant moving from a solution-orientated sector to running a specific area.
The same business systems and processes that were already in place were applied to this new structure. Once it was in place, however, unsurprisingly, performance didn’t improve.
Of course it didn’t!
All the restructure did was stall the business, due to changing a lot of the established senior relationships. Customers who had strong executive relationships, where trust was established, were suddenly working with somebody new they didn’t yet trust.
In addition, the new model just didn’t suit the customer base. The customers wanted to speak to somebody who had other customers in their line of business, and they didn’t really care where they were located.
The restructure had been implemented as a way of improving frontline services; however, it was never the structure of the team that was the issue. The issues that were really affecting performance were all the surrounding systems and processes.
At the end of the day, all that had been achieved was to move the deck chairs around. As a result of fully understanding what was really driving poor performance—underlying business systems, management systems, connection with our customers—and as a result of restructuring, the organisation headed into an era of losing customers, internal distraction, added costs of the restructure and stalled growth.
When all attempts you’ve made as an executive to boost business performance have been exhausted, it’s easy to presume that it must be the people or the structure that are wrong. Interestingly, the organisational view is similar to safety issues where 90% of the time the people are held responsible and only 10% of the time does the organisation see their processes as being deficient.
Yet, most commonly, it’s the other way around, 90% of the time, it’s the overall systems and processes that are usually to blame.
The Cost Far Outweighs The Benefits
Companies can look at restructuring if they’ve been struggling to perform to expectations. But the reasons for the struggle are often hidden inside complex systems and transactions in the business.
As an executive, choosing to restructure feels decisive. It feels like you’re really doing something to improve performance—it even feels easy. And it buys you time because, after you restructure a business, it’s guaranteed to take a few months for the effects to be seen.
Restructuring is highly seductive and easy to fall for. You believe the restructure will make a difference, and you can’t see anything else that’s wrong. You think that, by changing the people and the focus, you’re going to make a positive impact.
This is because all a restructure really does, particularly if you are moving your most talented executives around, is offer a perceived short-term improvement. More often than not, the underlying business doesn’t really change.
The trouble in determining the real cost of a restructure is that there are multiple impacts. There could be loss of sales, loss of growth, loss of profit, or change in strategic direction which can affect all of this. All these things take time to have an effect, and, by the time they are visible, they’re no longer obviously connected to the restructure.
In fact, the biggest cost impacts are the ones you can’t see that happen over time or were caused by lost momentum or lost opportunity.