The word ‘reorganisation’ in any company means different things for various people. If you are a part of the management, it’s exciting because one can make things happen. If you are the consultant, which is a necessary component of this transformation process these days, then it’s good business and income, as the contracts can run into large sums, depending on the status of the company. And if you are just another employee, you are scared,
because any reorganisation affects the entire staff, giving rise to uncertainty and discomfort. If you are lucky not to be asked to leave as part of the reorganisation process, your job profile can change for better or worse, depending on your luck. In short, any kind of reorganisation is a deviation from equilibrium.
Stephen Heidari-Robinson and Suzanne Heywood, who have worked as consultants on this aspect with various companies, have inside knowledge on how such schemes are drawn up and implemented and, hence, understand the nuances and emotions involved. In their book Reorg, they point out that the clan of consultants is the object of scorn of all employees, as it’s believed that they are responsible for job losses or relocation, which, in a way, is true. In fact, reducing the flab can always be a takeaway from the reorganisation process.
Based on their experiences, the authors draw up a template that should be followed in five steps to have successful reorganisations. Their view is that most of these attempts fail because managements are not clear about what they want and are often in a hurry. The authors believe that when any such action is being planned, the most important part is communication and this has to be with all stakeholders, starting from employees to customers, suppliers, regulators and so on to ensure that everyone is in the loop. While often one looks just at employees, any change in the structure also affects the supply chain players involved with the company.
Let us look at the five steps. The first move that has to be made is that the management has to construct the reorg’s (the new structure’s) profit and loss account, so that you are sure what it’s expected to look at after it’s done. The amounts have to be quantified and a timeline provided for achieving it. Often, the benefits aren’t calculated nor are the HR costs, as several people are involved, which includes ‘management time’. Therefore, a cost-benefit analysis is absolutely necessary before embarking on implementation.
The second step is to understand the present strengths and weaknesses. Often, one focuses only on weaknesses and not the strengths, which should be avoided. Also, one has to talk to the employees and not just the leaders to get a broader view, as the diverse set of views obtained will avoid the pitfalls of relying on hearsay. This sounds quite commonsensical, but is not practised by most companies that go in for such transformations.
Third, the management needs to consider various options that are available in the areas of people, processes and structures. This has to be done after the first two steps are completed and involves dealing with a large number of people and mindsets, systems, businesses and
management processes and, above all, defining new reporting lines, job profiles and governance. Tackling leadership is important and difficult because there are tradeoffs involved that are hard to resolve, given the complexity.
Fourth, the authors say the ‘plumbing and wiring’ should be right, which essentially involves the ‘nuts and bolts’. Detailed plans are needed, including the defined future roles of every member of the company, as well as communication with all stakeholders. The major pitfall is that we could end up confusing people or trying to change everything. One must remember that leaders in old positions would resist change and, hence, should be involved in this transformation.
The last step is self-explanatory, where the ‘reorg’ is launched and then the company meanders along the way before correcting the course when required.
The template sounds very good and logical to attempt, but very often these steps are missed. While the book tells one what to do, often to get acceptance from the board, it’s almost imperative to hire a management consultant. The reviewer of this book has been involved in several such exercises in the companies he has worked with and rarely have companies been able to plan and implement well. There is a distinct loss of commitment along the way or one may need to course-correct more often, as the planning may not have been right or the outcomes different from what was expected. This is one reason why most of them fail or don’t succeed.
Reorganisations invariably end up upsetting the morale of the employees, which can be a major disturbance for any company. This happens more so when leaders are egotistic and refuse to look at the human aspect and tend to carry on as if it didn’t matter. And to cover up this
failing, such reorganisations are attempted with greater frequency, which makes one forget the earlier failed plans. Also, it has been observed that every time a new leader takes over and comes from outside the organisation, a reorg is almost mandatory, as it’s believed that this is the best way to make an impact, which is quite unfortunate.
Madan Sabnavis is chief economist, CARE Ratings