A few months back I was catching up with a colleague of mine and we got talking about corporate reorganizations (reorgs). Now both of us have professional backgrounds with information and technology companies, living through the painful but sometimes fun Wild West like activities that went along with transitioning the information and media industry from a paper industry to existing online and interactive one.
After a few Boddington’s and a bucket of laughs later we got rolling and came up with our version of a Sitcom – The Reorg. The Reorg was a conceptual idea that would be a knock-off of the current hit show – The Office. The Reorg would take place in a large corporation where every 3 months a new organizational structure would come out, with new senior leadership, new strategies and reallocated capital expenditures. The gist of the show would be that reorg’s do not work but rather negatively impact an organization, destroy morale and sometimes destroy lives. I theoretically cast the show with Kelsey Grammer as CEO, Michael Richards (Kramer) as head of strategy and Penny Marshall as Head of Human Resources. The show was a dark comedy satire, yet with real world issues that come from actual reorgs. A scary – yet funny show.
Sure we had fun with this idea and I am sure someone can make millions of dollars casting the show but the reality of the situation is that reorg’s seldom work and more often than not hurt the organization performing the reorganization. Do not take it from me but rather from Harvard Business Review. In the June 2010 issue of HBR, “The Decision Driven Organization” Michael Mankins argues that reorg’s although are usually approached with the right intent seldom create the intended results.
At the core of Mankins argument is the idea that reorg’s are typically structured around an organizational chart, alignments moving up to the CEO. They typically are structured by an incoming manager / CEO who tries to put his/her best employees in the important boxes. Again the intent is right but the outcome is not.
Makins argues that rather than fixing problems with shuffling of the seats the company should first understand where the decision problems lie. This is where I found Mankins ideas genius. At the core of Mankins hypothesis is that companies fail or lose competitiveness because they are not making decisions fast enough and because of this are losing to competition. Mankins proposes that CEO’s of flailing companies should first figure out what decisions need to be made faster and design a structure around it. Perhaps a reorg is not needed at all and just some policies, accountability and transparency are needed to push the company to the next level.
I think Mankins highlights some interesting ideas in his article and one’s that should be heeded by CEO’s before they embark upon a costly, timely and almost never successful reorganization.
Shareholder value is not created by moving around boxes, but rather by executing on predefined strategies and if this can be accomplished without reorganizations than by all means try it first.