Why Your Next re-org Is A Bad Idea

Structural change is a vehicle of leader convenience. Leaders naturally find it easier to dismantle things they can’t manage and substitute new (hopefully more effective) arrangements.
— Curt Coffman in “Culture Eats Strategy for Lunch”

I’ve had a privilege of experiencing a number of company-wide reorganizations and so-called “transformations” throughout my career. In almost every case, at the core of the change effort was some kind of structural change. Business units were split, merged or dismantled, teams and reporting lines were reshuffled, and entirely new organizational structures were erected. The process was often disorienting (and traumatic) for many, and was usually met with a good measure of skepticism, if not resistance. The skepticism was well justified — most of the time, once the dust settled, an uncomfortable feeling of “same story, different name” would settle in. Ah, yet another flavor of the month re-org!

One particular reorganization effort sticks in my mind. I was working at a mid-sized hi-tech company (let’s call it XYZ) that was structured around functions — product, engineering, marketing, tech support, etc. We had a fairly typical challenge: we weren’t delivering relevant products to our customers fast enough. After a careful analysis, the management team became convinced that the problem was in the lack of focus: people were spread too thin among too many projects, and thus little was getting done. The solution came down swiftly — restructuring! The functional departments were dismantled. New, smaller autonomous teams were formed “to improve focus, product-market fit and time to market.” Six months later the XYZ’s output didn’t change much. Worse yet, we now had a slew of new problems related to coordination, managing dependencies, turf wars, etc.

Restructuring alone does little to shift an organization’s cultural patterns of thinking, working and behaving. Worse, it can erode trust and confidence in management’s ability to lead change.

In retrospect, the original problem had much more to do with the [dysfunctional] cultural patterns of poorly distributed leadership, weak connection to customer, ineffective strategizing and planning processes, and lack of robust accountability loops. The restructuring did little to shift these patterns. Worse, it further eroded our confidence in the management team.

A Deeper Look

Let’s dive deeper into why leading with structural change is so prone to failure. I find Bill Veltrop’s elegantly simple “organization design” model very useful:

In this model, an organization’s Stories and Structures shape its Patterns (of thinking, behaving, working, relating, etc.), which produce “Consequences” (intended and unintended.)

  • Stories include all our inner and outer conversations, our visions, our dreams, our fears, our metaphors, our beliefs, our values — our stories
  • Structures include our roles, rules, principles, objectives, strategies, our built and social infrastructure, even our language
  • We can think of ‘organization design’ as being defined by Stories and Structures
  • An organization’s culture (its collective patterns of thinking, behaving, working, etc.) is primarily shaped by its organization design — its Stories and Structures
  • Our Consequences (intended and unintended) are a direct result of our culture — our Patterns

If we want different organizational outcomes (e.g. better product-market fit and faster time to market), it is essential that we change the organization design (the Stories and Structures) in ways that shift the Patterns to produce the results we want.

Notice that for the “Sad Face” in the picture, there are no feedback loops from the Unintended Consequences to the Stories and Structures. Without those feedback loops there is no awareness of why unintended consequences occur, and there is no meaningful accountability for them and their causes. 

The point about awareness is an important one — most people are oblivious as to why negative consequences occur. The dominant assumption tends to be that it’s the “leadership’s fault” – your manager, CEO, etc. Few are aware that their patterns of thinking and behavior are largely a result of the organization’s stories and structures. Without awareness and accountability, positive change will be incremental at best.

Sadly, most of today’s organizations still fall into the “Sad Face” category.

Where to start the change effort?

While structures may be easier to see and change, focusing on structures first can be threatening to many people and thus almost guaranteed to arouse resistance. In general, Stories are the best place to start. If there is strong shared alignment around a new Story, the complementary adjustments to Structure will tend to happen more organically, and with a lot more support.

Capability development —
a missing link

While organization design (i.e. Stories and Structures) is critical to achieving the desired change in an organization, it is not sufficient. In the XYZ example earlier, a key cultural pattern that required shifting was poor leadership and decision making. This wasn’t necessarily about inadequate individual leaders. Rather, it was the company’s collective capability to make sound strategic decisions and implement them timely and successfully that was severely lacking.

How to go about building organizational capabilities is a vast topic deserving its own post (coming soon.) My intent here is to flag it as a critical dimension to consider when designing any significant change initiative.

What has been your experience?

What has been your experience with structural change — and re-orgs in general? Do the insights in this post resonate as true? Please share and comment below!