How-to: What does a successful reorganisation look like?

What is a reorganisation?

A reorganisation is literally the change of organisations. In most cases, this involves changing the following points:

  • Basic organisational form (e.g. from line to matrix organisation)
  • Workflows and business processes
  • Roles, governance and reporting structures
  • Composition of teams

In a broader sense, such a reorganisation also changes other components of the company. This may involve, for example, structurally necessary IT tools, requirements for employees, the type of cooperation and management within the organisational structures or even the corporate culture. The scope of a reorganisation varies greatly from case to case. It can extend to changes in individual business units/functions, departments and divisions or to the entire company.

The term reorganisation is often confused with restructuring. In practice, however, the difference is clear: a reorganisation takes place in a company that is in acute economic difficulties. The main aim is to cut costs and return to profitability as quickly as possible. It is not uncommon for employees to be made redundant to achieve this. However, reorganisation also makes sense for economically successful companies. The aim is to make the company "fit" for future challenges.

Typical reasons and triggers

From time to time, companies adapt their strategy in order to secure their long-term competitiveness. Perhaps certain markets have become more important. Or a new product changes the company's entire business model and value creation logic. Or an innovative business area deserves more attention. In these and similar cases, a reorganisation is the obvious choice.

Reorganisations are also typical after major personnel changes, such as a change in top management. It is not uncommon for new priorities to be set - and the organisation must position itself optimally in order to be able to pursue them effectively.

Time and again, however, we also see that organisations have grown historically and stick to existing structures and work processes for decades. However, as markets, society and technology are subject to constant (and ever faster) change, this means that at some point the organisation no longer fits in with its environment. This can lead to frustration among employees and managers as well as reduced performance. Then the time has come for a reorganisation.

Timing and procedure

A decision tree can help you to approach a reorganisation as consciously as possible. Of course, the risks and costs are sometimes considerable. Initiating a reorganisation is not a gut decision. The following questions can provide clarity:

  • Is a reorganisation necessary or can we achieve our goals in a different way?
  • If a reorganisation is necessary, what scale should it have?
  • Do we have the competences for it?
  • Do we have the capacity for it and when is the right time?
  • Is the organisation or, above all, are the employees ready for a reorganisation?

Objectives of the reorganisation

The most important thing is to define the objectives of a reorganisation at an early stage. Every case is different. Is it about speed and innovation? Should the organisation adapt to new regional priorities? Or is it primarily about efficiency? Clarity is extremely important here - also with regard to the subsequent change process

Both the market and the employees' perspectives must always be kept in mind. Only organisations that create value for both customers and employees will be successful in the long term. It is important to clearly define in which phases of the reorganisation who will be involved, in what form and how. And, of course, at which level decisions are made on which issues. This is the only way to manage expectations of the reorganisation. This contributes significantly to the success of target-oriented planning and implementation of the reorganisation process.

Three typical mistakes in reorganisations

Reorganisations do not have a good reputation among many employees and managers. The same mistakes are made time and time again. These can be easily avoided with a well thought-out approach and professional implementation. These three mistakes are common:

  • The illusion of the "perfect" organisational form: Time and again, top managers look for the one organisation that can really do everything best. Fast, innovative, close to the customer and, of course, highly profitable and cost-effective. Everyone wants such an organisation, but there is no such thing as the "jack of all trades". Instead, priorities must be set. What is really important - now and in the future? What suits the positioning of the company, the skills of the employees and the corporate culture? What can the company afford? Only when there is clarity on these questions can the fundamental cornerstones of the reorganisation be defined. Adjustments can still be made later.
  • One-sided focus on "lines" and "boxes": The focus is often solely on the layout of the organisation. A lot of work is invested in defining structures, processes, roles and governance. This is necessary, but not sufficient for a successful reorganisation. The fact that it is ultimately people who fill in these "boxes" and work together is often forgotten. With this in mind, it is crucial to also pay attention to the "soft" issues of leadership, collaboration and culture and to take them into account in the design. This does not mean "planning" a reorganisation around people, but by considering these factors, potential challenges can already be identified that can be taken into account as part of the development and change process.
  • Lack of communication with employees: Top managers often have a clear idea of what "their" organisation should look like in the future. As part of the reorganisation, employees are often presented with a fait accompli - this leads to resistance without need, despite the fact that they may agree with the content. Instead, employees should be involved in the development process in a meaningful way. This enables the introduction of perspectives on the challenges in day-to-day business and thus contributes to better results from the reorganisation. This approach also ensures that the reorganisation can be implemented at a later date. However, this does not mean that reorganisations are "grassroots democratic" processes. Rather, clear rules must be established as to which cornerstones are "set" and where there are opportunities to shape the new organisation.

The role of biases

Unconscious thoughts and attitudes - known as biases or heuristics - influence our actions, especially in situations of uncertainty. In his book Fast Thinking, Slow Thinking, Nobel Prize winner Daniel Kahneman talks about two systems. System 1 refers to simple, fast thinking. It helps us to categorise perceptions quickly, but also promotes biases in decision-making. System 2, on the other hand, comprises logical, rational thinking. System 2 takes a back seat, especially when we are under pressure. This makes us susceptible to cognitive biases. These include, among others:

  • Groupthink: Here, group dynamics (especially in large groups) tempt members to make statements that they are not actually convinced of: "What do you think of this idea?" And then it happens quickly: "Oh, it's not so bad, is it?" "Well, if that's what you think... Then we can give it a try." This leads to decisions that are not necessarily rational because individual judgements are adapted to the expected group opinion.
  • The fundamental attribution error: Here we shift the reasons for failures away from ourselves and shift them onto others: "The fact that this plan didn't work is only down to the people who didn't implement it properly. It's not down to the idea or the environment..."
  • Representativeness heuristic: Here, experience, methods, models and production rules that have proven useful in the past are used. For example, a manager has learned to lead autocratically in a reorganisation and has experienced that this management style leads to the desired results with a firm hand. If the manager now uses this type of leadership in a growth case, it may no longer work. This means that the previous experience is not representative of the current problem. Nevertheless, we tend to fall back on old behavioural patterns if they have proven to be advantageous for us.
  • Plan continuation bias: Here, plans are stoically pursued, even if there are clear indications that they will not work. For example, a board of directors decides to restructure an organisation. At some point, it realises that there are obstacles. But because they have decided to make the change and have already put so much work into it, they continue anyway, come what may - because what would it look like if they were to change direction again now?
  • Overconfidence bias: "I can do it. Who can do it if not us as a management team?" Such an attitude can have positive effects because it also mobilises energy in other people. However, this assessment is often not based on reality. Self-perception and reality can diverge considerably and tempt decision-makers to take unnecessary risks.

These and other distortions usually have an unconscious effect. This is why it is particularly important for decision-makers and top teams to regularly coordinate and recalibrate. Only those who repeatedly bring in various external data points and experience can permanently reduce biases.

Successful change in the reorganisation process

Psychological processes play an important role in reorganisations. First of all, a reorganisation always means discontinuity, the unknown, uncertainty - in other words, classic "change". Such changes are not always perceived positively by employees (and managers): There are often no immediate solutions to such challenges and the risks cannot be directly assessed. The psychological side effects of reorganisation processes should therefore be handled carefully and responsibly. It helps to be aware of your own instincts and the instincts of your employees and to take them seriously. For us, this means that we need good change management.

How do I create security for everyone involved? How do I give them the feeling that they have a say in their own destiny? How do I ensure that their reputation is not jeopardised and that changes are made in a face-saving manner? How do I make it feel fair for everyone in the end? We believe that organisations need to be able to answer these questions well in order to achieve successful change during reorganisations - in other words, they need to be considered in organisational design, process and change management. These questions are based on the neuroscientific CORE model: Certainty, Options, Reputation and Equity. The CORE model helps to reflect on whether people develop defence mechanisms in the face of change - or whether they can look to the future with confidence.

What is the "typical" approach to organisational change?

To anticipate this: Every reorganisation is fundamentally different and therefore every "typical" procedure can only be wrong. Nevertheless, a certain logic has proven itself in the sequence of individual steps. However, these can differ greatly from one another in terms of their concrete form.

  1. The first step is to agree on the objectives of the reorganisation. A top management workshop is often suitable for this, in which common priorities are defined. These should be reviewed again at the end of the subsequent analysis phase.
  2. In the as-is analysis, it is important to uncover the specific problems and potential for improvement. Surveys of employees, focus groups and structured interviews with managers and employees provide an insight into the issues that are "burning under everyone's nails". The works council can also be involved here. The information gathered forms the basis for subsequent decisions.
  3. Various options for the reorganisation are developed in the design phase. These are created on the basis of the diagnostic results and further elaborated in the project team. The final selection of the appropriate organisation is often made by top management - but can also be underpinned by the intelligent involvement of managers and employees.
  4. The organisational design should be reviewed before implementation. Use cases that come as close as possible to day-to-day work are used for this purpose and specific business processes are simulated. On the basis of these tests, the organisational design is continuously and gradually improved. The introduction of the new organisation should also be planned in this context (e.g. timing, gradual introduction vs. "big bang", framework conditions).
  5. At the latest before implementation, proper communication and involvement of a broader group of employees should be considered (ideally earlier, see above). What is the story of the reorganisation? How can its advantages be communicated? What reservations might there be? How can these be addressed?
  6. Day X, when the reorganisation is implemented, is always a challenge. To ensure that everything goes smoothly, it is important to prepare the main players, namely the managers, for this day in the best possible way, be it through a clear time structure for day X or the first week, assistance for team kick-offs, discussion guidelines or even basic sparring on the new role.
  7. Follow-up: Day X is not the end of the reorganisation. The first few weeks afterwards are of crucial importance, as some of the problems of the reorganisation only become apparent when people are actually working in the new setting. A "pulse check" a few weeks after the reorganisation has been implemented with the help of a comprehensive survey helps to uncover weaknesses and make adjustments if necessary, but also to recognise successes. This can also be the foundation for further learning within the organisation.

Talk to us

Do you have any questions or comments or would you like to discuss a possible reorganisation in your company with us? Florian Dressler, Partner in our Berlin office, will be happy to assist you with his many years of reorganisation experience. Or are you interested in other organisational topics?

Dr. Florian Dressler
Dr. Florian Dressler
Partner

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