5 Steps of Company Reorganizations (Heidari and Heywood)
As John Ferraro, the former COO of Ernest & Young, once said, “Every company today is being disrupted and so must frequently reorganize to keep up with the incredible pace of change.” (Heidari-Robinson and Heywood, 2016). However, few reorganization attempts are entirely successful.
Given that, how to handle reorganizations is important. Despite the common belief that reorganization is so fluid and dynamic that it would be hard to impose an established process for it, Heidari-Robinson and Heywood argue that companies need to take a more systemic approach if reorganizations are to deliver their potential. They developed a five-step process for running reorganizations
- DEVELOP A P&L STATEMENT. A reorganization is indeed a business initiative like any other, similar to a marketing plan, a product launch, or a capital project, so you should start by defining the benefits, the costs, and the timeframe. Earlier similar initiatives in your organization, and the experience of employees who have worked elsewhere, can help you estimate the figures.
- UNDERSTAND CURRENT SWOT. Before taking any action of organizational change, it is always worthwhile to examine the overall health of the organization so as to carefully avoid removing healthy tissue in the process. Interviewing senior executives to get input can be a good start, while you can use online surveys to understand how outcomes vary across the business.
- CONSIDER MULTIPLE OPTIONS. There are two basic change models to choose, changing the entire organizational model or just those elements that don’t work. The former approach is best when the company is completely broken or facing a fundamental market change that cannot be navigated under the current model. While the latter is best when the overall organization works well or the focus is on cost saving.
- GET THE PLUMBING AND WIRING RIGHT, which is the hardest part of reorganization. External consultants usually clock off at this step and good change leaders should know all the elements that need to change and plan the changes in the right sequence. For successful reorganizations, 80% of the business (by revenue, profit, and people) must make the change, and the rest must not be allowed to hold up progress.
- LAUNCH, LEARN, AND COURSE CORRECT. The company needs to encourage its employees to spot and point out the new organization’s urgent issues, debate solutions openly and transparently, and implement the fine tunes as soon as possible, in line with the logic of the original plans.
This reorganization approach is not rocket science, but a practical guide to company reorganization. A rigorous process will allow you to make better decisions, keep employees more involved and engaged and capture more value from reorganizations.
Source: Stephen Heidari-Robinson and Suzanne Heywood. "Getting Reorgs Right: A Practical Guide to a Misunderstood - and Often Mismanaged - Process". Harvard Business Review, vol 94, no. 11, 2016, pp. 84-89.
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