8 Signs You Need A New Organizational Structure

How To Know You Need A New Organizational Structure

When To Rethink Your Organizational Structure

“Is it time for a new organizational structure?” This question does not always have an obvious answer. Organizational restructuring, by definition, can be disruptive, even when handled as smoothly as possible, and even with the best of intentions. There is always a risk that the new structure will bring with it some unanticipated challenges. However, it is significantly more risky to continue operating in a structure that has outlived its usefulness. The question is, how do you know?

8 Signs It’s Time For A New Organizational Structure

As fast as change hits us in today’s market, it pays to create a nimble,  adaptive to rapid change. Here are eight events (with real-life examples) that should have you rethinking your organizational structure:

  1. Your competitive landscape changes.  

    When your customers significantly change the way they deal with you, you probably need to rethink the way you are organized.

    For example, when Coca-Cola’s biggest customers in the U.S. all started purchasing on a national level and demanded a single point of contact for bottles, cans and fountain soda, it no longer made sense to have independent bottlers selling to national accounts in every community and fountain drinks sold by Coca-Cola. This caused a merger of the biggest U.S. bottler, Coca-Cola Enterprises with Coca-Cola North America, primarily aimed at creating an experience that makes the company easier to do business with.

  2. You start up a new company or division or merge with another company.

    Obviously, a new business needs a structure. Bolting things together can work in the interim, but to sustain the company when disruption hits, the structure should be intentional.

    When AutoZone went into the commercial auto parts business, they recognized that they could not serve their commercial customers in a retail environment. Hence, that business remained independent and was structured differently; although significant work was done to leverage the retail network to get parts where they were needed.

  3. A new leader takes over.

    We never advise a new leader to restructure just for the sake of putting their stamp on things, but often a new leader is brought in to turn things around and will find ways to improve efficiency or better align the organization. This can be a great opportunity to identify and align around the capabilities the company must deliver to drive its strategy. If the structure isn’t driving those capabilities to the degree it needs to, rethinking the structure can be an excellent jump start.  

    When a new president took over one business I was working in, he assessed the need and determined we needed a team to launch six-sigma, build a business strategy and focus on learning. The business was reorganized to accommodate these needs.

  4. The external environment changes.  

    This could result from regulations changing, digital transformation, customer preferences, or a variety of other reasons and is largely why we recommend having a conversation about changing ‘business drivers’ at least twice a year.

    A commercial real estate company in the throes of digital transformation had to restructure to ensure that the right data is available to support the sales force. They needed to build a capability around data analytics to remain competitive.

  5. The business is planning to grow significantly.

    In this case, it is often necessary to increase the talent in the organization and create room for people who can handle a broader or deeper scope. This is also a critical time to measure how adaptive the organization is and put in plans to increase capacity to grow within an expandable structure.

    A client approached us a few months ago about leading a restructuring effort when they found out there was a good chance of winning a very large international contract that required a huge ramp-up and knowledge they didn’t currently have. In this case, they needed to add a capability and capacity.

  6. The business strategy changes.

    If the business is redirecting its focus or planning to sell new products or operate in different markets, it is likely time to restructure.

    One client restructured its marketing and sales organizations when the company decided to focus on selling more holistic solutions and move away from product-based selling. Their product based P&L structure no longer made sense when what they really needed was collaboration across product lines to build solution packages.

  7. The internal organization you interface with changes.

    Often, organizations need to redesign just to continue to do business efficiently internally.

    When Bank of America’s card business restructured, the learning, finance, and HR organizations that supported it had to restructure to ensure appropriate support and a single point of contact for each executive.

  8. Performance is below expectations.

    There are arguably many reasons for poor performance, but it does create an opportunity to assess the organization and determine if an ineffective structure is contributing to the problem.

The RapidOD Approach to Restructuring

If organizational restructuring is in your future before you get overwhelmed, know that the experience does not have to be painful or disruptive. In fact, it should be energizing and enabling.

At LeaderShift Insights we are all about reducing the pain of disruptive, costly and unsustainable organization restructuring. Our RapidOD approach leverages best practices in collaborative design from multiple disciplines and industries and applies organization design science to it. This inclusive and collaborative process takes a few days, not weeks, ͚to get the structure right the first time and minimizes time lost in creating alignment and buy-in across the organization

This approach works because it starts with the customer, the need, and the goals rather than boxes on a page. It is conversational and in our experience, the dialogue alone builds alignment among the team. The process is extremely collaborative and results in one or two potential organizational structures that are both effective and workable for everyone involved in as little as a couple of days.

If you want to talk about organizational design that creates alignment around your strategy, works the first time, and has minimal disruption, call us. It’s what we do!

*This is an excerpt from Resilience: It’s Not About Bouncing Back, a new book by Jennifer Eggers and Cynthia Barlow scheduled to be released this spring. More details on preorders coming soon.