A change too far?

2003

Too many organisational restructuring exercises are poorly-managed, piecemeal affairs that alienate staff and fail to deliver real improvements in performance. So says a survey of more that 800 executives undertaken for The Chartered Institute of Personnel and Development.

The survey, Reorganising for success: CEO’s and HR Managers perceptions, presents the opinions of business leaders about why corporate reorganisations too often fail and confirms that there is much room for improvement in the way organisations restructure.

Getting it wrong is common, with reorganisations failing to deliver real improvement in performance in four out of ten cases. Only four out of ten reorganisations are completed on time and six out of ten within budget.

And yet restructuring is a regular feature of corporate life: the survey respondents have experienced, on average, seven corporate-wide reorganisations over the past three years.

Despite the potential impact of reorganisation on employees, the people management elements of the process are all to often ignored or marginalised. For example, only just over a quarter of organisations offered training to those managing reorganisations, while only four out of ten organisations give their employees the opportunity to participate in decisions about the reorganisation.

The survey also found that reorganisations often see simultaneous "hiring and firing". More than eight out of ten reorganisations in the survey involve a reduction in the workforce, while nearly two-thirds of reorganisations lead to the recruitment of new employees. And organisations are failing to audit existing skills before making redundancies, with the respondents recognising that they are likely to be letting talent walk out the door.

Another failing is that despite the often significant change for individuals in terms of responsibilities and job profile, there is rarely a corollary change to career and reward structures.

Richard Whittington, Professor of Strategic Management at the Said Business School, who carried out the survey said: "The financial markets richly reward the potential rewards from good organisational design – it is essential for survival and success.

"But all too often organisations find themselves in trouble because of poor management of the change process. In particular the change is piecemeal, doesn't have the buy in from employees and does not result in the necessary skills and capabilities for the new organisation to operate effectively. "

One of the key influences on the outcome of reorganisation is, perhaps unsurprisingly, the experience of those in senior management – in both their current and previous enterprises. In about seven out of ten cases respondents report that the attitudes, behaviours and capabilities of senior management are an enabler of change. One quarter report it as a constraint. The report challenges senior management to raise their competence in order to improve the success rate of reorganisations.

The rationale for and management of reorganisation is mainly the result of internal thinking and experiences. Very few organisations report the positive influence of consultants in reorganisations or ideas and models taken from training courses and seminars on their approach to reorganisation.

Professor Whittington concludes: "This survey shows that with much more attention to the management of organisation-wide change, reorganisation stands a much greater chance of success. At the moment there is still too much of a piecemeal approach – and this lack of cohesion is causing many reorganisations to fail.

"For more and more managers, reorganisation is an ongoing and critical part of their responsibilities. This survey provides an important agenda for action: in this fast changing world embedding the ability to reorganise quickly and effectively is imperative for organisations looking to build long term advantage."