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The science behind corporate restructuring during disruptive times

September 14, 2020 | Operational Excellence

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With COVID-19 impacting economies around the world, some organisations are restructuring their organisations to sustain their operations. Often, they do this in a rapid and drastic way.

Many executives believe that all it takes to restructure an organisation is to put a few boxes and lines on a piece of paper. They don’t realise that there is a science behind this task.

When companies hastily restructure without a scientific approach, and layoffs, pay cuts and role redundancies are made in a rush, they may potentially suffer at a later stage when business returns to normal.

Don’t restructure in haste

Recently, we worked with a client in Asia Pacific to explore the option of centralising their cargo services across different levels and locations.

From a structural perspective, this seemed like an easy task. We could simply pull the warehousemen and supervisors from each location or floor and establish a new department.

However, the warehousemen and supervisors had different work activities and were operating independently. Putting them together was going to cause profound procedural problems.

For example:

  • How will the warehousemen be assigned jobs (a process issue)?
  • How do we ensure that the tasks will be aligned with the work requirements (a control issue)?
  • How are we going to measure productivity? How flexible are their skills (a resource issue)?

Shifting to a new organisation structure without addressing these issues would have been disastrous.

That’s why it was important to first get a deep understanding of an organisation’s key processes and activities through data and observation. Then, by using the principles behind organisational design, we identified the organisation’s achievers, fighters and supporters. This information helped us plan a new, more effective organisational structure.

The keys to efficient restructuring

Here are some key points to bear in mind when assessing and rethinking the structure of your organisation:

1. Accountabilities and responsibilities

It’s important for leaders to define accountabilities through better delegation of authority. This doesn’t simply mean spending authority – it means what kinds of decisions at what level should be made. All too often decisions are delayed as they are unnecessarily relayed up the chain of command.

It’s also crucial to identify the right person within the organisation to be responsible for each task and process step. With clear responsibilities, each person is better empowered to get the job done.

2. Specialisation rather than generalisation

Over time, it’s natural that people take on additional responsibilities that were not in their original job description. However, if your organisation is mainly composed of generalists, rather than specialists, your overall performance is likely to suffer.

When roles and responsibilities are clearly defined, people will be able to focus more on their key responsibilities. This will lead to a higher quality output, achieved more quickly and at a lower cost.

It’s also good to apply the RACI (responsible, accountable, consulted, informed) matrix to define who is responsible and accountable for each activity and who should be consulted and informed at each step.

3. Boundaries and spans of control

If boundaries are unclear, this can lead to wasteful allocation of manpower resources, inefficient processes and increased operational costs.

For example, in one of our projects, we discovered that the client had 14 levels of roles. However, these were split by pay grade, which didn’t necessarily correlate with levels of responsibility or experience. The organisation ended up paying over the odds for a large proportion of its staff while levels of supervision were inadequate. This will lead to inefficiency.

Consider the science

Effective organisational design involves building a structure that supports the most effective deployment of resources and processes within the purview of the management control systems.

But all too often, when companies are frustrated with performance, they will design a new structure and ignore the profound implications this has on the resources, processes and controls.

To prevent this, take the scientific approach. This will enable you to design a new structure for your organisation that actually works, providing a solid foundation for its future success.

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