The sci­ence behind cor­po­rate restruc­tur­ing dur­ing dis­rup­tive times

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.