Business

Restructuring: What is it good for?

In my nearly 40 years of employment I’ve been through about 10 restructurings. I have written many responses to restructuring proposals, and read many responses written by colleagues. Given the pain inflicted on an organisation, and the staff, is it worth it?

It is my view that in most cases a complete organisational restructuring is a symptom of management failure. The reasons often given for ‘change’ is that the organisation is no longer fit-for-purpose, that it is not serving its customers well enough, that it is having financial issues, that we need to find ‘efficiencies’. The complete list of reasons is actually pretty short, and when it comes down to it, the group of people responsible for all those things is The Management, and The Board.

How did the organisation get to this point?

1. The strategy of the organisation was wrong.

The Board and Management made the wrong choices, focussed on the wrong things, and didn’t change the strategy when it was clear it wasn’t working out.

2. The Management were not incrementally improving the business in response to continual market changes.

The market gives off signals. Competitors come and go, they merge, they refocus. Most of this is public information, or at least known to those with good connections.

Sometimes companies who aren’t competitors steal you lunch (e.g. Facebook, Google and the media).

There were signals, early warning signs, but they didn’t read those signals, or did, and ignored them.

3. They were not listening to the voice of the customer.

The customers were complaining more, spending less, using a competitor, or not buying at all. The Management changed staff targets, work smarter, not harder. That’ll solve the problem.

It didn’t.

The staff knew these things but were not allowed to change the system. Some managers did too, but their KPIs were focussed on other areas.

4. They weren’t tracking important financial information or other data, both in the market and the business.

Sales were falling, maintenance costs were rising, staff turnover was high. The numbers don’t seem that bad. Oh look we had a good month, we are trending up, no need to panic.

5. (added in response to feedback) The myth of the all-knowing manager

The manager (or consultant) knows best. They’ve done this before. They are in charge. They have ‘authority’. You do not.

Who pays for the restructuring?

1. Staff

In almost 100% of cases it is the staff. But they only work in the system; they are not responsible for managing or improving that system, or for ensuring it is fit-for-purpose.

The loss of knowledge capital, capital that is needed to run the company, is inestimable. For those who remain, productivity, and organisational commitment returns. Eventually.

2. The System

Every organisation is a system made of of interconnected and interdependent parts. Restructuring stresses that system and makes it unstable and unpredictable. Change one thing, something else somewhere else is impacted. Managers don’t see this, and cannot stabilise the system. The only levers they can pull are KPIs, or another restructure, just making things worse.

3. The customer

Distracted staff, thinking about their own jobs, their colleagues, and later, of staff who left. It’s just not possible to work as well as before. Don’t think this isn’t so.

4. The tax-payer

You and me. We get bad service, data breaches, junkets, no accountability at the top.

The same-old same-old

I read somewhere (cannot find it) that organisations that restructured using business process reengineering (BPR) in the 90s were inherently unstable afterwards and required continual reapplication of the same at regular intervals. The reason? Management had accepted that monolithic change processes were the only option, and having only a hammer, treating everything as a nail.

The same is the case for the all-of-org restructurings we see today. Mobile managers move from organisation to organisation applying down-sizing, the new way, target operating models, working smarter, applying the only thing they know.

Einstein is reputed to have said, “The definition of insanity is doing the same thing over and over again, but expecting different results”.

In the case of these restructurings the same ignorance and arrogance that gave rise to the need to restructure also comes with the inability to see the results (and failure) as clearly as is needed, or at all.

Tom Peters once proposed that manager need to adopt management by walking around (MBWA). He knew that managers were out of touch.

Some might argue that restructuring is sometimes required to ‘move people on’. Again, this is management failure. Who is responsible for managing staff? If staff are not working within agreed or acceptable parameters it is up to the manager to deal with that. Respectfully, as a human would treat another human. Yes there are outliers. If it’s bad they can be dismissed, no bonus, no golden-handshake.

I’ll add one thought here. Workers do their work in a system controlled by management. Very few workers are able to change the system. (Think Neo in the Matrix – he was able to see and change the system. Others could not. One in a million.)

If the system is bad, the worker’s performance will also be bad. If the worker is overloaded with work, has not been trained, is being constantly interrupted – it is a manager’s responsibility to improve the system and protect staff from these things.

A lot of managers rely on what I’ll call the restructuring industrial complex. They have been captured. Flying in a ‘consultant’ and delegating responsibility for something that should be yours? Think about it.

A way forward

How do we avoid the losses and disruption caused by all-of-org restructuring?

1. Systems thinking

An organisation is a complex system. Look it up. Systems thinking is a core skill, but few seem to have it. It changes everything.

Reading: The Fifth Discipline, The New Economics.

2. Improved management practice

Too many assume that the knowledge and experience that got them this far will serve them well for the rest of their career. Was that 20-year’s experience, or 1 year of experience repeated 20 times?

We can, and should, strive to be better managers. We owe it to ourselves, to our direct-reports, and to society.

Reading: Books by Peter Drucker, What Got You Here Won’t Get You ThereThe Effective Manager.

3. Lean thinking, incremental improvement

Toyota got to be the dominant car maker in the world by improving 1% (or less) at a time in everything they do. Their hybrid technology is many generations ahead of their competitors. Some might argue that Tesla (and others) has leap-frogged over Toyota. Perhaps for now, but not for long.

Slow and steady wins the race.

Reading: The High-Velocity Edge, The Lean Mindset.

4. Incentives

The current system of incentives is wrong. It is focussed on short-term measures, siloed thinking, and KPIs that are not SMART. The system is too open to gaming. The favourites get the bonuses and pay-rises.

One small example: imagine that instead of each manager’s bonus being tied to the performance of their own business unit, it was tied the performance of the whole company? Suddenly managers would have to work with others to improve the overall bottom line.

Another: The number one salesmen always makes the sale. Be like number one, they tell the sales team. But customers are unhappy, #1 is pushy, offers too many discounts and makes promises that the warehouse cannot keep. The number two salesman doesn’t always make the sale. The customer comes to him and always pays full price. The goods arrive on time. They tell others, and they come back. Who has greater value to the company.

There are many other things that could be added to this list, but these are the areas I seem to keep coming back to in my reading, and in practice.

To make these changes we need to be a different kind of manager, and a different kind of Board member.

With that challenge laid down, the next move is yours.

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