Organization and Reorganization

I recently had an opportunity to consult with a senior executive at a local company who was contemplating a corporate reorganization. There were several issues identified with the current structure, primarily lack of financial results, and past reorganizations had not yielded any improvements in results.

As is often the case, the question being asked “what should the organization look like” required several other questions and answers before a solution could be discussed. The most important was “what do you want to accomplish and how will you know when you’ve accomplished it?”
We need to understand that many reorganizations are done for reasons that have nothing to do with the competitiveness and success of the company. Perhaps someone has been promoted or has left the company, their “spot” needs to be filled and some change in the organizational structure is needed to accommodate the strength or weakness of the person filling the “spot”. Or perhaps financial (or other operating) results aren’t acceptable and reorganization is seen as a way to “shake things up”, but there is no clear idea of what will happen or what the outcome will result. Maybe there is a senior person who has been identified as “on the way out” and a ‘disposable” organization is being created to ease the transition (easy for executive management, not for the shareholders).

Many reorganizations start with the question “who will be in charge” and then create an organization “under” that person. The “who-reports-to-who” approach. This often leads to “one-of-us” behavior and creates a group of people who get along with each other and are then motivated to behavior emulating and supporting the person “in charge”, since that is the criteria that will lead to job security. Company performance and results aren’t part of the decision process and aren’t identified as objectives.

So the question “what do you want to accomplish and how will you know when you’ve accomplished it?” is an important one to answer.

If real financial results are the objective then we need an approach that will yield that outcome; an externally oriented approach. It is a tactical approach that implements the competitive strategy; one that responds to the market/customer/competitor environment. The objective: make us more competitive and more profitable.

This approach starts with the sources of revenue and with the customer “touch points” (where the customer comes in contact with the company). Then assures that the organization provides everything needed for those “touch points” to be successful in getting and processing orders, producing and shipping what was ordered (correctly), supporting the customer in using or implementing what was ordered, and billing and collecting payment for what was ordered. This holds true for any kind of business, but most especially for a business based on delivering a physical product or product/service combination.

This approach also creates supporting relationships within the company, rather than competing ones.

This is the reverse of the previously mentioned approaches. It is an outside-in viewpoint instead of a vertical reporting structure. It has as its objective the improvement of the business in response to the environment, rather than some internally oriented goal; “I’m in charge”, job security (illusory), “move him/her aside”, “things aren’t working”, or even the seemingly logical “it’s a technical function so put it in engineering”.

Operational capability belongs where it can serve the business best, and that means where it can get, make, ship, bill, and collect orders.