Tuesday, July 6, 2010

A Good Application for the Reorg

Organizations go through restructuring exercises for a multitude of reasons, not the least of which I would propose is to assure corporate boards and stockholders that "action is being taken" and "sweeping changes are underfoot".  The reality, though, is that the majority of reorgs do not improve business performance.

However, having just read reports from two unrelated studies, I'm seeing a connection between a large challenge and a good application for a reorg.

One of the key findings in the 2010 IBM Global CEO Study is that there's a new primary challenge facing these executives:  Complexity"Increasingly interconnected economies, enterprises, societies and governments have given rise to vast new opportunities.  But a surprising number of CEOs have told us they feel ill-prepared for today's more complex environment.  Increased connectivity has also created strong - and too often unknown - interdependencies.  For this reason, the ultimate consequence of any decision has often been poorly understood.  Still, decisions must be made."

In the June 2010 edition of The Harvard Business Review, there is an article by Blenko, Mankins, & Rogers titled The Decision-Driven Organization.  These authors propose that "reorganizations are popular with chief executives, who believe that making big structural changes will lead to better performance...In reality, a company's structure results in better performance only if it improves the organization's ability to make and execute key decisions better and faster than competitors." 

The complexities of today's business climate make decisions even more challenging and more impactful than ever before.  Yet the speed and nimbleness with which these decisions need to be made is staggering.  A review of how an organization's structure does/does not support decisions in today's complex conditions sounds like good advice to me.

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