- Why Organisational Redesign Efforts Fail
- How To Handle The Employee Dimension
- The Planning Phase
- The Redesign Phase
- The Post-Redesign Phase
- The Benefits Of Managing The People Impact Intelligently
Companies are restructuring their organisations more frequently than ever before and putting their employees through an unnecessary grind. To capture maximum value from their reorganisation efforts, leadership must make employee handling a key executive agenda item and manage it thoughtfully.
Why Organisational Redesign Efforts Fail
“The only thing that is constant is change”
Heraclitus’ words of wisdom are as applicable to modern large organisations as they were to the ancient Greeks over 2,500 years ago. In the late 1990’s start-ups were called out for their high frequency of organisational structure changes and the associated churn, while larger corporations rarely went through large-scale restructuring of their organisational architecture. Just two decades later, companies of all sizes in almost every industry are constantly reorganising their workforce to better meet the changing external forces. In a McKinsey interview of global executives, almost 60 per cent of the respondents said they had experienced a redesign within the past two years, and an additional 25 per cent said they experienced a redesign three or more years ago.
Every large-scale restructuring exercise is fundamentally about transforming a poor performing business to a vastly better one, to better enable the company to cope with new business challenges. Or about capitalising on a set of opportunities that were previously lying untapped, and reshaping the enterprise to better capture the value. The new state of affairs should be much better than the status quo, at least for the employees that are retained. However, the vast majority of employees in any organisation usually come out of this exercise exhausted by the short-term churn, and rarely appreciative of the longer-term rewards. Even the company leadership who lead these redesign efforts confess that they are usually not able to come out of their redesign efforts with a ‘winning’ feeling. So why do these efforts fail? Based on my experiences, it is almost always about not managing the people dimension well.
In the same McKinsey study, the top five reasons executives cited for their reorganisation efforts to be challenged were all related to not managing employees smartly.
How To Handle The Employee Dimension
There are several articles written about how organisational restructuring exercises result in low employee morale and low productivity due to job insecurity and role uncertainty. It has also become a cliché to remind management of how important it is to communicate with and support employees during the organisational change process. Without regurgitating the 'What', I want to focus the remainder of this article on the 'How' - practical tips, from personal experience, on how senior leadership and team managers can manage their employees smartly and compassionately during an organisational redesign effort.
The Planning Phase
It is imperative to plan things out in detail before you pull the trigger. Every reorganisation effort will inevitably create surprises you haven’t planned for - plan as meticulously as possible to reduce these.
Appoint an executive and a team to manage the people aspect
In most of my client companies, HR executives handle the people aspect of reorganisations as an addition to their regular day job. Successful restructuring efforts need a dedicated executive and a small, dedicated team to look into the people and ‘emotional’ aspects. The first job of this team is to create a sense of urgency within employees and a desire to change. Change management is much easier if there is a critical mass of employees advocating the need for change. The team needs to understand embedded tensions within the organisation – emotions, hopes, and fears. Based on these, and in discussions with top management, this team needs to create a high-quality employee communication plan. The plan should include frequency and mode of communications - both broad messages and communication in smaller, team groups. The people strategy should include how to retain key employees, how to handle affected employees with fairness and compassion, and how to let employees get their queries and concerns addressed seamlessly and continuously.
Understand the career aspirations and strengths of your top talent
…. and document them. The new organisational structure will most likely create new openings critical to the new direction of the company. This is a great opportunity to assign challenging roles to your top talent, in line with their strengths and career goals. However, considerable planning is required to assign the right roles to the right people. Some of your people may just want job security, some may want more money, while others may want bigger roles and, perhaps, a promotion. The Burke Litwin Change model, widely used to understand how motivational forces work during times of organisational change, suggests that employee motivation during a change heavily depends on an individual’s aspirations and matching of tasks to his/her skill sets.
An organisational redesign model allows you to redefine both of these items in a big way, that may not be possible during business-as-usual. On the flip side, reorganisation is also the time when these can be disregarded most easily. It is critical for every manager in the company to do their homework of diligently capturing team members’ career objectives and skill-sets (including skill-set gaps). During the redesign exercise, it should be the duty of the manager to look out for the right roles matching an employee’s aspirations and skills-sets, even if that means moving the employee to another team. In my experience, great managers have the career aspirations and skill-set summary of their team members memorized. However, most managers hate to give up a great team member to another team, even if that is the best option for the employee. Those that do end up retaining key talents in the organisation and creating mentees for life.
The Redesign Phase
Reach out to your best performers first, and take them into confidence
Most often, your best performers don’t get negatively impacted, so these are relatively easier conversations to have. Ironically, however, during periods of prolonged flux, your best performers have the highest risk of leaving. Quite simply, because they are the fastest to get picked up by your competition. One of the first things smart managers do is to take their best talent into confidence, give them enough reassurance that they are valued by the company, and explain to them that the restructuring exercise may actually create new opportunity for them. While we recommend one-on-one discussions, it may also be a good idea to pull groups of “key talent” into each session, so that participants also feel rewarded to belong to an elite group.
Identify people openly resisting the change and move quickly to remove barriers
Employees’ inner apprehension to deal with change can be managed, but employees that openly oppose and sometimes go out of their way to prevent the change need to be handled firmly and quickly. These employees can come from all ranks, including at the highest levels – such as a tenured CIO at one of my Fortune-100 manufacturing clients.
In fact, leaders of companies that go from good to great start not with 'where' but with 'who'. They start by getting the right people on the bus, the wrong people off the bus, and the right people in the righ seats. And they stick with that discipline - first the people, then the direction - no matter how dire the circumstances.
- Jim Collins
There isn’t a standard solution to this problem since it deals with a specific individual or individuals. It is best to single out these individuals and understand the root cause of the behaviour in a private setting. In most cases, it is more than just the individual’s predisposition towards change or a fear of the unknown. In my experience, when the vocal change opponents come from high levels of the corporate ladder, it usually involves a loss of people control, and, in some cases, a fear of job loss of the individual. In either case, the rationale doesn’t justify a delay in the overall organisational change process. Once you understand the real reason behind the behaviour, engage in a dialogue with the employee and look for mutually agreeable solutions. In the event that’s not possible, have a firm discussion with the employee on the need to change his or her behaviour, and consequences of non-adherence. But most importantly, do this quickly, with antibiotics before it infects the entire company.
If a person’s job is getting redundant, communicate quickly and offer help
In most large companies identification of employees for layoffs is done by the direct manager, with each manager usually getting a cascading employee reduction or cost reduction target. Most managers know well enough in advance, which of their team members have the highest risk of job redundancy, and savvy managers plan their communication well ahead of time. One executive, at a diversified manufacturing client, makes it a point to ‘softly’ warn layoff victims in advance even if the probability of a layoff is not a hundred per cent. Employees have a right to get this message directly from their reporting manager, in-person, and strong leaders practise that. Even if you have to let a team member go, there are several things you can help them with, such as ensuring they get a fair severance package, fair recommendations, and an introduction to your professional network that can help him or her find a job. I have several team members who I had to let go off (because their jobs got redundant) who are still good professional friends and have become mentees for life. Letting team members go is a very emotionally fatiguing experience for a manager too, and being able to help your affected team member brings a lot of emotional relief to the manager if done genuinely.
Monitor how your team leaders are communicating and help them
Create a platform to continually monitor how your mid-level managers are keeping their team members informed about the change. Few best practices I have observed include - a chat box for managers to ask questions and get immediate responses, a company internal webpage with FAQs for managers that are updated regularly, email alerts to managers with breaking news, and a PowerPoint deck to all managers with critical facts.
It is important to do this frequently, even though it may seem like an administrative burden after a while. One retail client I worked with got so caught-up in the drafting up the new organisation that no communication went out for over a month. This tends to happen more often when the top leadership is relatively new and hasn’t established a personal connection with the employees yet. Smart managers carry short communication bullet points ready with them all the time in case they get impromptu questions from team members. Your message should summarise the state of affairs accurately without revealing anything confidential. When you run into employees with a particular concern, immediately get into a room, preferably in a small group setting, and have a candid discussion with them. Be cognisant of the audience in the room as there may be individuals that get impacted differently. Tell people when you don’t have the details on a question but do it in a way to not fuel speculations.
The Post-Redesign Phase
Tell people they are safe and valued by the company
To be effective, the change should be executed quickly. Once all impacted staff members have been communicated with, tell the others they are safe, and valued by the company. It is very important to let people know that the end is over, and things will only move up from here. Studies have clearly shown that the loss in morale and productivity during reorganisations is huge. What is more alarming is that the rate of loss of productivity gets worse with every passing week of flux and uncertainty. Letting a team member know that he or she is safe puts an end to the emotional uncertainty and is the most important catalyst to bring productivity levels back to normal. Another exercise I usually suggest to my clients is to prepare a catalogue of employees with the highest risk of leaving – a “risk heat map” framework can be used for this. See Exhibit 5 for an example from a McKinsey study at a European industrial company.
The employees in top-right (dark green) cells pose the highest risk to the company. Managers must urgently put together a plan to retain these employees.
When you are moving a team under a new leader ensure a seamless assimilation
When a team loses their leader during a reorganisation, they either get a new leader or they get amalgamated with another team, creating a feeling of uncertainty within the team. Often their leader has left the organisation due to the poor performance of the individual, or of the team, causing an even greater feeling of insecurity within the team. There may be an ‘us vs. them’ feeling within the new team, which needs to be broken as soon as possible.
It is very important that when two teams get merged, the new leader and senior members of his team go out of their way to welcome the new team members. The best way to do this, of course, is during the course of your day-to-day work. You can also schedule a team offsite to discuss the new team’s initiatives, and carefully insert a few activities that can serve as an ice breaker between the teams. Lastly, make sure all gestures to integrate the new team member are genuine and are perceived to be as such – otherwise, it degrades the credibility of the new leader.
Identify new roles created and offer to your most promising employees
When restructuring is done to pursue a growth opportunity, the new roles are obvious. But even when restructuring is about job cutting, removing a person may provide an opportunity for the next level below to be pushed up. These roles can be great career opportunities for deserving candidates. If possible, combine this with a promotion or a path to one, conditional to the role being executed successfully. Post any reorganisation, change management is a mammoth task. You can define critical change management initiatives as projects and assign them to employees with strong leadership potential. Make sure the projects have clear deliverables that are measurable and time-bound; otherwise, this could end up being a never-ending process for the leader without a clear sense of accomplishment. Try to make the project leadership role very visible to senior executives within the company – budding leaders love to prove themselves to leaders they respect, and it also provides great networking and coaching opportunities.
Create a ‘Key-Talent Program’ and invite potential leaders in the new organisation
If your company doesn’t have an official Key-Talent program, post-restructuring is a great time to create one. Typical activities in such programs include additional project opportunities, networking sessions with executive leadership, very high quality (and often lavish/offsite) leadership training programs. Some companies combine this with a long-term incentive payout - however, in my experience, career growth opportunities and bigger roles are far more important to this population of leaders than financial rewards. Great companies usually invite no more than 5% of their total employee base into a key talent program, in order to create a sense of exclusivity.
Celebrate short-term wins
This is one of the most powerful and emotionally easy ways to rebuild lost momentum in an organisation, yet I have found most organisations under-utilise it. After a long, arduous organisational churn most employees gradually slide back into a business-as-usual mode and don’t realise the positive impact of the redesign effort. In order to celebrate short-term wins, leaders must first define finite, meaningful goals for the new organisation. I advise clients to use a simple, 2x2, Impact vs. Time matrix to define initiatives post the redesign effort (See Exhibit 6 - Each dot is an initiative).
Make sure you have a few quick-win initiatives in the bottom left quadrant as highlighted. Every time one of those initiatives is successfully completed, celebrate your success. Go out for a team outing, hand out awards to the participants, applaud them in team meetings, and make a big deal of it. After every win, analyse with the team what went right and what you as a team can improve upon.
The Benefits Of Managing The People Impact Intelligently
Driving an organisational redesign effort is frustrating and energy sapping and most executives accept that their company’s track record in driving such efforts have been poor. On the other hand, I have personally observed that well-executed restructuring programs have a tremendous positive impact on employee morale, organisational agility, and ultimately on the company’s bottom line. Managing employees, in such cases, has been one of the stated top objectives of the restructuring effort, and the planning for that starts long before the actual restructuring project kicks off.
In order to steer a large organisation in a very different direction, you need the dedicated support of a large number of people, for a really long time. In a vast majority of cases, it is your employees’ willingness to support the change that makes the difference between success and failure of an organisational redesign exercise. It is imperative, therefore, that top leadership put managing the people agenda at the forefront of their organisational redesign effort, and execute it with thoughtfulness, diligence, and empathy.