"The new structure is effective immediately" is the final line of a typical memo describing a reorganization at many companies, yet most of the time it is years, if ever, before the reorganization is truly effective. With the number of reorganizations increasing due to economic demands, companies need to make them effective much more quickly. A focused plan for how to address several predictable problems that often slow or derail the effectiveness of a reorganization over the first 100 days¹ can help it quickly reach and sustain optimal performance.

Many leaders spend the bulk of their reorganization-planning designing organization charts, projecting cost-to-revenue ratios and selecting people to fill key roles. Once the reorganization is announced, they have to deal with operational tasks and daily problems, which can quickly become a full-time job. In the meantime, the organization can slip back into its old way of doing things, often with fewer people. The resulting problems, which will delay the organization from becoming effective, will ultimately become evident and require fixing, if it is not too late.

Four Problems

Sibson Consulting has identified four common problems that need to be solved in reorganizations and the order in which they must be addressed:

1. Unclear Customer Value Proposition  If the products or services and distinctive value the reorganization provides its customers and customer segments is not clear, nothing else matters. The organization will be a target for any future consolidation or, at best, struggle to justify its budget.
2. Murky Roles and Goals  It is often not clear what each unit within the organization does, how the units align with each other and what their goals are. Duplication of effort and initiatives that fall through the cracks will be the norm until this is resolved.
3. Dysfunctional Operating Model  In many reorganizations, the decision-making approach is uncertain, there are too many meetings with the wrong people in them and the lines of communication are ill-defined. This will frustrate people inside the organization and anyone who deals with the reorganized company.
4. Uncertain Employee Value Exchange  If the required level of performance and the rewards process are unclear, top performers may feel that it is better to look for another job while low performers think this is a good place to hunker down. Defining "the deal" is a necessary prerequisite of success.

In a 100-day plan, the reorganization leadership team addresses each of these four problems, involving others inside and outside of the organization as needed. This approach requires five or six leadership team meetings, each planned and led by a different member of the team. Additional problems can be addressed, but this will require more time and/or more meetings. The work done in the 100-day plan to address these problems is not a full-time job for the leadership team. Rather than just going silent for 100 days, at several points during the plan, leadership should communicate to all employees the direction they are setting for the organization.

Days 1–25: Clarifying Value

A reorganization is seldom completely new. It is often a combination of several prior organizations. For example, to create decentralized business units, product design, marketing and sales may be merged into an organization-wide shared services department, or they may be set up by each unit. Problems occur when each function in the reorganization continues to do what it did before and no new value is created. Value can be created through better productivity, improved service or increased customer or product focus, but these objectives cannot be achieved if the legacy groups continue to operate as they always have.

In one large consumer products company, a top-to-bottom restructuring failed to consider the relationship value the company’s customers placed on individuals, not just the company. Valuable time was lost while the problem was addressed, and the effectiveness of the restructuring was limited.

Value needs to be clarified in almost all reorganizations by targeting the customer segments, the products and services to deliver to each segment and the distinctive value each segment seeks from the organization. This can be true of external-facing or internal-facing business units, including Finance, IT and HR. It is critical that the leadership of the reorganization clarify in the first 25 days the value it will deliver to its customers.

A value pyramid can help a reorganization determine what kind of value it wants to offer. (See Figure 1 below.) The organization begins by defining its customers and customer segments. The organization then works upward to align its products and services to customers, to determine what will be distinctive about those products and services and, finally, to decide what value they will bring to customers. Filling in the details of the value pyramid from the bottom up is critical in creating a foundation upon which to build. It will also help align the leadership team around a common set of value-creating principles.

 

Source: Sibson Consulting

Days 25–50: Aligning Roles and Goals

While all functional leaders know their group’s roles (main tasks) and goals (measures or objectives), they may not know what other groups in the organization do. This can create duplications of effort and/or gaps in what needs to be done. The solution is simple: Group leaders should attend a meeting to which they bring a list of the roles and goals for their group. Although these will vary greatly in terms of granularity, stretch and alignment level, sharing this information among the leaders is the best way to get the organization’s roles and goals articulated and refined for alignment.

For example, in one reorganization, leaders were asked to share their group’s roles and goals in a meeting of their peers. They had about three weeks to prepare and then spent three hours reviewing and refining them. In discussing the roles and goals, the group discovered several areas of duplication had developed, even though there was no overlap in the organization design, which was only a few months old. In addition, several gaps were discovered where no group was providing an important customer service that had been identified in the first 25 days. During the roles section of the meeting, it became clear that some groups had merely listed day-to-day activities as goals while others had set measurable stretch objectives. By the end of the exercise, all the groups had stretch objectives that, when combined, would create a high-performing organization.

This illustrates one of the keys to success in the 100-day plan approach: creating visibility across the leadership team in each group. Having the group leaders clarify their roles and goals with their peers creates more alignment than if each group leader did it alone with the leader of the organization. Figure 2 below shows a new type of organization chart that the organization’s leaders should complete in this step. When it is done, the main roles and goals for each part of the organization will be clearly articulated on one page.

 

Source: Sibson Consulting

Days 50–75: Fixing the Operating Model

Chances are the old operating model was broken and, if it is not refined within the first 100 days, the reorganization is likely to adopt several broken parts. For example, one of the problems with many old organizations is that there were too many meetings, but a common outcome of many reorganizations is even more meetings.

Some of the most important decisions to make in a reorganization involve defining what meetings will occur, how decisions will be made and how information will be communicated. Leaders can address this issue by making a list of the 10 most important and the 10 most frequent decisions that the organization must make and then creating a matrix to determine how each decision will be made. This matrix can also guide what regular meetings need to be scheduled, who should attend and what type of communications should result.

In many reorganizations, a poorly thought-out meeting schedule is one of the biggest barriers to organizational effectiveness. Not only will this engender ineffective decision-making and stymie communication, it will consume large amounts of staff time. As with the roles-and-goals meetings, group leaders should get together to report and discuss what meetings they hold and what meetings their people attend. By doing so, they will often discover synergies and avert one of the major causes of poor decision-making: having the wrong people in the wrong meetings.

Another problem that many reorganizations face is a lack of clarity over how operational decisions will be made. Who, for instance will set the budget targets? Is it a going to be a group decision, a finance decision or a leadership decision? Who has input? Rather than going one or two budget cycles with this unclear, the key decision roles should be determined in advance.

Another aspect of the operating model is deciding "what kind of team we want to be." Robert W. Keidel’s book Game Plans: Sports Strategies for Business provides a useful framework for discussing whether the operating model will be based on centralized control (like football), individual autonomy (like baseball) or spontaneous cooperation (like basketball). It is important to clarify "what game the organization is playing" or individual leaders will make their own assumptions about how the organization is to operate.² Keidel’s Sport Triangle (see Figure 3 below) can help an organization determine how it currently operates, how it should operate in the future and the steps it needs to take to improve.

 

Source: Reprinted by permission, "Game Plans: Sports Strategies for Business" by Robert Keidel

Days 75–100: Defining the Employee Value Exchange

It is always interesting to watch how quickly some employees go from being glad to be part of a reorganization to wondering what is in it for them and if they should be looking for something else. Rather than starting with what is in it for employees, this part of the 100-day plan starts with leaders agreeing on the criteria for employee success: "the value the organization expects from its people" and "how this will be evaluated."

The reorganization needs to define the new criteria for success as soon as possible, because leaders and employees probably bring different assumptions with them from the old structure. With a shared definition of employee success, leaders can then clarify how they will make reward decisions, including those that involve pay and promotion, and clarify how to enrich jobs to make working in the organization more rewarding.

An exercise based on Sibson’s Rewards of Work (ROW) model³ can help leadership groups refine how the reorganization will use rewards. Using the following grid (see Figure 4 below), leaders can chart how much focus the current organization puts on each ROW element. For example, 15 percent of the organization’s focus may be on affiliation, 20 percent on compensation, 25 percent on benefits, 20 percent on career and 20 percent on work content. Using that information as a baseline, they can then determine how they want to change that mix — which ROW elements to emphasize and which to deemphasize. This will provide direction for establishing the reorganization’s value exchange with employees.

 

Source: Sibson Consulting

For example, a reorganization is a good time to consider improving work content, which typically is a strong driver of employee retention, engagement and motivation. One company that wanted to improve its work content conducted an exercise to determine what job parts that employees disliked could be eliminated as the jobs were redesigned.

Conclusion

In any reorganization, leadership alignment in value, roles and goals, the operating model and the employee value exchange is critical in achieving positive, lasting change and organizational success. By addressing these relatively straightforward issues within the first 100 days, a reorganization will have a better likelihood of succeeding. Failure to do so can cause the reorganization to be mired in a long startup mode that can prevent the intentions of the reorganization from ever being realized.

About the authors:

Jim Kochanski is a senior vice president in the Raleigh office of Sibson Consulting. He works extensively with companies experiencing talent or performance gaps. He can be reached at 919.233.6656 or jkochanski@sibson.com.

Robert Conlon is a senior vice president in the Chicago office of Sibson Consulting. He has nearly 20 years experience consulting on human resource issues with a wide variety of organizations and industries both domestically and internationally. He can be reached at 312.456.7913 or rconlon@sibson.com.

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¹ A new administration means a fresh start for the federal government. Observers pay close attention to the first 100 days to see what how well it achieves its first goals. Reorganizations have a similar blank slate, and the first 100 days are very important.
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² Cited by permission, "Game Plans: Sports Strategies for Business," by Robert W. Keidel, published by Beard Books.
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³ Sibson’s Rewards of Work model measures employee perceptions and attitudes toward five financial and non-financial elements of rewards: affiliation, compensation, benefits, career and work content.
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Copyright © 2009 by The Segal Group, Inc., the parent of The Segal Company. All rights reserved.