Why Reorganizations Fail -- and How to Get Them Right

It’s a great feeling to get a brand-spanking new reorganization chart done and then present it in all its unsoiled glory to the entire company.

Unfortunately, that gleaming chart with all its little color-coded boxes lined up with precision has little to do with making a reorganization successful. In fact, putting so much effort and aspiration into that spruced-up chart could be one of the biggest mistakes a company makes when it comes to reorgs, says Stephen Heidari-Robinson.

That’s because too many companies believe that once they present the chart, then the reorg is done. The reason behind it goes to the heart of how reorgs are often undermined before they begin.

“Some managers think the number of people reporting to them is a sign of their power, so the org chart becomes their battle ground,” says Heidari-Robinson, co-author with Suzanne Heywood of “Reorg: How to Get It Right.” “Many managers also shy away from the human element of reorgs and org charts provide something solid that they can hang on to.”

No matter the reason, the result is that “they miss out on the essence of a reorg: getting people to work in a different way in order to create more value,” he says.

While outlining reporting lines and accountabilities is important in a reorganization, defining the different ways that people should work in the new process and the skills and capabilities the employees need are just as important, “and sometimes even more so,” he says.

“You are only really finished when people are working in the new way and the value you wanted has been delivered, not when you announce the new org chart,” Heidari-Robinson says.

Heidari-Robinson led McKinsey & Company’s Organization Practice for energy clients in addition to developing the firm’s thinking on implementing reorganizations. He also served as UK Prime Minister David Cameron’s advisor on energy and environment.

He says a McKinsey survey done by him and Heywood finds that more than 80% of reorgs fail to deliver the value companies desired, and 10% actually damage a company.

“More important, they can be damned miserable experiences for employees,” they say.

Heidari-Robinson says he believes that the pace of reorgs will pick up as all industries face accelerating changes because of innovation. “That is not to say that every business change requires the whole organization to flip (read more here)