The 5 steps to a successful organizational transformation
Organizational change – of a company’s structure, people and / or processes – tends to raise high hopes only to end in disappointment. McKinsey’s Stephen Heidari-Robinson and Suzanne Heywood argue that change methods are often too conceptual and delivery too confused.
What do Netflix, Microsoft and Apple have in common? All three companies owe their success to a series of strategic shifts, rooted in profound organizational transformations. Unfortunately, only one “reorg” in six actually fulfils its aims in the allotted time, according to a survey by McKinsey.1 Moreover, 70% of attempted transformations result in outcomes that are mixed, incomplete and behind schedule – worse still, 9% are positively harmful. Why do certain companies succeed where so many others fail? How can you execute a reorg that creates value rather than deadlock and demotivation? Heidari-Robinson and Heywood provide an answer in the shape of a 5-step roadmap to delivering a successful reorg in under a year.
Step 1: Evaluate the proposed reorganization in terms of profit and loss
Too many organizational transformations are designed to follow whatever good practice is in fashion. Heidari-Robinson and Heywood call for pragmatism; before embarking on your reorganization, make sure that the benefits will cover the outlay! Draw up a detailed plan that quantifies not just the objectives and predicted profits and losses but also the schedule. Keep a close eye on the value creation for the company as a whole, and do not minimize the impact of the reorganization on your business. Over half of the managers in the McKinsey survey noted a significant short-term drop in productivity together with a 10% slippage in project deadlines and an average 10% fall in turnover. In addition, a reorg requires dedicated resources, especially human resources. Heidari-Robinson and Heywood state that the transformation team should consist of a manager and a dozen full-time employees drawn from different functions and business units, assisted by part-time experts. The estimated cost? 1.8 million euros for a period of nine months. The authors recommend operating to a tight timetable, since longer reorganizations tend to be more expensive and more destructive.
Step 2: Evaluate the state of your business
An effective reorganization targets no more than 20 to 30% of a company. It is pointless – and dangerous – to change what already works. In particular, Heidari-Robinson and Heywood suggest that you should not try to standardize practices blindly across business units. Cultural differences may explain and account for enormous differences in processes, methods and structures at commercial and HR levels in Europe, Asia and on the other side of the Atlantic. Even within the same country, a head office may only have a limited understanding of local idiosyncrasies.
1.Source: McKinsey Quarterly 2010: «Taking organizational redesigns from plan to practice: McKinsey Global Survey results» – a survey of 1,800 managers whose companies (across all continents and sectors) carried out a reorganization in the previous five years.
Excerpt from Business Digest N°283, February 2018
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