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Rules For Reorganizing Can Maximize Efficiency

This article first appeared in the September, 2002 edition of the Jacksonville Business Journal

Hate to re-organize? Most people do. It's disruptive. Established ways of working are threatened. But there are times when reorganization is necessary.

  • An organization has outgrown its structure.
  • Business requirements change.
  • Work methods or processes change.
  • Too much bureaucracy.
  • Territorial issues.

A re-organization should be designed to maximize the intended benefits and minimize unintended consequences. Here are some rules to use.

Rule #1 - Don't re-organize if you don't have to.
Reorganization seems like quick and decisive change. But if the work processes remain the same then nothing really changes. Analyze your situation to determine what really needs to change.
Example: I was asked to help re-organize a computer hardware design group. Five different groups were making five types of circuit boards and fighting over shared support resources. The real problem was the lack of one common design process. Once the groups agreed to a common process and created one master project schedule the resources could be shared without re-organizing.

Rule #2 - The new organization must be "fit for purpose."
Design the organization around the work to be done and how the work should flow. Completed pieces of work should be done within one organization. Remove unnecessary boundaries and hand-offs.
Example: An insurance company was organized in departments that handled components of a claim. Claims moved from one department to another until processed. The result: long cycle time and no accountability for errors. They re-organized into units responsible for processing one type of claim from start to finish. Processing time dropped from six weeks to three days.

Rule #3 - Keep the structure as simple as possible.
If an organization chart requires explanation it's too complicated. Everyone should have just one boss. Each box should have a clearly understood function. Differences between line and staff should be clear. Matrix structures should only be used to meet a compelling business need.
Example: A global engineering and construction company established a matrix structure - one side for technical departments and the other for projects. Then they also divided their company into both geographic regions and global business lines. Everyone had four bosses (technical, project, market, regional) each with his own priorities. The resulting conflict killed the company. It was acquired for pennies on the dollar.

Rule #4 - Design the structure around the work; not personalities.
Build the organization to perform the work that needs to be done and assign people where they will make their best contribution. Do not build the organization around personalities. Those are the seeds of future disaster.
Example: I was asked to look at a company's structure. Everything made sense except for two unusual boxes. The president described that these positions were created to accommodate two people. A year later both people were in new roles but the dysfunctional structure had now been institutionalized.

Rule #5 - Design for flexibility and scalability.
Markets, customers, competition and technology change. Structures must be built with the flexibility to scale up or down as conditions require. Project-based structures, assignments vs. permanent positions, team-based work groups and a mix of permanent and temporary staff maximize flexibility.
Example: I worked with a project-based organization where people were assigned to project task forces for six months to two years. Every Thursday was "moving day." When you joined a new team you packed up your cube on Thursday evening. On Friday morning you went to your new cube. Your boxes were waiting, your computer was connected and you had the same phone extension. That's flexibility!

Rule #6 - Design for team performance
We extol the virtue of teamwork. Yet most organizational structures are designed for individual performance. If you want the synergy of teamwork, establish natural work teams as the structure.
Example: Consulting organizations typically establish cross-functional project teams to deliver their work. Over time these teams become high performing seamless units even though they come from different traditional disciplines.

Rule #7 - Design for empowerment and accountability.
People want work that is meaningful, challenging, and enables them to learn. Give people a whole job to do so they can see the results of their work. Provide work that requires a variety of skills. Empower people with the autonomy and authority to perform and hold them accountable.
Example: You're at a restaurant and your meal is not prepared well. You complain. One server can only ask for the manager. Another server has the authority to take whatever corrective action is needed to satisfy you. Which restaurant would you want to work at?

There is no one best way to design an organization. Use these rules to help create the best structure for your company.

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