7 Strategies That Increase the Success Rate of a Reorganization in Corona Time

The impact of the corona has forced countless companies to reorganize at an accelerated pace. What can leaders do to improve their chances of success?

Reorganizations driven by crisis situations do not always work out well. In two-thirds of the cases, a reorganization actually provides an advantage. 19 percent of the reorganizations cause damage to the company. And only 8 percent achieve the intended result within the planned time. This is evident from the research of a database with more than 2500 reorganizations, compiled by consultancy firm Quartz Associates and HBR.

Based on the research, Quartz identifies seven strategies that can contribute to a successful reorganization. Strategies that help to maximize the chances of achieving the intended result within the planned time while minimizing disruption.

# 1 Act quickly, but always with a plan

Time is critical. If a crisis reorganization lasts longer than six months, the chance of failure is significantly higher. The longer the reorganization takes, the more likely it is that the business context has changed. Certainly in a rapidly developing crisis situation, which makes the new model irrelevant. That is the case in 30 percent of crisis restructuring.

Acting quickly, of course, doesn’t mean running ahead without a plan. Only a third of the companies implementing a crisis-driven reorganization develop a detailed plan. Another third has only one focal point, which everyone has to work towards. A final third has no plan at all. The research shows that the last two cases have much lower success rates.

# 2 Analyze human capital

The vast majority of companies fall short when it comes to human capital analysis capabilities. Especially when you compare it to the level of financial analyzes. This means that speed or accuracy must be sacrificed in reorganizations. The explanation of an HR director of a major British energy company illustrates this well: ‘We don’t have the correct data on people, so we have to wield the blunt ax: I know we have to reduce the workforce by a certain amount to save costs, but I don’t really know where the inefficiencies are. ‘

Rather than researching their own organization, some companies try to compare their cost savings goals with those of peers. This usually takes a lot of time and results in less reliable comparisons. Leaders cannot know whether differences are caused by a different context, level of automation, level of outsourcing, or simply poorer performance. In addition, any conclusions may no longer be relevant.

Instead, organizations should opt for an internal benchmark analysis. For example, why is your operational team more efficient in region X than region Y? Internal benchmarking enables companies to act quickly, understand what causes differences, roll out best practices to other areas, and more effectively challenge opponents based on evidence.

# 3 Set differentiated goals and consider targeted investments

Saving 20 to 30 percent across the board isn’t always the right answer. Perhaps some departments need to be remediated by 50, 80 or even 100 percent, while other parts require targeted investments. Businesses that are able to reinvest some of their cost savings in the organization are significantly more likely to succeed, even if it means more cost savings elsewhere to afford it.

# 4 Involve the entire leadership team

How you decide about organizational change is of enormous importance. Sometimes it is even more important than the actual decision. The Quartz and HBR database clearly shows that in the most successful reorganizations, the entire leadership team is involved in the decision-making process. Often supplemented with input from the employees.

However, the data shows that this approach is not common. Instead, crisis-driven reorganizations are usually devised by just the leader and some of their most trusted colleagues. And that is a big miss, say the researchers. Managers who feel left out are more likely to resist change.

# 5 Be flexible in implementing the new organizational model

Half of the crisis reorganizations do not go as planned, as leaders resist a centrally imposed solution. Companies that provide leaders with some flexibility in deciding how to implement the changes are much more likely to succeed.

What can help with this is defining a general design, outlining what is acceptable, goals for cost savings, and defining a process for local leaders to fill in the details. This benefits the speed and leads to a workable result.

# 6 Communicate changes quickly and humanely

In regular reorganizations, personal communication contributes significantly to success, much more than communication via e-mail. However, the chances of success in reorganizations based on crisis situations are much greater if communication is largely done by e-mail. This is probably because in a rapidly changing situation employees would rather receive news quickly than feel in the dark.

The most important thing for leaders to remember is that reorganizations are not just about numbers, but also about people. Friends and colleagues lose their jobs. With massive, impersonal layoffs via video calls without any advance warning, you won’t get your hands on each other, to put it mildly. A better approach is to tell all employees what is happening and why, and then have managers or HR employees speak to those affected (and this can all be done virtually). Even when changes happen quickly, employees need to understand why, when, and how these changes will occur.

# 7 Enable feedback

Reorganizations deployed in response to crises are much more likely to succeed with formal feedback processes. Think of staff surveys, a ‘counter’ where employees can share problems or a formal assessment three to six months after the completion of the reorganization. In the absence of clear processes for feedback on escalating problems, the risk of failure is very likely.

Interestingly, growth-driven reorganizations are benefiting from employee surveys of implementation issues. Quartz concludes that this approach is less effective for cost-effective reorganizations. This may be because cost savings naturally divide and therefore take longer for employees to embrace change. Nevertheless, companies that have completed a cost-effective reorganization would do well to thoroughly evaluate the implementation.

Felix Tammi

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