Organizational Nip and Tuck – 4 Reasons Your Org Change Efforts Failed

The design of organizations: Intentional construction or haphazard org-charting

Most executives can sense when their organization isn’t working effectively.  They see the classic symptoms of poor coordination, cumbersome decision-making, and once-promising initiatives stalling. Few know what to do about it.

So leaders shift boxes on an organization chart, bolt on more resources that were lobbied for by a zealous executive, or begin cutting costs across the board. These are some of the first organizational levers of change that leaders reach for.  Like the person addicted to cosmetic surgery, they conduct endless “nips and tucks” over several years, until their organization looks as gruesome and incoherent as the face of the person whose had a few too many nips and tucks of their own. Worse, the inefficiencies, mayhem, and underperformance that result from these impulsive organizational changes (intended to produce the opposite outcomes) leads to levels of cynicism that make subsequent change efforts much harder.

For many executives, the concept of “organization design” is an oxymoron. They have neither the patience nor the skill to understand the importance of configuring the precious assets of their organization into a defensible way to execute strategy. But in today’s markets, where agility is needed, customers are demanding engagement, and technological disruption impacts everyone, executives must start taking how their organizations are designed far more seriously.

Over this two-part series, I want to lay out some of the common pitfalls to substituting meaningful organization design work with counterfeits, and the costly consequences that result. I will also lay out a meaningful and elegant approach to designing organizations in a holistic and strategic way that actually gets the results leaders want.

Here are four common mistakes we’ve seen executives make when trying to improve their organizations:

1. Confusing the org chart for the organization. Whenever I ask executives, “How are you organized,” I get very interesting responses. “Some odd combination of regions and functions” or “in silos” or “a funky matrix nobody can figure out” are among recent responses. Notably, one said, “here’s our org chart.” Many leaders confuse the org chart with “the organization.”  The “org chart” is nothing more than a depiction of hierarchy – vertical reporting relationships that display who sits where. It tells nothing of how the organization actually works. The cultural nuances, core processes, governance systems of decision-making, competitive assets, and critical capabilities of the company are not represented. So when leaders start moving chunks of the organization around on the org chart, amputating from one place and bolting on in another, how the work gets done is brutally tampered with. The result is that the ability to resolve conflict, clarify roles and decision rights, and make sure workflow is efficient and allocates resources is worsened, not improved.  And the “after we move it, all that stuff gets worked out” mentality is the reason most “re-orgs” fail to deliver much of anything other than headaches and weaker performance.
2. Bolting on resources for short-term performance gains. When organizations struggle to deliver results, executives find ways to work around the organization rather than fix it. The proliferation of task forces and special project groups, or adding “bodies” to deal with challenges that come up becomes the band aid silver bullet leaders’ use for triage. Unfortunately, these temporary fixes commonly take on lives of their own, replicating like a bad flu, and then have to justify their existence by making up work, whether or not the original issue they were aimed at gets resolved or not.
3. Moving organizational components to address leadership shortfalls. Executives use organizational surgeries in response to leadership deficits to great detriment. It’s not uncommon for us to hear things like, “Let’s give marketing to Susana since Bill can’t handle it,” or “Let’s start grooming Elise for COO, so we can combine the Western manufacturing region with all of distribution to start stretching her.” When leaders make moves like this, similar to the consequences cited in #1 above, they set people up for failure and compromise the organization’s ability to execute. Rather than strengthening leadership, they hamstring leaders with suboptimal organizations.
4. Blanket cost cutting. When headwinds hit, organizational bloat goes from a sluggish annoyance to a lethal threat. In small companies, even making payroll becomes a risk. In large companies, cash gets hunted to replenish low reserves. So when pronouncements of “15% cuts across the organization” get made, the gaming begins. Hyperbolic appeals for why certain sacred cows can’t be slaughtered, or budgetary shell games that shift or hide resources get played to outmaneuver the cost cutters. The most dangerous outcome is that leaders end up cutting competitive muscle, not just the fat. As I’ll discuss later, not all work is created equal.  Sometimes market headwinds are the time to invest heavily in critical competitive muscle while cutting fat in bloated functional groups that do little to drive results. Or courageously trimming the portfolio of products or businesses that are no longer relevant or profitable.

In our next post, we’ll discuss the alternative to these haphazard approaches to organization design. In the meantime, reflect on the past few organizational adjustments, or “re-orgs” your organization has attempted. What were the results? What was the aftermath? Can you calculate the cost of a suboptimal or failed attempt to improve the organization? It’s likely far greater than you may imagine.