Why Most Reorganisations Fail

James: 0:03

hello, I’m James.

Jimmy: 0:04

Hi, I’m Jimmy.

James: 0:05

Welcome to A Job Done Well, the Right, good morning, how are you doing?

Jimmy: 0:14

Hi, James. Yeah, I’m doing all right. How are you been?

James: 0:16

I’m very good, thank you very much. My three saga goes on and on and on. I’m not going to tell you about it anymore. I cannot believe how inept these people are. It must be costing them a fortune. Anyway, over to you.

Jimmy: 0:31

going to not talk about Zurich this week because like you, I’ve had enough. I’ve got two TV recommendations for you this week. One is traitors. Claudia Winkleman presents Amazing TV. Everyone should watch it.

James: 0:49

Yeah, it’s like an adult version of Love Island

Jimmy: 0:52

Well, funny enough, that isn’t my second recommendation, but Love Island All Stars started, started this week, But the other one that you should watch in all seriousness is the one about the Postmasters,

James: 1:03

I’ve been reading about this in the paper.

Jimmy: 1:04

oh, it’s absolutely an incredible story. It’s so well done, but it will have you frothing after about five minutes and yelling at your TV after about ten.

James: 1:16

Yeah, it’s an absolute case study on how not to manage anything, I think. So, what are we going to talk about this week?

Jimmy: 1:23

This week we’re going to talk about what often is the number one thing that people do to improve performance.

James: 1:31

yeah, and what’s that then?

Jimmy: 1:33

yet. Tell

James: 1:35

unveil it? Tell

Jimmy: 1:36

a

James: 1:38

it. The story, ah, okay. Well, the story goes like this. There’s a guy, and he goes into a new job. He’s just been reorganized, and he’s got the top job. And he walks into the office, and the previous incumbent of the job is busy there. He’s packing his crates. And he says, Oh, I’m glad you’re here. And he hands over the new guy three envelopes. And the new guy says, Well, what are these three envelopes for? And The um, Previous incumbent of jobs says well, these are the three things you need to know to be successful in your job. Says when the things start to go wrong, as they will, open envelope one, then move on to envelope two, and then move on to envelope And the new guy says, oh, alright, thank you very much. So anyway, the old guy shovels off with his with his cases and his bags of stuff, and the new guy starts to Get his mind around the job and of course it’s a re org so after the first two or three weeks everything’s new and exciting but then things start to go a little bit wrong because they always do. And he’s thinking what am I going to do and he opens his desk door and he finds these three envelopes. So he opens the envelope with number one written on it. And the instruction on envelope number one, the letter on envelope number one is blame me, blame the previous incumbent at the job. Always, thinks both things are brilliant. That’s the way forward. I can blame him for all my woes. So he sets about, you know, bad mouthing the previous incumbent of the job. and that, Well, yeah, it lasts about three or four months and after that you’re not going too far with that. So he does three or four months of bad mouthing the other chap. And things still aren’t going terribly well. But he finds envelope number 2, so he thinks now’s the time. So he opens envelope number 2. And inside envelope number 2 is the instruction, Have a reorg. I think it’s brilliant, that’s what I knew. That will solve all my operational woes. So he does an absolute, you know, throws everything in the air, sacks a few people, hires a few people, changes responsibilities, should do the job perfectly. You see it a lot in number 10 Dining Street by the way.

Jimmy: 3:47

And then

James: 3:48

after about, three, four months, you things aren’t going terribly well still. And he looks inside the um, the desk, and there’s envelope number three. He thinks, hallelujah, here I am. So he opens envelope number three, and he opens it, and he looks inside, and it says, go out and buy three envelopes. secret to managing So there you go, that is the secret to management success.

Jimmy: 4:13

So today we’re going to talk about that secret the restructure, the reorganization. Organizations just always use this as a tool to try and solve problems.

James: 4:25

problems. many reorgs do you think you’ve been through in your career then?

Jimmy: 4:31

I think, I think it was almost constant because there are phases a little bit like the three envelopes. I think that you’re in a constant cycle of either thinking about re org, or designing a new structure, or the next phase then is you’re into implementation of a new structure, and then once you’ve implemented it, you’re picking up the pieces from it.

James: 4:55

Yeah. There’s another stage, which is the explaining why the Re Org didn’t work stage.

Jimmy: 5:01

stage. Yes.

James: 5:02

Yeah. So, overall though, you’re talking about once every 18 months to three years, I

Jimmy: 5:09

thought so. I would have thought so. Every couple of years you have to have a reorganization. You have to look at your structure. When things aren’t going right, to the envelopes again, you know, things aren’t going right, the first thing you do is restructure.

James: 5:24

So why do you think it is the thing that people jump to? Why is it the ubiquitous management tool?

Jimmy: 5:30

People think it’s going to solve a whole host of problems and they use it to solve capability issues. They use it to often solve people issues. So if you’ve got somebody who shouldn’t be there, rather than dealing with an individual. I’ve seen organizations do complete restructures to get rid of one person. And generally underperformance. Why are organizations, why are teams underperforming? It’s because the structure’s not right. Yeah.

James: 5:58

and rather cynically, I do think that there is an element of, it is the easiest way to take cost out of an organization. If you restructure and get rid of a load of people, it will save you some money and it will make your financial results look better. It’s just what happens afterwards is the question. The other thing though I think is a downside is you’re just looking at one part of the system. So you’re only. Pulling the people lever. You’re not looking at your supply chain. You’re not looking at your infrastructure. You’re not looking at your sales strategy. All of those things go by the by. You’re just looking at the people lever.

Jimmy: 6:30

And I think it’s worse than that, James, though, because although you are looking at the people lever, what you’re actually doing is just looking at a job role in a structure and stuff like that. And so therefore, the upside you might get is probably eroded by the downside of the distraction and the uncertainty.

James: 6:50

And what are the costs of that then?

Jimmy: 6:51

of that? Well, they can be all sorts, can’t they? I mean, it’s a massive distraction for people.

James: 6:57

people are scared that they’ve got a job or not.

Jimmy: 6:59

Yeah, exactly. So, can you imagine now, I mean, you’re an analyst, but I’m not even sure that you could quantify the underperformance that organisations have because people are uncertain about the

James: 7:09

Yeah, there’s nothing for employee engagement at all, maybe a link point, but really difficult to get engaged with your work when you’re worried about your future. And then I suppose there’s also the, after the event, there’s just that uncertainty and people sweeping up and trying to work out how to to solve things.

Jimmy: 7:27

up and trying to work out how to to solve things. Yeah,

James: 7:33

I think a lot of these reorgs are done just to save cost because somebody’s got a target to hit. And the way you do that is you sack your experience. So you probably throw out a load of experience stuff that you maybe do not want to be having to retrain for anyway. But. Let’s not be cynical, James. Are there, do you think, any times when it does add value? I

Jimmy: 7:53

I think it does. I think, I think the problem is organizations use it willy nilly to solve all sorts of problems. But I do think It can help you if you, if you don’t have the right capability. I think, you know, shaking stuff up often does, really help. I think you get the kind of bounce immediately after a restructure. You know, everyone’s excited about the new structure. They’ve all, yeah, they sigh of relief. I’ve got a new job. I’ve got a job. I think sometimes, that will improve performance. In the short term, I think sometimes people get opportunities they might not otherwise get because a restructure comes along. So I think, in the short term, they often at least improve performance giving the effect of solving the problem. But they don’t really get to the root cause. Yeah,

James: 8:43

it’s a bit of a blunt stick, isn’t it? There is almost an element of, I’ve got to do something, and this is the easiest thing for me to do. So I’ll have a reorg. Now, if you’ve got to have reorgs, then I suppose there is a question, which is, which structure is the best structure? Because you can go all sorts of ways around this. Now, I will go, as a process guy, I think I will go decentralized. By which I may have your things facing the customer. Because if you think about it, the organization that you want or the structure you want,

Jimmy: 9:13

Yeah. Yeah,

James: 9:14

get that to follow your purpose. so if you structure towards the customer and structure towards your purpose, you stand the best chance of succeeding. But do you buy that or not?

Jimmy: 9:25

one? Well, yes and no. So I think structuring, in line with a process or, your customer journey is one way of thinking about it. I think you also see people thinking about. centralizing stuff and at what level in an organization do you centralize things? You can have things functionally, i. e. by expertise, so you have your claims teams together, your marketing teams together. You can have it divisional, so you know, to chop your organization into a number of divisions. You can have a holacracy, where you’ve got authority decentralized out into all your areas. Exactly. Look it up,

James: 10:03

good. Yeah.

Jimmy: 10:05

Or what organizations often do, they take a little bit of all of those and put it into a kind of hybrid approach. So I don’t think, personally, in my experience of doing dozens of restructures and trying all sorts of things, there is a silver bullet in terms of what’s the right structure to have. I think it depends on, really, on your context. Yeah,

James: 10:27

I think, again, rather cynically, the right structure depends on where you happen to sit in the organization and where you think you can amass the most power. But coming back to it, you know, classic example, is there a right or wrong way of doing it? It’s a bit like the story of the sharks and the dolphins.

Jimmy: 10:44

quite

James: 10:45

Well, so a shark is a fish and a dolphin is a mammal, biologically they’re quite different types of creatures altogether. But what’s really interesting about them is not what their innate structure is, but how they’ve evolved to live in their environment. And so they’ve both evolved to be a very similar sort of size and shape, and gone to the top of the food chain, they’re the ultimate predators in the sea. But they didn’t do that by worrying about their structure, they worried about all the different adaptions and evolutions, and that’s how they got to their point. So I think there is a little bit about, not so much worrying about the structure per se, but making the structure work for you.

Jimmy: 11:25

no, I, agree, James. I, I think. A couple of things. One, people try and solve all sorts of problems by restructuring, whereas actually focus on what’s, what’s the real solution to the problem often isn’t the structure. And also, I think you just got to pick your poison. There’s lots of different things you could do. Just pick your poison and then optimize around that and make sure that things really work. So a good example of that a few years ago. I was running an operation that reported into one of the business lines. But it wasn’t owned by the business lines. It was a functional setup where it sat with the chief operating officer. And the business line wasn’t happy about that. They wanted to own it. Often that happens. People want to own things. They don’t trust that someone else can deliver for them or better. Anyhow, it was accepted that that was the structure, but they weren’t happy about that at all. So I spent a lot of time understanding what they really wanted, what they really needed, and making them feel like I was part of their team. And actually, they got over the fact the structure wasn’t set up in the way that they wanted it. They didn’t have control over it. They were getting the results they want in the way that they wanted. They were all right with it. So the structure stopped being a distraction to performance. And actually we just accepted it and optimized our ways of working around it. Yeah,

James: 12:52

and that’s interesting. As a process guy, whenever I go into an organization, the places where all the inefficiencies are, all the cost savings, all the opportunities, it’s invariably when you go from one part of the organization to the other. And I think it’s a lot to do with your point, trust.

Jimmy: 13:10

want to

James: 13:11

There’s a bit of an academic theory there as well. So if you look into systems thinking, The Systems Thinking guys will talk about three levels of a system. And the first one they talk about is purpose, what’s your system there to do. The second one they talk about is interactions, so how do the parts of the system work together. And then the final bit is the parts of the system. And their point is, if you really want to improve performance, focus on purpose first, then look at the interactions. And actually moving the component parts about reorganizing people and roles. It’s a bit like shuffling deck chairs on the Titanic. But that kind of ties in with what you said, isn’t it? Yeah, because, yeah, purpose, what we’re here to do for our customers, and then interactions, a lot of that is just about how well you get on with the people around you. But passing information around, making sure that your processes work smoothly, stuff like that.

Jimmy: 14:04

people spend loads of time restructuring around the components of the system when actually, you don’t need to do

James: 14:10

It’s a really blunt stick, what’s the problem you’re trying to solve,

Jimmy: 14:13

and I think that’s fair, but I think if you are going to, reorganize I think there’s a couple of things to to think about, and I, I genuinely think you should only do it if it is going to solve the problem that you have, rather than thinking it’s the panacea for all, all ills, but I would say don’t be half arsed about it. What I’ve seen quite a few times is people design a structure and then they think, James won’t like that role, or he won’t want to report to that person, or, some other form of what people’s preferences are. So then they start messing around with it. And, alright, that keeps James happy, but it’s completely suboptimal for how the structure’s set up. And I’ve seen that happen a few times. So don’t be half arsed about it. I think also Yeah, another good example of, of that when we worked together previously we were set up functionally, but then they decided they were going to have process owners that, to your point, that owned the end to end journey, and so you had a process owner, but we were set up functionally, and they never changed the actual structure, so all they did is add a layer of complexity By having these process owners who are trying to work across all the different functions to get the job done. And all it did, because they had no authority to do that, the authority sat in the business areas. So all it did is pissed everyone off and created a whole load of noise and frictional cost within the organization.

James: 15:43

And I think you’re right, a lot of these reorgs, there’s a whole host of just confusion about roles and responsibilities and people jumping up and down each other’s puddles and it’s just messy. Is another upside though, of course. You keep your people in HR employed.

Jimmy: 15:59

That’s true, actually. You know, there are people throughout the globe, no doubt, in HR, who are running restructures for organisations. I wonder if their time might be better spent on other parts of developing talent, and if they shouldn’t be counselling senior leaders, other ways of improving performance. But, as you say, it keeps them in the job.

James: 16:21

Absolutely. And then of course the sad truth is that It’s very unusual to have a restructure without there being some redundancies involved. Yeah, well, I have restructured, I have been restructured.

Jimmy: 16:34

think we both experience both sides of, of that coin. I worked on

James: 16:39

Yeah, I worked on one project once, it was called Project Hessian. What was that? A bloke looked at me and said, ah, it’s a type of sacking. I

Jimmy: 16:45

Very good, James.

James: 16:47

But if you are going to go through that, are there any tips on the way to go? Yeah, I think

Jimmy: 16:54

I think having been on both sides of that experience, it is both a scary, unpleasant and liberating experience, depending on how it happens. So as a leader, I think. I’ve always been focused, when I’ve had to do that sort of stuff, on doing things the right way. So treating people, you know, really humanely, understanding their perspectives trying to help them understand what’s going on, communicating really clearly and openly with them, helping them think positively about the future. So do it the right way, rather than just push people out the door. Because you have to remember that those people, A, I think you want them to get on with their lives and do well, but B, They will either be advocates or not for your organization.

James: 17:46

One organization that reorged me, I cannot say enough good things about them. The other organization that reorged me, I cannot say enough bad things about them. But are you? No, I’m absolutely not. Yeah, not on social media. So I suppose you come to the question then, if it’s a bit of a pointless exercise or we think it’s a bit of a pointless exercise. What should you do instead? What’s the better way? And I think one of the things really is minimizing the conflicting objectives, being clear about purpose, and that way you get rid of the frictional cost. You’re always going to have a matrix so make that matrix work focus on the internal customer and If you sit aside from them, be part of their team, you know, help fix their problems. I

Jimmy: 18:36

to pick up on your point about the matrix. I do think that’s a really under, underappreciated skill that people have because think, as you rightly say it. Organizations, whatever structure they, they operate in, they always have some form of matrix because ultimately you have to get some stuff done through somebody who isn’t in your direct control, unless you’re the CEO, that’s a reality. So being able to work where you don’t have authority relies on negotiation skills, relationship skills, communication, empathy, EQ, all of those things. And I think That, that ability to work in a matrix and get the job done where you don’t have authority is, an undervalued skill. Yeah,

James: 19:22

I worked for a guy once and I was moaning about the structure and he he looked at me rather blankly and he said, yeah, James, but you’re either going to have cross functional processes or cross process functions. You can’t win. Get on with it. And you need to make what you’ve got work. So, where does that take us then? In summary, the art of the re org.

Jimmy: 19:43

think the reorg is almost always the number one thing that people try and do to solve all manner of problems. So it’s an always on activity.

James: 19:58

just upsets people, it puts people in a position where they’re scared, they’re worried about their job. And consequently performance will fall.

Jimmy: 20:07

rarely actually solves the problem that you were trying to solve in the first place.

James: 20:11

Yeah, a very blunt stick. So the solution really is, pick your poison, choose a structure and stop messing about.

Jimmy: 20:19

Optimize around your overall purpose.

James: 20:23

that stop people working together. And

Jimmy: 20:27

And build those matrix management skills.

James: 20:31

And maybe most importantly of all, if you are going to restructure some people, do it humanely. Right, I’m glad we’ve put that one to bed. Good work.

Jimmy: 20:42

Hope you enjoyed today’s episode. If you’ve got any questions for us, then as ever, feel free to drop us a line at jimmy at a job done well dot com or James

James: 20:57

at a job Done Well dot com. And

Jimmy: 20:59

you liked the episode, please feel free to share it with someone and give us a positive review online.

James: 21:04

online. for your time.

Jimmy: 21:05

time. Thanks everyone, have a great week. If you’d like to find out more about how James and I can help your business, then have a look at our website at ajobdonewell.Com.