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Summary.
Companies must reorganize periodically to keep pace with changes in market conditions. But executives grapple with conflicting advice about whether, when, and how to do so. The term “reorganization” encompasses two distinct change processes: restructuring and reconfiguration. Each delivers value if pursued in the right way. Restructuring involves changing the structures around which resources and activities are grouped and coordinated—for example, function, business line, customer segment, technology platform, geography, or a matrixed combination of these. Reconfiguration involves adding, splitting, transferring, combining, or dissolving business units without modifying the company’s underlying structure. The goals for both tend to be the same: to boost innovation and, ultimately, financial performance. But the authors’ research shows that success is almost always situational. In this article, they offer four guidelines to help companies decide which type to pursue when, how to space their reorgs, what should be reorganized, and what else needs to change in the process.
To cope with ever-changing market conditions, companies often have to reorganize. But leaders tend to get conflicting advice about when and how to do so. Does the company need a new structure, or should it tweak the existing one? Will the benefits of a reorg outweigh the costs? Can the work be accomplished before conditions change again? How far should the changes go?