Caution! Reorganization Ahead!

“Hi Mike.  Sorry I couldn’t get back to you sooner.  We’re going through a re-organization and things are pretty hectic here.  We’re going to need to let the dust settle a bit before we can move ahead with that project we were talking about.  Check back with me in a couple months.”

I have heard some variation of the above message too many times to count throughout my career. I’ve heard it so often, I’d probably be better delivering it than the caller.

I am convinced that some companies exist only to reorganize; its their only core competency. It’s almost like when things get too normal, management gets bored.  And as we all know, the devil makes use of idle hands.

I state the following unequivocally:  I believe that corporate reorganizations destroy billions of dollars of shareholder wealth annually.

It would be interesting to see financial analysts (the people who analyze the value of a firm on behalf of investors) to get wise to this.  I remember an investor in the Silicon Valley – where, at the time, building big corporate headquarters was in vogue and rooted in corporate vanity – tell me that his rule was to “short the stock of any company building a new headquarters”.

Similarly, there may be an undiscovered investment strategy tied to shorting the stock of any company going through a reorganization.  The only problem with the theory is that so many companies are in a state of perpetual reorganization that it would be hard to limit the fund to only a few.

Below are some points on how to think about re-organizations from the perspective of a leader and a team member.  Before that, three cautionary notes:

  1. Management frequently underestimates how disruptive the change will actually be.  Like founders with visions of a “happy path” laid out before them, company leaders think that all the messy human stuff will sort itself out faster than it does.
  2. Here’s an adage I once heard in business school that never left me:  “Uncertainty consumes slack resources.”  Reorganizations, by definition, introduce uncertainty all over the place. Keep it in mind.
  3. Reorganizations are often seen as some sort of panacea, but they never are.  Even worse, the activity hides the real issues that hold the company back.

If you’re a leader considering, or in the middle of, a reorganization…..

  • If you only remember one thing from this post, remember this: You can’t re-org your way out of problems you’ve behaved your way into.
  • We often talk about the need for speed, and re-orgs are often sold as a way to make a company faster.  Sounds great, but just like acquisitions, the more likely outcome is that the change will not deliver on the business case.
  • A re-org is usually exchanging one set of problems for another.  Be realistic.
  • The burden of proof for a re-org lies squarely on management’s shoulders.  If you can’t demonstrate how you WILL achieve large productivity gains, then you lose the argument. Note that I say “large” productivity gains because you’re probably over-estimating anyhow.

If you’re an employee in a company that has just reorganized…..

  • Congratulations.  You’ve just been given an opportunity.  Most of your peers will assume the defensive crouch of a boxer in the corner of the ring.
  • Remember that “fortune favors the bold” (an exhortation I heard many times in the Army). Use this opportunity to spread your wings.
  • Avoid furtive, whispered conversations in cubes about who’s in and who’s out.  That takes time away from the important stuff that will help your career.  You have work to do.
  • Re-commit yourself to the fundamentals of your work.  If you primarily work with customers, spend more time with customers.  If you’re in accounting, invest in new skills.  Whatever you’re there to do, use the reorganization to do more of it.

Reorganizations are often needed.  After all, business and markets are always changing, so no organization is going to stay in some state of perpetual stasis. But knowing when to pull the trigger, why to reorganize, and how to make the most of it is an art form.  Smart leaders adapt.

Commit yourself to excelling in midst of organizational change.  It will be the one constant in your career.

Good luck!