Corporate Reorganizations Present Challenges, Opportunities

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Corporate Reorganizations Present Challenges, Opportunities

06/01/2015

By Mark Hamstra

The fast-changing environment in which today’s CPG retailers operate may present both opportunities and challenges for companies seeking to optimize the structure of their organizations to align with revamped strategies.

Competitive pressures and disruptions caused by changes in customer behavior are two key trends concerning business leaders, cited by 61 percent of corporate CEOs in a recent survey by Strategy& (formerly Booz & Co., now part of the PwC network). 

These trends and others are forcing many top executives to consider reorganizing their businesses to better suit the strategies they have laid out for their companies. Strategy& found that 42 percent of senior executives at companies around the world felt that their organization was not aligned with their strategy, and that parts of the organization resisted the strategy or did not fully understand it.

Retailers tend to be in a better position in that regard than some other industries, according to Gary Neilson, senior partner at Strategy&.

“According to our research, the retail industry fares slightly better than most other industries in terms of organizational effectiveness,” he says.

However, retailers face four key challenges during a reorganization, Neilson says.

“First, they need to ensure that employees have a clear understanding of their responsibilities. Top leaders must also improve their performance in delivering consistent messages. Third, employees across departmental lines must improve collaboration. Finally, leaders need to give more relevant information to field employees so they can better understand the bottom-line impact of their day-to-day decisions.” 

Strategy& has outlined what it describes as 10 fundamental principles that senior executives or division leaders should keep in mind when undertaking a reorganization. These principles, it says, apply to any business, large or small.

Some of these principles include:

• Focus on the future strategy, rather than placing blame on previous organizational structures or strategies. In other words, “declare amnesty for the past.”

• Consider both the formal and informal building blocks of organizational design. The formal, or tangible, blocks include things like how decisions are made and how people are compelled to perform. Those are offset, respectively, by intangible elements such as how people instinctively act and their commitments, such as individual goals and aspirations.

• Don’t rush to implement a new organizational reporting structure. Instead, focus first on finding solutions to the problems within the organization, then fix the structure of the organization. It’s a common misconception, according to Strategy&, that revamping the hierarchical org chart will solve a business’s problems.

• Organizations need to take into consideration the skill sets and personalities of the people they are appointing to executive positions in a reorganization. Positions can be tailored to suit an individual’s talents, and sometimes responsibilities can be reassigned to compensate for an individual’s shortcomings.

“Armed with these collective lessons, you can avoid common missteps and home in on the right blueprint for your business,” Strategy& concludes in a blog post on the topic, which was authored by Neilson along with Jaime Estupiñán, a partner with Strategy&, and Bhushan Sethi, a people and practices lead at PwC.