Read the article titled “Ten Best Practices for Restructuring the Organization”. Next, evaluate your current organization, one in which you are interested, or one with which you are familiar. Sele

Ten Best Practices for Restructuring the Organization RONALD J.

RECARDO AND KLEIGH HEATHER Business leaders who have been involved in any as- pect of a restructuring understand the difficulty of crafting a successful solution. Experience gleaned from more than 50 successful restructuring projects and interviews with corporate executives point to 10 best practices that organizational leaders can use to accelerate the restructuring process and ensure that it meets its objectives: start with executive spon- sorship; tie strategy to design; use a structured ap- proach; keep business process work simple; collect data and use it; consider the various options; be aware of trade-offs; keep the focus on people; avoid declaring victory prematurely; and get an early han- dle on the IT systems. © 2013 Wiley Periodicals, Inc.

The process—some might say bogeyman or phenomenon—of organizational restructuring has been called many different names over the years, ranging from organization design and rightsizing to business transformation and downsizing. Any busi- ness leader with gray hair and a large number of reports probably has, at one time or another, dealt with the task of changing the number of boxes and the names in those boxes on their organizations' structure charts. Aside from the emotional turmoil that a restructuring can generate, the process itself can be difficult because:

• Very few of the curriculums in leading business schools today have a course on restructuring.

Business leaders almost always lack a framework, methodology, and toolkit for organizational de- sign, or even a conceptual understanding of it.

• The vast majority of books written on restructur- ing have a conceptual rather than an application- oriented focus. The authors often are academics with little practitioner experience. No matter how interesting, the information they present typically is communicated through some type of model rather than a detailed methodology and support- ing toolkit. This can be frustrating to readers who do not understand what to do and how to do it when they get back to their offices.

Interviews with corporate executives, research on successful and unsuccessful restructuring initia- tives, and experience with more than 50 successful projects reveal 10 best practices for restructuring or- ganizations.

Start With Top Sponsorship Successfully restructuring an organization will al- most always fail without strong executive sponsor- ship from a variety of players, including:

• Senior management. This means, at a minimum, the leader of the organization being restructured, his or her boss and all additional upward lev- els within the hierarchy and those who poten- tially will be leading the new organization once it is rolled out (often referred to as Level 1 managers—that is, all those who report to the senior-most leader).

• Leaders of other internal organizations (same company) or external third-party service providers who supply or require services from the organization being reorganized.

Executive sponsorship means that key decision mak- ers agree that a change is required and they agree on the timing, factoring in business cycles and compet- ing initiatives. It also means that they are willing to actively participate in developing and/or validat- ing critical strategy that will drive the restructuring.

Published online in Wiley Online Library (wileyonlinelibrary.com) Global Business and Organizational Excellence • DOI: 10.1002/joe.21470 • January/February 2013 23 Finally, being an executive sponsor means being committed to reviewing the output of the design team and proactively informing key internal and ex- ternal stakeholders of the reasons why the organiza- tion has to change.

Neil Metviner is the chief marketing officer for OSG Billing, a midmarket business process outsourcing company headquartered in Englewood, New Jersey, with annual revenues of approximately $100 mil- lion. During more than 30 years of corporate expe- rience, Metviner has been president of two Pitney Bowes companies and held executive positions for Cendant.

According to Metviner, one of the keys to a success- ful restructuring is having senior executive sponsors take a visible and active role in making sure that employees understand the end game. For example, if the focus is to improve product quality, then the organization's leaders must explain how the restruc- turing efforts will help achieve this outcome.

Restructurings in organizations that lack senior- executive support of the effort will most likely not be taken seriously. Employees may not understand why the current state has to change, and ultimately may resist the proposed new design. This happened at a leading financial services firm based in France whose international transformation program stalled as lo- cal managers were not convinced that the proposed changes would solve their local business challenges.

As the following example shows, in the best cases, the driving force for restructuring comes from the top executive level.

One consumer products company embarked on a multiyear HR transformation initiative by forming two teams to design and build a global HR IT system:

• One team was composed of employees who re- ported to HR and were responsible for the func- tional aspects of the IT system and the design of the new business processes. Most of these em- ployees had HR backgrounds.

• One team was composed of IT professionals who reported to IT and were responsible for the tech- nical aspects of the IT system and overseeing the work of third-party service providers.

Being an executive sponsor means being commit- ted to reviewing the output of the design team and proactively informing key internal and external stakeholders of the reasons why the organization has to change.

Following the grueling work of system design and implementation, however, customers and service providers of the platform concluded that although the organization had successfully implemented the IT system, the structure was not optimally config- ured to support the next phase of the company's HR and IT strategies.

This led HR and IT leaders to jointly initiate a re- structuring project whose mandate was to propose a transformation (involving processes, structure, peo- ple capabilities, measures, and rewards) that was aligned with where the company wanted to go. Their input and sponsorship—which included visits to the operational offices located far away from corporate headquarters—was critical in achieving buy-in from the two teams. Following the "go-live" or roll-out of the solution, 91 percent of affected employees said they supported the new organization and upgraded processes.

Tie Strategy to Design There have been countless discussions about what drives the design of an organization. Some schools of thought maintain that process drives the structure, while others assert that strategy drives the config- uration of the various organizational components.

24 January/February 2013 DOI:

10.1002/joe Global Business and Organizational Excellence Experience shows that designing only by process will lead to an organization that is conceived to de- liver a very specific performance, whereas designing by strategy will result in a more holistic and pow- erful answer to the business issues that need to be addressed.

No matter what the purpose of an organization— regardless of whether it is a small business, a non- profit, a nongovernment organization, or a multi- national corporation—the strategy it has adopted should heavily infiuence the way it is organized. This strategy takes into account both the internal and the external factors that influence the organization.

Internal factors, which include customers, competi- tors, suppliers, and employee culture, affect the or- ganization. External factors, such as the economy, politics, industry and social trends, the environment, and government, indirectly affect the organization.

There has been a great volume of work devoted to business strategy ever since it became a management discipline in the second half of the twentieth century.

According to strategist Richard Rumelt, "a good strategy honestly acknowledges the challenges be- ing faced and provides an approach to overcoming them" (2011, p. 4). This is why it is essential to collect data to develop and support compelling ar- guments for any business strategy and restructuring proposals.

In the real world, it is important for senior managers to consider this question when they are making an attempt to envision a new organization: Why do you think you need to restructure your current organi- zation.' Looking at the situation backwards—that is, asking. What is wrong today?—can often inspire business leaders to reach a conclusion about what they want to do tomorrow. In contrast to what many people believe, some of the best strategy out there can be relatively simple.

A consumer products manufacturer in Australia had some issues with machine up-time (that is, the com- pany was underutilizing its machines) but was still performing adequately in terms of product qual- ity, inventory levels, safety, and fixed costs. After completing an assessment, the facility's management team concluded that the organization's structure was contributing to the root cause of the problem.

Using their business strategy—which was to maxi- mize resource utilization—they then crafted a list of concrete criteria and measures that helped them vi- sualize what the organization should look like after redesign.

Experience shows that designing only by process will lead to an organization that is conceived to deliver a very specific performance, whereas designing by strategy will result in a more holistic and power- ful answer to the business issues that need to be' addressed.

A good deal of the literature on organization design emphasizes design criteria, and rightfully so; it en- tails some of the "heaviest lifting" in terms of the thinking that needs to be done during a restructur- ing process. At the manufacturer described above, a sample criterion was that when a machine breaks down in the future, the observable result should be an "immediate and panic-like response," including a measureable key performance indicator and target.

Gollecting a good half-dozen or so of these types of real-world criteria makes the subsequent design work a lot easier, for they serve as ongoing confir- mation of whether the right solutions to problems are being designed and implemented.

As a result of the utilization of design principles, the manufacturer's maintenance team was split from the centralized engineering unit and reconfigured to report into each production cell. The key im- pact of having maintenance mechanics report to the team leader and shift foreman instead of to central Global Business and Organizational Excellence DOI:

10.1002/joe January/February 2013 25 Exhibit 1. The Catalyst Fast-Cycle Methodology Define Organize Project Establish Design Parameters Assess Current State Design Complete Macro Design Complete Detailed Design Implement Implement New Design / Desired \ ( Business 1 Voutcomea/ engineering was an 80 percent decrease in tbe time it took to repair unscbeduled breakdowns.

Almost immediately, production and machine up- time bad risen in priority over preventive mainte- nance. Additionally, tbe design team worked bard to get more out of tbe preventive maintenance pro- cess to counter-balance tbe break-up of tbe central maintenance team. Tbey also created a cross- functional team wbose members now meet regu- larly to minimize the downtime resulting from line changes as tbey support multiple products.

Tbe alignment or common tbread running tbrough this cross-functional team is the design principle to in- crease up-time.

communications (no mixed messages), is critical to the success of tbese initiatives. Most important, be believes in using data to drive the final solution or organization design, not allowing tbe process to lan- guisb, and providing timely feedback to the individ- uals wbo will be affected when tbe dust settles.

Organization Design:

A Practical Methodology and Toolkit (2008) details a fast-cycle, data-driven ap- proach that can guide any organization design effort, from simple to complex.

As depicted in Exhibit 1, tbe methodology is organized across three phases of work supported by more than 30 tools tbat can be used to assess tbe current design, identify alternative designs, complete tbe bigb-level design, and roll out tbe detailed design. Eacb phase is bigbligbted below.

Use a Structured Approach Organizations tbat bave a reputation for successfully executing restructuring initiatives understand tbat it cannot be done using a "figure it out as you go" pro- cess.

Mark Sorrentino, a 25-year veteran of tbe life sciences industry wbo bas beld senior positions in sales and marketing, understands tbis. Sorrentino's perspective on organization design comes from be- ing on tbe receiving end, as well as from being part of leadersbip teams tbat bave driven tbe restructuring process.

His experience strongly suggests tbat hav- ing a reliable, data-driven, transparent, and repeat- able process for restructuring, coupled witb clear Phase 1: Define Tbis pbase is broken down into tbree distinct tasks:

organize tbe project, establisb design parameters, and assess tbe current state.

It is essential to begin any organization design project witb sound project management. It is helpful to develop a formal charter tbat delineates tbe core and ad-boc team members, scope of responsibility, constraints and underlying assumptions, project deliverables, a detailed project plan, and resource requirements and budget.

Depending on tbe complexity of tbe initiative, it may be necessary to develop additional project 26 January/February 2013 DOI:

10.1002/joe Global Business and Organizational Excellence governance. This can address myriad issues, ranging from roles and responsibihties to decision-making rights.

Experience strongly suggests that develop- ing uniform project management processes and templates to address the following contingencies contribute to project success:

• progress reporting, • risk management, • issues escalation, and • scope change.

Two key change management issues that need to be addressed up-front include:

• The identification, assessment, and prioritization of affected stakeholders. This should result in a commitment strategy.

• The development of a communications plan that uses the stakeholder assessment as a key input.

Ideally, communications should be customized to each key stakeholder group.

Once the project management issues have been ad- dressed, the first place to focus attention is on fully understanding the business plan and the implica- tions it has on current structure. At this point, it is crucial to create four to eight design principles, or criteria, which will serve as the general parameters to guide the design of the organization—from the se- lection of the high-level structure to designing roles and jobs. These principles should spell out what the design should accomplish. Design principles cascade from the business strategy and a vision statement of what the future state organization should look like.

Listed below are some examples of design princi- ples compiled from restructuring projects in various industries.

• Move decision making to organization units that face customers.

• Design jobs around competencies, not around current incumbents.

• Outsource non-strategic functions.

• Eliminate nonvalued products and services.

• Minimize functional silos.

• Optimize processes cross-functionally.

• Aggressively apply enabling technology.

• Decentrahze where appropriate.

• Assure clear responsibility and accountability for results.

• Incorporate a multiskilled whole job concept into the new overall structure.

Once the design principles have been finalized, they must be translated into a short list of metrics that can be used in prioritizing design alternatives and, later, in evaluating the effectiveness of the imple- mented design. These are some examples of design metrics compiled from restructuring projects in var- ious industries:

• There should be no more than four layers be- tween the president and the lowest level in the organization.

• Reduce the cycle times of key processes by at least 30 percent.

• Maximize spans of control (target: one manager for every eight employees). Reduce headcount by 15 percent.

• Reduce operating costs by 20 percent.

• Target 70 percent of process activities to add value versus cost.

The final task that must be completed during this first phase is a thorough assessment of the current structure. This includes collecting data using a vari- ety of methods, ranging from interviews with inter- nal customers to a review of processes and budgets.

At minimum, organizational leaders need to under- stand the strengths of the current structure, the cur- rent structure capabilities (spans of control, levels, type of structure, work flow across the structure, cost data, and the relation between performance is- sues and the current structure), and key structure performance gaps and their root cause.

Global Business and Organizational Excellence DOI:

10.1002/joe January/Eebruary 2013 27 Exhibit 2.

Sample Solution Selection Matrix Design Alternatives Design change 1 Design change 2 Design change 3 Design change 4 Direction R with design vision 3 1 2 1 Design Principles strategy drwes the redesign 2 2 1 1 Aggressiveiy apply enabltfig technology 1 2 3 1 Outsource non.

strategic funct'ons 3 2 1 1 2 3 2 2 ProbiemsfDesired Functionality Not aligned to voice of the customer 3 2 2 1 Decision making too centralized 3 2 1 3 Slow response to environmental changes 1 1 1 Return Risk analysis 3 2 1 3 Bnanciai analysis 3 1 1 1 rotal 25 18 15 14 Phase 2: Design During this phase, two tasks are addressed: Com- plete the macro design and complete the detailed design. This phase should start with a benchmarking of similar structures. Organizational leaders should not constrain their thinking by benchmarking only their competitors.

To obtain a broad perspective on "what can be," it is important to benchmark the best, regardless of industry. Doing so will help identify the functions that may be able to be out- sourced. There are a number of benchmarking resources available, ranging from professional asso- ciations and trade groups like The Conference Board and the Corporate Leadership Council to private groups, such as the Benchmarking Institute and the Benchmarking Exchange.

Keeping in mind their organization's vision, and us- ing the design principles and metrics and the in- formation gleaned from their benchmark analysis, organizational leaders can, at this point, identify sev- eral macro-level design alternatives. Here, they need to evaluate the various designs and make a final se- lection using objective decision filters (see Exhibit 2) such as:

• fit with the vision of the future state; • alignment to design principles; • alignment with design metrics; • degree to which the design alternative does not adversely affect the strengths of the current struc- ture; and • degree to which the design decreases or eliminates weaknesses in the current structure.

Once the macro design has been selected, it is neces- sary to complete the detailed design, which includes defining work units and the details of each job. Too often, leadership teams declare victory and move on to their next "initiative du jour" before completing this task. The outgrowth of this is a new structure that does not align with the core and support pro- cesses and does not have the methods of coordina- tion to link interdependent work groups, a lack of clarity regarding roles and decision-making author- ity, and unresolved change management issues.

According to Mark Sorrentino, two types of metrics should be used during this phase:

• a balanced set of metrics that look beyond cost and headcount reduction to increasing revenues, increasing market share, or increasing customer satisfaction and • an additional set of measures concerning the change process. These include employee satisfac- tion, trust, and regrettable talent loss.

Phase 3: Implement This phase groups the execution of all the project management, change management, and process and technology issues that are addressed during rollout.

Depending on the scope and complexity of the re- design efforts and how radical the changes are, it 28 January/February 2013 DOI: 10.1002/joe Global Business and Organizational Excellence may be necessary to conduct a simulation or to pilot test the new design to ensure that the desired func- tionality can be realized. Once approved, the new design can be put into operation. During this phase, it is critical to address all the people and change management issues including:

• stakeholder management and communications; • a process for evaluating incumbents for key posi- tions; • possible candidates to fill vacant positions; • competency gaps; and • project-related issues, including risk manage- ment.

Spending too much time up front will often dilute the solution and take time and attention away from solving the basic business problems.

Lisa Van Capelle is the vice president of global hu- man resources for Quintiles, a fully integrated bio- pharmaceutical services company offering clinical, commercial, consulting, and capital solutions world- wide. Quintiles has more than 25,000 profession- als, generates about $5 billion in revenues, and does business in more than 60 countries. During her 25- year career. Van Capelle has worked for a number of organizations and has been involved in a wide vari- ety of restructurings, from stand-alone initiatives to those emanating from M&A integrations. Her expe- rience suggests the following issues are most critical to success:

• Understand—It is important to understand how the management decision regarding restructuring gets made and how it will affect people.

• Speed—The longer the process lingers, the worse the results.

• Transparency—This is essential in both the pro- cess used for restructuring and the communica- tions that cascade from the initiative.

Keep Business Process Work Simple Those who have worked with business processes will likely recognize these terms: optimization, reengi- neering. Lean, Lean Six Sigma, and Total Quality Management. In the context of a restructuring, how- ever, the subject of business processes can hurt as much as it can help.

As management teams are often not that interested in process flow diagrams, going into too much detail with that level can be dan- gerous.

As discussed earlier, the final organization design should be driven by the business strategy and not by the organization's processes. Spending too much time up front will often dilute the solution and take time and attention away from solving the basic business problems. The important thing to bear in mind is that business process analysis boils down to answering two questions:

• What kind of work should the organization be doing?

• How should the work be done?

These questions require different skills and per- spective to answer successfully.

The first question is tightly linked with strategy, while the second is linked with execution. Answering them with a fair degree of certainty, however, does not require think- ing about flow diagrams, cycle times, or even who is going to do what.

To begin answering the first question, it is worth building an inventory of the business processes that the organization under scope is currently involved in. These processes can then be divided into:

• Operating processes—those in which the work that is performed directly affects the customer and/or the finished product or service.

• Management processes—the mechanisms used to govern and communicate within and across orga- nizational boundaries, including budgeting, per- formance management, reporting, and formal communication processes.

Global Business and Organizational Excellence DOI:

10.1002/joe January/February 2013 29 A useful tool to accelerate this inventory process, the APQG Process Glassification Framework (PGF), can be downloaded free of charge at http://virww .apqc.org/process-classification-framework.

After the inventory has been completed, each process should be categorized, depending on its relevance to the business strategy, as "strategy critical," "en- abler," "mandatory," and "stop doing!" The output of this exercise will help clearly define what the new organization needs to do well in order to meet its objectives. Gategorizing also serves to double-check processes against strategy and design criteria and helps keep the focus on the most valuable topics.

For their restructuring efforts to be successful, lead- ers must ensure that the new scope of work is clear and that it is tightly linked to their business strat- egy before they consider making any changes to the organization.

As for the second question about how to get the work done, a smart first step is to estimate how much time key resources will have to spend on pro- cess analysis and design work. Having this informa- tion in hand will help in planning the restructuring approach.

Depending on the available documentation of the "as-is" situation and the restructuring project's timeline, process analysis and design work almost always results in a bottleneck—not just in the level of detail that can be explored, but also in the num- ber of processes that can be tackled. Therefore, it is wise to start with the business processes that are critical to the organization's strategy before moving on to the rest. In terms of methodology, this is where process redesign methods, such as Lean Six Sigma, can be leveraged to define requirements, measure and analyze process characteristics, and design how work will be done in the future.

Bringing out process design methodology too early is a mistake that is commonly made. Without taking a holistic look at the organization, jumping into pro- cess design can often limit the potential impact of the restructuring. For example, if it takes too much time for an organization to launch new products, it might try to fix the problem by immediately jumping into a process redesign initiative. The problem with this approach is that it risks overlooking the variables outside the current product launch process that may be causing the performance issues.

A smart first step is to estimate how much time key resources will have to spend on process analysis and design work. Having this information in hand will help in planning the restructuring approach.

Collect Data and Use It Joel Goeltl is an integration manager for a $125 bil- lion hardware and software corporation headquar- tered in the United States. Since his focus is primarily on postmerger integration, Goeltl has observed and led many different organization restructurings. He believes that "leaders must have an open mind re- garding the benchmarking data and the information they collect from customers. Leaders must realize they don't have a corner on the market for infor- . mation/experience and be able to use that data to inform their decision making on the most appro- priate structure to achieve the tangible restructuring outcomes." One of the toughest hurdles to overcome for some organizations is a culture that discounts anything that was not invented within it. In some instances, the root cause of a problem is a cadre of long-tenured workers who cannot imagine any other way of do- ing something. In other cases, it is an outgrowth of arrogance born of many years of success.

Understanding the voice of the customer requires collecting data from appropriate stakeholders— such as outside organizations with similar 30 January/February 2013 001:

10.1002/joe Global Business and Organizational Excellence structures, internal customers, and staff witbin tbe scope of tbe redesign efforts—to understand customer requirements, strengths, weaknesses, and performance gaps and to solicit suggestions for improvement and alternative ways of structuring.

Tbe data can be collected tbrougb a variety of means, including organization design structures of related functionality sold by professional associa- tions and trade groups, interviews witb internal cus- tomers and staff wbo are witbin tbe scope of tbe redesign, and primary researcb via bencbmarking.

Data also can be collected via a document review (of tbe financial cost breakdowns, performance reports, etc.), focus groups, and observation. Tbe value of collecting voice of tbe customer data is tbat it identifies:

Judy Ingalls is tbe director of executive development for Staples, a $25 billion office supply retailer, witb more tban 2,000 stores in 26 countries. Her career bas spanned jobs in external consulting, corporate organization development, and leadersbip develop- ment. Her views on restructuring bave been sbaped by ber own experiences as an employee affected by a restructuring and as a member of restructuring de- sign teams. "I bave never seen an organization com- plete an organization restructuring quickly enough," sbe said. "If a restructuring initiative drags on, tbe stress on employees rises to a very bigb level and tbe organization will become frozen. Tbe use of teams and, generally, stakebolder engagement in tbe pro- cess can move tbe process along wbile addressing tbe myriad cbange issues".

• tbe Strengtbs of tbe current structure so tbey are not lost in any future restructuring, • specific and actionable ideas for restructuring tbe current structure, • specific performance gaps and tbeir root cause, and • outsourcing opportunities.

When it is important to move quickly, some steps in the restructuring process can be skipped, but it is essential to stick to some core steps to ensure sound business decisions.

Consider the Various Options Tbere is no "one size fits all" solution to running a restructuring project. If a business is tanking, its leaders probably are not going to organize a tbree- day off-site meeting for middle managers to discuss improvement tecbniques. Conversely, if a business bas just posted record profits and wants to tweak its manufacturing capabilities, its leaders may decide to do precisely tbat. Different types of restructuring work proceed at different paces. Wben it is impor- tant to move quickly, some steps in tbe restructuring process can be skipped, but it is essential to stick to some core steps to ensure sound business decisions.

Real-world experience sbows tbat Vilfredo Pareto was rigbt wben be stated tbat a great majority of ef- fects (80 percent) are produced by a few key causes (20 percent).

In tbe numerous restructurings tbat Joel Coeltl bas been involved in, be bas used and observed a vari- ety of approacbes from a top-down/centralized re- structuring process to one relying beavily on design teams.

Altbougb no one approach is always best, be believes tbat design teams can enbance stakebolder engagement, facilitate communications, keep peo- ple focused, and, most important, increase tbe likeli- bood of success.

According to Neil Metviner of OSG Billing, "tbe worst tbing a senior team can do is to bave an end structure already in mind and embark on a process to collect data and restructure tbe or- ganization. Tbis quickly becomes disingenuous and will kill management credibility." Most senior leaders can recognize wben tbings in tbeir organization are not working tbe way tbey Global Business and Organizational Excellence DOI:

10.1002/joe January/February 2013 31 should be.

Having said that, most of them are not always 100 percent sure of what they need to change to make things better.

In many instances, leaders have closed themselves in a room with their lieu- tenants for a few hours to begin redrawing the orga- nizational structure. More often than not, however, the new structure they come up with seldom solves the operating problems they face.

In general, using a design team composed of six to twelve members who will then share the experi- ence of moving through the restructuring approach makes the most sense. Here are some key reasons why design teams work:

• Significantly better design work comes from a group of people with different jobs and perspec- tives on the business.

• When team members go through the design pro- cess together, their decisions are made as a group and, thus, they become aligned with the generated outcome.

• The members of the design team can significantly help promote the adoption of the new organiza- tion.

Ideally, a restructuring design team should include senior managers, middle managers, and operational specialists. They should all know how the business works, understand the organization's strategy, and have a good grasp of operational details.

• Craft a structured and credible case for change using the output from the various design steps.

• Build engagement among her direct reports and others for the deployment of the new organiza- tion.

Be Aware of the Trade-Off Senior leaders need to think two or three steps past the implementation and clearly understand in what direction the new organization design is going to take them. Using design criteria and design metrics is essential in getting a sense of where the organization will find itself a few months down the road. In a fac- tory, for example, a campaign to improve machine up-time may end up reducing flexibility, increasing the product volume of production runs, accumulat- ing finished goods inventories, and increasing deliv- ery time. Such collateral damage can be minimized and even prevented by introducing additional com- ponents in the design, such as process tweaks, liaison roles, and lateral processes. The best practice here is for leaders to carefully pick their battles.

Rather than try to sell her preferred structure top- down, the CIO of an international communication and high-tech company delegated the actual restruc- turing work to a design team made up of her direct reports, middle managers, and a few top operational people. By working closely with the team members for six weeks during their design process, she was able to:

• Generate a detailed organization design com- pletely aligned with her strategy.

It helps to play devil's advocate by listing as many negative aspects of a design as well as the positive ones.

This will help lead to good decision making.

Sugar-coating the work does not make sense, be- cause if the drawbacks of a particular design go un- mentioned, the team may end up starting all over again a few months later.

The literature on orga- nization design, which explains the pros and cons of the different types of structures (functional, divi- sional, process, geographical, matrix, network, etc.), is a good source of help.

32 January/Eebruary 2013 DOI:

10.1002/joe Global Business and Organizational Excellence When organizational leaders are working with a de- sign team, they should encourage the team members to challenge each other with the question "What are we trading off?" The more everyone understands the limitations of the proposed design, the greater the probability that they have gotten it right and it will make the impact they are hoping to achieve.

Keep the Focus on the People Internal and external stakeholders will need help to adjust to the changes brought on by restructuring.

Therefore, leaders would do well to broach the sub- ject of change management at the start of the project rather than at the tail end of it. Organizations that begin thinking about the impact on people early set themselves up for success.

Judy Ingalls of Staples believes that "HR's role is to help employees get through the organization restructuring in as whole a manner as possible.

This includes helping manage emotional fall-out and helping leaders with organization alignment, partic- ularly around goals, roles, and performance expec- tations." Leaders would do well to broach the subject of change management at the start of the project rather than at the tail end of it.

the restructuring. Human Resources needs to bring common sense to a difficult situation and help en- sure the business leaders own the initiative. HR must provide cutting edge change management support to leaders, and ensure key HR practices like per- formance management, talent management, and the reward systems closely support the new structure." To keep their focus on their people, leaders must first identify all the effects that the restructuring will have on the following HR/people practices:

• rewards and recognition, • performance measures, • performance management, • competency gap analysis/training, • employee selection, • talent retention, • career progression, and • talent management.

Second, they need to address change management issues, which include but are not limited to:

manpower redeployment strategy, human capital planning, risk management, stakeholder assessment/commitment planning, communications, and organization alignment.

Lisa Van Capelle's introduction to restructuring oc- curred during her first day on the job right after graduating from college. When she arrived to start work, she found her area almost completely dark, save for the light that was on in the department head's office.

A restructuring had just occurred, and it had a particular impact on the management de- velopment function of the bank that she had just joined. According to Van Capelle, "I learned very early in my career how leadership decisions impact people. Leaders must understand the decision from a business perspective and the expected outcomes of Avoid Declaring Victory Prematurely Most Fortune 1000 companies are simultaneously involved in many strategic initiatives that divert at- tention and resources. Coupled with publicly traded companies' preoccupation with the current quarter's financiáis, this often results in LADD—leadership attention deficit disorder. The net result is a huge temptation to move on to the next initiative when only the macro design has been completed. Unfor- tunately, some organizations have a track record of doing so. The downstream ramifications of declar- ing victory too soon are:

Global Business and Organizational Excellence DOI: 10.1002/joe January/February 2013 33 Exhibit 3. Summary of Sources/Causes of Problems Interdependent Units Data Stream Team Sales IT Risk and Compliance Finance Historic Problems Slow response Quality problems Structural Root Causes Different reporting relationships, different priorities Lack of standard operating procedures Lack of rcle clarity Possible Fixes Align and calibrate goals at unit and individual levels Fix decision rights Establish policies • a lack of role/responsibility clarity; • unclear decision rights—who has the final author- ity to make each decision; • processes that are not aligned with the new struc- ture; • technology architecture (data, applications, hard- ware) that is not aligned to the new structure; and • unresolved conflict.

In such an environment, interdependent functions do not work well together. Using a baseball analogy, the situation could be compared to what happens when the right fielder and the center fielder do not adequately communicate with each other: The ball that is hit out to them will probably fall in between them as they each mistakenly think that the other will take charge of it.

Organizations need to set up methods of coordination—that is, formal methods for getting two interdependent units to work together effec- tively. These are some principles used to assist in determining these methods:

• Different types of interdependence require differ- ent methods of coordination.

• The objective is to design each group so that it receives all the information it needs to perform and work effectively with other interdependent groups.

• Decisions about methods of coordination must be made at each level in the organization.

There are five steps to crafting the most appropriate method of coordination:

For each unit, identify the other groups with which it is interdependent. Also identify the spe- cific information that each group needs to effec- tively work together.

Identify the historical sources and causes of performance problems between interdependent functions. Isolate the performance problems that are structurally related and identify specific and actionable methods co facilitate the hand-offs be- tween each function. Organizational leaders can collect this data by using a simple worksheet sim- ilar to the one shown in Exhibit 3.

Understand how activities or processes are linked using an RCI chart. Such a chart identifies who is responsible for completing each activity or making each key decision ("R"), who must be consulted ("C"), and who must be informed ("I"). Information for an RCI chart can be generated by involving people who have been involved in the process, activity, or decision via:

structured workshops to determine R, C, and I; updated process documentation; and 34 January/February 2013 DOI: 10.1002/joe Global 8usiness and Organizational Excellence Exhibit 4.

Tool for Selecting Types of Integrating Methods Rules, procedures Formal hierarchy Targets/goals Networks Liaison roles Teams Lateral processes Integrator roles Methods of Coordination Importance i \ 1( ) Complexity i \ Hi gh Task Uncertainty é Hi Interdependence Poo i Seqi > Reci led lential Drocal • a survey submitted to a group whose feedback is used to determine R, G, and I.

Once the RGI chart is created, it can be used to plot the processes, activities, and decisions of the function and/or role in question.

Use the tool shown in Exhibit 4 to determine the coordinating methods (also referred to as inte- grating methods) that must be incorporated into the future state design. Users can select the most appropriate type of mechanism by rating each unit's importance, complexity, task uncertainty, and type of interdependence. The most common methods are:

• Rules, programs, and procedures: Develop standard operating procedures, policies, and practices that specify the desired behaviors, govern decision making, and/or limit discre- tion in advance.

• Formal hierarchy: Appoint a common man- ager to oversee two different units.

• Targets/goals: Specify outputs, goals, or tar- gets to coordinate interdependent groups.

Networks: Set up formal or informal vehi- cles for encouraging knowledge sharing across functions, businesses, and geographies. There are six common ways to foster networks:

co-location, communities of practice (groups of employees that share common organi- zational interests), annual meetings/retreats, training programs, rotational assignments, and technology/e-coordination (for example, chat groups. Intranet electronic mail, Lotus Notes, Microsoft Exchange, instant messag- ing, group calendar management, and shared databases).

Liaison roles: Assign an individual to serve as a source of information and expertise for a work group. These individuals rarely have formal authority, and their position is usually part-time.

Teams:

These can include issue teams, cross- functional teams, task forces, and self-directed work groups. Whether they are permanent or ad-hoc teams, they are valuable in pooling Global Business and Organizational Excellence DOI: 10.1002/ioe January/February 2013 35 expertise, breaking down functional silos, and coordinating efforts of interdependent units.

• Lateral processes: Tbese are tbe tbree to five processes tbat are critical to tbe mission and cut across multiple functions witbin tbe orga- nization. Tbese processes sbould be mapped and include metrics at tbe end of tbe process and at eacb point wbere tbe process crosses functions and wbere performance problems bistorically bave occurred.

• Integrator roles: Tbere are tbree common types of integrator roles: (1) tbe GM, an indi- vidual wbo is responsible for taking a general management point of view in belping multi- ple work groups accomplisb a joint task; (2) coordinators, sucb as a project, brand, pro- gram, or account manager; and (3) boundary spanning, for example, a cbief learning offi- cer. Tbese individuals ensure tbat tbe work of multiple units is aligned witb tbe business strategy.

Get an Early Handle on IT Systems Tbere is notbing more irritating tban successfully moving tbrougb design work only to find out tbat "tbat is not bow it works in tbe system." Knowing tbe functional strengtbs and pitfalls of tbe tecbnol- ogy associated witb tbe organization under scope is critical to eventual design decisions. Here are five systems-oriented questions to address during a re- structuring project:

• Is someone from systems on tbe restructuring project team? (If not, wby not?) • Will current systems be retained to support tbe new organization?

• If tbe goal is to cbange tbe way work gets done, bow flexible and configurable are tbe core sys- tems?

• If cbanges are made to tbe system(s), wbat will be tbe downstream effects on otber processes?

• Sbould vendors be consulted on new versions of tbe software tbat is currently in use?

Ensuring Maximum Gain With Less Pain As customer preferences and markets continue to cbange at alarmingly faster rates, an organization's ability to continuously define new business strate- gies and transform tbem into action is essential to maintaining its position in tbe marketplace. As pre- viously mentioned, bowever, tbe leading MBA pro- grams currently offer little guidance on tbe subject of organization restructuring and even less on bow to go about executing it. Tbat situation sbould cbange as tbe ability to lead a restructuring becomes rec- ognized as one of tbe critical skill sets for senior executives of tbe future.

Today, corporations are investing in Centers of Expertise. Staffed by full-time employees, tbey are cbarged witb building long-term partnersbips witb external service providers and delivering in-bouse capability-building programs to respond to tbe in- creasing demand for organization design and re- structuring.

No restructuring is ever easy. But witb a firm grasp of a few concepts, a structured approacb, and guid- ance from establisbed best practices, organizational leaders can make tbe process less painful tban antic- ipated and infinitely more rewarding.

References Recardo, R. J. (2008). Organization design: A practical methodology and toolkit. Amherst, MA: HRD Press.

Rumelt, R. (2011). Good strategy/bad strategy: The differ- ence and why it matters. New York, NY: Crown Business.

Ronald J. Recardo is managing partner of The Catalyst Con- sulting Group, LLC, a professional services company based in Connecticut that provides growth, performance improve- ment, and organization effectiveness services to its clients.

He has more than 30 years of experience as an executive at Johnson & Johnson and Fidelity Investments, and has also worked for Arthur Andersen, where he was involved in strat- egy and change management projects. Recardo is the author of six books and more than 40 articles.

He can be reached at (860) 518-3S83 or [email protected].

36 January/February 2013 DOI: 10.1002/joe Global Business and Organizational Excellence Kleigh Heather is the director of commercial organization at ArcelorMittal Dofasco as a cold rolled product engineer development at Philip Morris International in Lausanne, in Canada. In 2001, he moved to Paris, France, where he Switzerland. He works with sales and marketing organiza- worked for nine years at Accenture as a management consult- tions worldwide, helping them improve through process in- ing executive involved in strategy, process design, and restruc- novation, organization structure, people capabilities, and per- turing projects.

He can be reached at [email protected].

formance measurement methods. Heather began his career Global Business and Organizational Excellence DOI: 10.1002/joe January/Eebruary 2013 37 Copyright of Global Business & Organizational Excellence is the property of John Wiley & Sons, Inc. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.