R

eorganization is a powerful tool for changing the trajectory of a business and enhancing its performance. But keep in mind that the business world of the early 21st century is radically different from that of the early 20th century, in two key respects.

First, organizations now have to operate in a vastly more complex environment — one of globalization, hyper-competition, revolutionary technologies and elaborate regulation. Second, in most companies the nature of work has changed: from algorithmic work — that is, clerical or manual labor — to knowledge or heuristic work.

In a survey conducted by The Boston Consulting Group, almost 80 percent of respondent companies reported undergoing reorganization exercise, about half of which is a large-scale, enterprise-wide reorganization initiative.

However, reorganization efforts all too often disappoint. Survey respondents rated fewer than half of the reorganization efforts as successful. The underlying reason for such a low success rate: all too often, the companies’ leaders relied on organizational frameworks that have become outmoded and ineffective in today’s business environment.

If reorganization efforts continue to overlook the two aforementioned major changes in the world of work, they will continue to fail. A new approach is needed, one that is better suited to the realities of the world in which companies now operate.

Called Smart Design, the new approach to redesigning an organization, which is far more appropriate for the new business environment, has behavior at its core. It involves identifying and explaining the current behaviors of the workforce, defining the desired behaviors — those that would improve company performance — and generating the new behaviors by creating contexts that are conducive to them.

Smart Design approach involves three main steps — the why, what, and how. The “why” is defining the purpose of the reorganization. The “what” is determining the behaviors that will support that purpose and design the organization in such a way as to promote those behaviors, using a broad range of design elements. While the “how” is making it happen.

By redesigning the organization, your company can resolve many stubborn issues of strategy and execution.

But before embarking on the redesign, make sure to identify clearly the company’s current performance shortfall (that is, the gap between the company’s current performance and its target performance) and hence the precise aims of the reorganization effort — with regard to competitive advantage, strategic priorities, or organizational pain points.

In the second step, define the behaviors required to achieve the purpose. That will, in turn, lead to a set of design principles to be used for guidance as you shape the four key design elements, which are the building blocks for producing the desired behaviors. These elements are organizational structure, roles and responsibilities, individual talent, and organizational enablers.

Note that they affect one another in many ways, and they act in combination to alter the context for individuals and encourage behaviors that drive high performance. So, instead of dealing with each of the four elements independently, you need to consider them jointly and align them.

Reorganization is undertaken not for its own sake but in order to successfully execute strategy and boost performance (in each case, by modifying the behavior of the workforce). So the implementation phase is crucial. It has two main aspects: establishing the right context throughout and enhancing the capabilities of leaders and top talent.

And it can be accomplished most efficiently through a process with three features: cascaded design, rigorous program management with multilayered communication, and capability building.

Cascaded design, or “layer-by-layer, team-by-team design,” involves role chartering by each employee successively down the organization, in consultation with his or her colleagues and line manager. Rigorous program management involves creating, tracking, and course correcting a portfolio of change initiatives.

Capability building, or enablement, drives performance and hence value. Organization design provides a unique opportunity for companies to boost capabilities in this way, provided that the company’s leaders and top talent learn the necessary skills: first, how to execute the organization redesign smoothly, then how to lead within the new organizational context and help their subordinates to adapt, and then how to drive business objectives and value in their new roles.

To ensure sustainable outcomes in each of these requisites, companies often benefit from a tailor-made leadership- and talent-development program.

Smart Design is premised on the recognition that company performance is a function of employee behavior. So to improve performance, the trick is to modify behaviors appropriately.

And to do that, you must first study the existing behaviors — the good, the bad, and the absent — and then comply with the other success factors as follow: Align design with strategy; Clarify roles and responsibilities; Deploy the right leaders and capabilities; Design layer by layer to set the right context; Execute optimally by minimizing risk factors; and Do not wait for a crisis.

A conscientious approach to reorganization can make a striking difference to its chances of success.

Successful reorganization is often the most promising route for companies to regain their former sparkle, consolidate their strengths, or gain a competitive advantage. But taking that route requires steady nerves and bold measures. Many corporate executives are sufficiently bold to authorize a thoroughgoing organization redesign, but not to break with the conventional approaches to it.

The trouble is, the conventional approach has produced uninspiring results in recent years, and in many cases has actually made matters worse. It is simply inadequate in the present-day business environment: the circumstances have changed, and the approach needs to change as well. To drive productive behaviors, you must create broader and more conducive contexts for them and then implant the new contexts, layer by layer, deeply into the organization.

Smart Design is a comprehensive end-to-end approach that is specifically adapted to the new circumstances and precision-engineered for boosting performance and engagement.

It has produced outstanding results with minimal disruption: companies applying Smart Design have seen a revival of employee motivation and engagement and a surge in company performance. If reorganization initiatives often offer the best hope for troubled companies, Smart Design offers the best hope for reorganization initiatives.
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The writer is a senior partner & managing director for The Boston Consulting Group (BCG), in the Jakarta office. The views expressed are his own.