Are restructures a waste of time?

February 10, 2012
The Age

Twists and turns … company shake-ups cause plenty of angst.

Vodafone’s doing it. So is Westpac. Even government departments such as Queensland Health have started to fiddle with their organisational charts. It seems the restructure is back in vogue, but what’s the point? And is it worth the angst it causes?

While reading Strategic Management recently, a book by Graham Hubbard and Paul Beamish, I came across this intriguing sentence: “There is little evidence to support the view that [restructuring] is a particularly valuable task.”

Referring to a study published in the Annual Review of Sociology, the authors state “the benefits of restructuring are illusory and rarely achieved.”

And this comes from people who’ve spent decades working in the field. Graham Hubbard, for example, is a former professor of strategic management at the University of Adelaide. He has authored and co-authored 16 books on the topic. I asked him to elaborate on his view that restructures are “overrated”.

“Every time I see an organisation announce it is restructuring, I shudder,” he tells me. “It is the wrong place to start.”

The right place to start, he suggests, is on strategy, leadership, people, systems and culture. You know, the more difficult stuff. “Unless you have the right people in the right boxes, and they are well led, you won’t get much change in performance from restructuring per se.”

Several years ago, research conducted by consulting firm McKinsey supported this perspective. Their findings showed that restructured organisations improved their performance but at a rate that was slower than their unstructured competitors.

According to Hubbard, the ineffectiveness of restructures can also be seen in the political space. In December, Julia Gillard reshuffled her cabinet at great cost and inconvenience, but the positive outcomes are yet to be seen. It’s not dissimilar in the corporate world, where many executives think success comes from a reshuffle – or a restructure – than from better leadership.

In their immensely readable book Reframing Organisations, leadership professors Lee Bolman and Terrence Deal reach a similar conclusion that successful restructures are “few in number compared to disasters”. Regardless, they believe every organisation is forced to restructure sooner or later, and there are four main pressures that compel them to do so.

The environment shifts: In Australia, we see this in the telecommunications industry. The market is now saturated with competitors and there are more mobile phones than people. Plus, the government is introducing the NBN, which further alters the environment.

Technology changes: The music industry – and now the book industry as well – are prime examples of the ways in which technology and software (in this case, e-readers and iTunes) have forced publishers to change how they operate.

Organisations grow: This is especially common among SMEs. They start off flexibly with fluid processes and reporting lines, but as the business expands and staff numbers increase, entrepreneurs realise they need to put in place a formal structure to keep the business functioning efficiently.

Leadership changes: Occasionally, the business doesn’t need a restructure at all – everything is going just fine. But then a new CEO comes on board, and that means it’s time for him (or her – but usually, sadly, it’s him) to stamp his authority by changing the corporate hierarchy.

As Hubbard and Beamish write in their book: “It is not surprising … that many restructuring efforts have little effect on the running of the organisation and bring little joy to the restructured.”
‘Little joy’ might be an understatement. In an analysis of American companies, research firm Towers Watson found that employees of restructured organisations were 50 per cent more likely to have low levels of engagement. In the end, no one’s happy – except for the consultants hired to manage the project

Read more: http://www.theage.com.au/small-business/blogs/work-in-progress/are-restructures-a-waste-of-time-20120209-1rzf0.html#ixzz1lvzYifFK