Think before reorganising

The obsession with reorganisation in the private and public sector often fails to deliver sustained improvements. So says new research by the Chartered Institute of Personnel and Development (CIPD) who have launched the findings of a survey of 880 Chief Executives and HR Directors.

The research reinforces the need for organisations to develop an embedded capability for organisational design. It also highlights that people management and development professionals will need to have a leading role in the implementation of reorganisation.

The survey findings also reveal that people issues often get left out of reorganisations, with the predictable ill-effects of falling morale and lost employees. The results come against a backdrop where large UK companies are now undergoing major change about every three years, while more localised changes are even more frequent.

The survey, Organising for Success in the 21st century, was carried out by Richard Whittington, Professor of Strategy at the Said Business School on behalf of the Institute.

Key findings included:

• Nearly a half of reorganisations fail to achieve hoped for improvements
• Where there is no involvement of human resource professionals only a quarter of cases lead to improvement while the figure rises to around 40 percent when an HR professional is included on the steering group. 
• Those reorganisations that involve employees to a greater extent lead to better outcomes. Over 60% of respondents wish to see greater consultation with and training of employees in future reorganisations. 
• For future reorganisations, two thirds of respondents feel that employee consultation should be increased. This feeling was particularly widespread among those who had reported attitudinal and knowledge constraints at both a senior management and employee level. 
• Almost 90 per cent of reorganisations emphasise the use of project management techniques such as careful attention to budgets and planning, but only about 40 per cent allow for employee participation or training. 
• Improvement in employee related factors (e.g. employee morale, retention of key employees, knowledge sharing and organisational flexibility) is rarely 'very important'. In nearly two thirds of reorganisations employee related factors fail to be improved. 
• Employees only rarely have the opportunity to participate in decisions about the reorganisation. 
• About half of the chief executives indicated that employees participated in decisions about the new organisational design, while only a third of human resource professionals were of the same opinion. 
• Reorganisations are often associated with redundancies but they can also lead to the hiring of new employees. 
• Most reorganisations are shaped by the previous experiences of senior managers. External influences such as learning from other organisations are of limited importance.

The report shows that improving organisational design is not a one-off activity; rather, it is increasingly becoming an almost continuous process of adjustment and creation. It also explores how organisations move from one design to another, rather than which particular designs are adopted, the focus of most research.

Professor Richard Whittington said:, "It is clear that organising for success in the 21st century requires new ways of thinking about and managing reorganisations if they are to deliver sustained improvement for organisations.

"As the report shows, the human resource profession is already playing an important role in the process. Nevertheless, there is considerable scope for strengthening its role. By getting involved in the initial design, rather than waiting to pick up the pieces afterwards, people management and development professionals can make a major contribution. In particular they can improve the outcomes in terms of those employee-related factors that are crucial to success.

"Dupont is a an excellent example of the benefits of putting organisation design to the top of the corporate agenda when reorganising. When the company announced its reorganisation in February 2002, its stock price rose 12%, putting a valuation on the new organisation design of $7bn."