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June 23, 2009

Reorganizations That Last

Four out of five organizations have gone through some type of redesign initiative over the past 12 months. This may not be big news since during the recession, many companies were quick to undertake reorganizations in order to reduce costs, improve efficiencies and increase the quality of service. However, you may be surprised to learn that more than half of these organizations expect to go through another major redesign over the next 12 months. Why? While companies have had relative success in hitting their cost cutting targets, the results might be masking a significant problem that’s growing in the organization, and threatens to undermine overall organizational outcomes in the long termthe cost to employee performance as a result of these redesign initiatives.

Over the past year, the Corporate Leadership Council (CLC), a program of the Corporate Executive Board has interviewed more than 260 organizations around the world about more than 400 redesign initiatives they’ve undergone over the past 18 months. While 90 percent of those organizations reported hitting the cost-cutting targets after one year, only 60 percent hit the employee performance targets for their redesign initiatives. Many of these redesign efforts resulted in a work environment with unclear decision-making authority, reduced collaboration or poor alignment between an employee’s interest and their new job. To address these challenges and improve employee performance, most companies have focused on change management activities such as improved communication or more coordinated implementation planning and decision making after a reorganization.

Certainly these are important activities yet, according to CLC analysis, they are not the real differentiators in improving employee performance. In fact, the companies that have been successful in not only achieving their cost-cutting goals but also their employee performance targets, have chosen to focus on two additional areas which can significantly impact the overall success of a company’s redesign efforts: defining workflows and monitoring the success of organizational design.

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