Reorgs are common for a reason. They’re difficult to get right

Reorgs are common for a reason. They're difficult to get right
Courtesy geralt

Corporate reorganizations are a fact of life. Reorganizations come around for many different reasons:

  • A turbulent market
  • A new leadership team
  • A changing strategy
  • A revamped Wall Street narrative

I heard a funny quote about corporate reorganizations once. “If you don’t like the reorganization, don’t worry. Just wait 18 months for the next one.” Sounds about right.

Over time, I have found two significant obstacles to a successful reorganization:

  1. A lack of trust between teams.
  2. A lack of clarity around new roles and responsibilities.

Lack of trust leads to unnecessary redundancy

Let’s start with the lack of trust. Leaders tout almost every reorganization as a way to make the business more efficient. You can improve efficiency by eliminating wasted effort. The wasted effort might be redundant, or it might not bring value in the first place.

In an efficient organization structure, you have as little redundancy as possible. You probably don’t eliminate redundancy entirely. There are some business critical processes for which you’d like to have some degree of backup. Still, you keep redundancy to a minimum.

In order to achieve the efficiency gains, you need every group to trust that every other group is doing its job. It’s the New England Patriots approach to football, under Bill Belichick. Even though the advantage is obvious, it’s still super difficult for human beings to trust each other.

The kinds of corporate reorganizations we’re talking about occur at large companies. As you move down the org chart, you find situations where the leaders of cooperating teams are total strangers to each other. Yes, you can build new working relationships over time. But to harvest the immediate value from a reorg, you need total strangers to trust each other quickly.

Trust is hard to come by in any capacity, let alone this one. People at the same level of the organization are competing for the same promotions. They’re competing for bonus dollars out of the same pool. And yet they’re supposed to trust each other, that they’ll keep each other’s best interests in mind.

One source of friction is the belief that if someone else fails, you’ll get the blame. The most visible point of failure is rarely the root cause. Even though another group let you down, you were holding the ball when the failure surfaced.

It takes a lot of team- and trust-building to overcome these hurdles. The price of a lack of trust is added redundancy. If my team and I don’t believe you and your team are reliable, then we’ll build out some infrastructure to cover your responsibilities. It’s classic control freak behavior. And managers trying to climb the corporate ladder through reorganizations tend to be control freaks.

Lack of clarity leads to guessing and conflict

Let’s move to the second obstacle to a successful reorganization: a lack of clarity around roles and responsibilities. The simplest reorg imaginable is where you keep the same titles, but you shuffle them around, connecting them in different ways, moving people from one bucket to another. However, almost every actual reorg involves creating new roles, often from merging or splitting previous roles.

The problem is, it’s difficult to be crystal clear about what exactly each new role is, and what it isn’t. You want to make sure none of the responsibilities slip through the cracks. The challenge is two-fold. First, people want to retain the responsibilities from their old role that they enjoy the most or give them the most prestige. Second, people want to avoid the new responsibilities that are the most tedious or least visible.

It’s not that people are trying to cheat or game the system. It’s a natural response to uncertainty. Uncertainty creates a space where a bunch of competing narratives are equally valid. Without an arbiter constantly squashing the spurious stories, confusion and conflict emerge.

Like with creating trust, creating certainty and clarity is super difficult. It’s tough to imagine all the potential sources of ambiguity in a new org structure. It’s tough to know which groups will fight over which responsibilities.

Reorgs shine the spotlight on Human Resources

For all of these reasons, I think Human Resources is the least appreciated, and most underutilized, group in any company. We have tons of brilliant people walking the planet. We all have something meaningful to contribute.

I don’t think raw talent is an important competitive advantage for any company. I think successful companies are more likely to encourage their people to make their greatest contributions. And that’s pretty much a game of psychology.

Conflict is rooted in the human condition. All groups of people, everywhere on the planet, for all time, have struggled to make peace. Those dynamics don’t vanish inside a company. All companies have tribes of people within them. These tribes will battle each other, in the absence of an incentive to align. Leadership absolutely has to provide that incentive.

Sure, it’s great that the Human Resources team knows how to recruit people. They know how to onboard them. They know how to manage different compensation structures for different teams. They know how to identify and develop the most ambitious employees.

What they spend little time doing is mediating the conflict that keeps the company from reaching its potential. It’s not their fault. It’s a Herculean task that’s overlooked. And I’m not talking about mediation of acute conflicts, the improper behavior problems. I’m talking about the chronic conflict, where two teams don’t trust each other or own each other’s success.

It’s a problem with deep psychological roots. Again, it’s fundamental to the human condition. No company nails this, but some get closer to figuring it out than others. It’s a sustainable advantage for small companies, since they have fewer people and fewer opportunities for confusion and distrust. It’s one reason you see sweeping reorg after sweeping reorg at large companies, but nothing similar at small companies.

In a sense, the solution is obvious: leadership. The preferred outcome, trust plus clarity, is difficult to achieve, in part because it’s difficult to measure. We can measure spans and layers. It’s an awesome opportunity for you to contribute. If you can harness the initiative to battle distrust and ambiguity wherever you see them, you’ll become a hero at work. And maybe you can slow the reorg train in the process.

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