When Should You Reorganize Your Team?

I’ve lost count of the reorganizations I have enjoyed in my career. Through those experiences, I have acquired a specific perspective on what works and what doesn’t, and in what situations. This is relevant right now because I have just helped lead a major technology restructuring here at Beachbody, and I want to share the ins and outs (as much as possible) to both help other leaders and to send a clear signal about the company’s progress.

The question of what was done – what actions we’ve taken – is definitely interesting stuff and I will write about that in future posts. But before I get into that, the foundational questions are: When is it time to reorganize? How do you know?

I’m going to draw on my broader experience to cover this topic, not just Beachbody. Some of this pertains directly to our recent changes and some of it is earned from my countless trips through the reorganization blender as an employee, leader, investor and consultant.

I want to reorganize my team/company. Where do I start?

You may find yourself asking at some point “Is it time to reorganize?” The answer is “Nope, it’s probably not.”

The default position should be NOT to reorganize your company.

Here’s why:

• You will lose productivity in the transition: So much time, money and traction is lost in the process. When the team senses it is coming, uncertainty grips the company and slows productivity. Speculation about actions and impacts increasingly move to the front of everyone’s minds. We’ve all been there… you can’t avoid the “What’s going to happen to me?” And then, when the changes are made, additional traction is lost while people figure out the new way of doing things. All of this leads to a decrease in execution speed. Things grind to a halt when uncertainty enters the equation.
• Different isn’t usually better: Work is matrixed. There is no way around it. Organizations are messy in that there are operational divisions, work functions, product lines, geographies, etc. Any one of them can make sense as a primary organizational construct at any given time. But the truth is that, no matter what you base your org on, there will still have to be people on teams who don’t have formal reporting lines to each other. And therein lies the messiness. When you realign a matrix you will still be left with a matrix… just with different problems you are less familiar with. You can always imagine the grass to be greener, but it’s rarely true that the grass is green enough to justify the upheaval.
• Some talent will leave: Change causes people to reevaluate their situation. It’s human nature that stability is preferred over uncertainty. Every time someone’s day-job is affected, and particularly when there is a change in reporting relationship, it is both natural and healthy to ask yourself if this change is beneficial or if it’s time to try something else. As a leader, you want to avoid creating situations where this happens. Why? Because a certain percentage of the time people who would otherwise stay, decide to leave… and you don’t get to influence who goes and stays.

So, if there the default decision is to avoid changing things up, when is it time to reorganize? In my experience there are four key situations when it is worth incurring the three penalties above.

1. SCALE: Have you added (or lost?) a zero or two to your topline revenue? Are you expanding to global markets or replicating your business model out to new locations? Are you adding new lines of business to your current operations? Are you refocusing your business on a profitable core and reducing other exposure? These are all times when there is new dimension in a business, and it may require a different organizational structure.
2. DISRUPTION: Have your market conditions changed dramatically? Are your competitors gaining strength? Is your business impacted by advances in technology? External factors have a massive impact on the inner workings of a company. And there will always be change. Does this change require you to organize differently to innovate or respond? By the way, the difference between innovation and disruption is timing. Leaders innovate. Laggards are disrupted. Wouldn’t you prefer to stay ahead of your customers’ needs?
3. INTERNAL FRICTION: As mentioned above, there will always be messiness in organizational design. And given that there is messiness, there will also be friction. Friction occurs at the “seams” of a company where organizational lines meet. If not appropriately managed, this friction can cause slowness, ineffectiveness and even negativity within the teams. The good thing is that friction can be used for your (or your customers’) benefit. So look at your organization and determine if your customer benefits (competition to deliver value) or is harmed (infighting, disjointed experiences, etc) from the nature of your internal friction.
4. INFLEXIBILITY: Businesses need to move quickly. They need to serve their customers and generate profits in a very competitive world where is very little ability to build competitive advantage. I have come to believe that the only sustainable advantage is to solve problems for your customers and get to market quickly. Can your company mobilize for new opportunities? When you need to accelerate or change directions, what happens? Do you get action or alternatively do you get emotion and resistance? Frequently, inflexibility means that your org structure is not aligned to respond. And here’s the litmus test: If you need to accelerate, can you apply money to the problem and get results for your customers? If not, you may have a less-than-aligned organization. Do you have to talk to fifty people to make a small change? If so, you may not be aligned for execution.

The exciting thing about business and technology is that there is no single answer. It’s just like golf: there are infinite routes from the tee to the hole, and conditions change every day. There is no recipe for success… but there definitely are common mistakes. Keen observation, coupled with some pointers and some focused practice can work together to help you improve your game.

(Reposted from Gerry’s feed on LinkedIn)