Report: Why companies must keep reorganizing

Companies are now being forced to constantly reorganize in order to stay competitive. A new report from The Conference Board pinpoints the implications of executing a new organization design, and the telltale signs that indicate organization problems. The report is based on discussions from recent Conference Board conferences and workshops, with senior executives from a wide variety of industries.

“Executives in many companies have come to accept a new reality,” says author Robert Kramer, principal researcher, The Conference Board. “Since organizations now experience constant change – driven by today’s global and hyper-competitive environment – they need to build an internal design capability to reorganize on an almost continuous basis. To play this vital role, managers and HR professionals must develop a more robust, holistic definition of organization design and have access to a new set of tools.”

The report identifies key warning signs that suggest problems in corporate organization design:

• A disconnect between the application of the company’s resources and the work that is done and business outcomes (misalignment of structure to strategy).
• Significant disagreement regarding the company strategy and how it is executed.
• A steady increase in bureaucracy, cost structure, etc.
• Excessive layers of management.
• Investments in capital are made without corresponding investments in people.
• An excessive focus on internal company issues.
• Absence of employee engagement.
• Organizational inability to change to meet new strategic or operating needs.
• No set process for continuous improvement.
• Key stakeholder requirements are unmet.

Other suggestions to improve organization design capability:

• Become competent in organization design. Since organization design is a constant (requiring perpetual redesign), companies that do it well make it a core competency for their line managers.
• Encourage dialogue regarding organization design among all stakeholders so they understand how the elements of an aligned, flexible design can improve the performance of organizations, teams and individuals.
• Fix the right problem. Careful diagnosis of issues leads to good design recommendations.
• Select leaders with the skills, attitudes and competencies required to operate effectively within a new organization design.
• Resist the temptation to introduce organizational practices used by others into your company. The alignment of many design choices has greater impact on an organization’s success than a handful of “best in class” but misaligned choices. What other companies do informs – not necessarily answers – how management should resolve a design issue.

The Conference Board creates and disseminates knowledge about management and the marketplace to help businesses strengthen their performance and better serve society. Working as a global independent membership organization in the public interest, The Conference Board conducts conferences, makes forecasts and assesses trends, publishes information and analysis, and brings executives together to learn from one another. The Conference Board is a not-for-profit organization and holds 501(c)(3) tax-exempt status in the United States. To learn more, visit www.conference-board.org.