Book review: ‘Reorg: How to Get it Right’

Inept reorganisations cost dear, say Stephen Heidari-Robinson and Suzanne Heywood
Chain reaction: once the business case for a reorganisation is clear, the next stage is to persuade stakeholders to buy into it, beginning with employees © iStock

Listen to this article

00:00
00:00

We tend, noted the Roman writer Petronius, “to meet any new situation in life by reorganising; and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency and demoralisation”. Most people who have been through a reorganisation will recognise the sentiment.

As heads of consultancy McKinsey’s organisation practice, Stephen Heidari-Robinson and Suzanne Heywood have been involved in hundreds of reorganisations. They are inclined to agree with Petronius. “Over and over again we have seen the debilitating consequences of bad reorganisation processes that led either to poor designs or poor implementation,” they say. “Badly run reorgs cause massive human stress and cost shareholders value.”

Their response to these disasters is Reorg, a book that tries to distil the lessons of good reorganisation practice. At 256 pages, it is not a long book; as the authors point out, the principles are actually quite simple.

The first step is to determine whether reorganisation is needed at all. Unfortunately, reorganisation has become one of those things chief executives reach for when they cannot think of anything else to do, or in order to impose their authority. It is not uncommon for incoming chiefs to reorganise in order to “scent-mark” the business and make it clear who is boss.

This, say the authors, is a mistake. “Reorgs need a clear business rationale to be successful, rather than one leader’s desire to reshape the world in his or her image or a general feeling that things need to be shaken up.”

Once that clear business case is determined and goals for the reorganisation are set, then comes the next vital step: getting buy-in from stakeholders. That means all stakeholders, not just shareholders. In the authors’ view, the first and most important stakeholders to win over are the employees.

They describe two common blunders: the “wait and see” approach, when the leader tries to keep the reorganisation secret until all the details have been worked out and then spring it on employees as a surprise, and “ivory tower idealism”, where leaders try too hard to sell the idea and are perceived as inauthentic. It is important to communicate, but leaders must focus on telling staff what they need to hear, when they need to hear it, and on allaying their fears. Honesty and sincerity are key attributes.

Getting buy-in from employees is essential if any reorganisation is to succeed; failing to do so will result in the disillusionment that Petronius described. Once employees are persuaded, similar messages of reassurance must be sent to other stakeholders.

The groundwork having been laid, the authors then set out five steps for a successful reorganisation. First, be sure of the profit and loss. Be realistic about costs and risks, and about the timeframe. Second, understand the current weaknesses of the business; this is essential to a full understanding of risk. Third, choose from a range options; never have just one plan on the table. Fourth, “get the plumbing and wiring right”; that is, understand how the organisation really works and how best to implement the plan. And finally, monitor the reorganisation process closely and make adjustments if things seem to be going wrong.

It all sounds quite simple, but then as 19th-century Prussian general Carl von Clausewitz famously said, “everything in strategy is very simple, but not everything in strategy is very easy”. Doing what this book says will be a lot harder than reading it. And Reorg is an easy read, digestible on a short flight or train journey, and well written in plain English with not too much consultant-speak. Anyone contemplating a reorganisation would do well to read this book, if only to avoid the mistakes of the past.

Reorg: How to Get it Right, by Stephen Heidari-Robinson and Suzanne Heywood, Harvard Business Review Press, RRP£21.99/$32.00

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.