New study shows firms can reverse odds and achieve successful reorganisation

Friday, 4 May 2012 00:01 - - {{hitsCtrl.values.hits}}

Rapid change requires companies to reorganise more frequently, more fundamentally, and faster than ever before. Yet the odds of failure are high.

The good news is that companies needn’t resign themselves to the statistics. By incorporating six factors into their approach, they can reverse the odds and achieve reorganisation success.

Organisation of the Future—Designed to Win: Flipping the Odds for Successful Reorganisation, a new report by BCG, describes these six critical success factors in detail, offering practical strategies for incorporating them into a reorganisation effort. The report is part of a broader study by BCG and 12 global partners on the role of organisational capabilities in business success. The study was based on a survey of approximately 1,600 executives from more than 35 countries.

The six critical success factors that BCG has distilled—some tried and true, others perhaps less well known—represent a mix of behavioral, design, and process capabilities. “Until now, their impact on reorganisation success has not been well understood,” said Andrew Toma, a partner in BCG’s New York office and the research leader for the study. “We’ve now been able to demonstrate statistically the impact of these factors, including their aggregate impact.”

Among the report’s key findings:

nWhen synchronising organisation design with the business’s strategy was the top design criterion, companies had a 5:1 rate of reorganisation success.

nCompanies that clarified roles and responsibilities using a clear, systematic process experienced a 6:1 success-to-failure rate.

nSeventy-four per cent of companies with highly capable leaders achieved reorganisation success.

nLayer-by-layer design was found to be more effective than top-down CEO-only reorganisation design. Companies that followed this approach experienced four times the rate of reorganisation success.

nDiscipline in execution was found to be the most critical factor in overall reorganisation success. Seventy-nine per cent of companies that executed with rigor achieved total overall success.

The odds of success when reorganising under duress were only 50/50; during periods of strength, they jumped to 21:1. In addition, the study revealed a multiplier effect: the more success factors that companies implemented, the greater their success rates. Eighty-eight per cent of organisations with five or more success factors in place reported complete reorganisation success. Furthermore, it’s not just a matter of doing things right; performing the opposite of a success factor actually increases the odds of failure. Organisations that adhered to any five “antithesis” factors realised only a 7 per cent rate of reorganisation success.

Finally, these findings have economic implications, as well: 68 per cent of companies that adhered to any five factors achieved superior economic performance—three times the proportion of those in the “antithesis” group.

As reorganisation increasingly becomes part of the continuous process of transformation for companies, the stakes become increasingly greater. By putting these success factors in place, organisations can flip their odds of success to ensure they realise the broader goal of reorganisation: driving competitive advantage.

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