Due Diligence

By Marc Wilson

You don’t take a hospital visit for surgery lightly. In fact, neither do good surgeons. Most recommend conservative treatment first due to risks and trauma involved in surgical procedures. Restructuring is the orthopaedic surgery of corporate change. Yet it is often the go-to option for leaders as they seek to address a problem or spark an improvement.

Restructuring offers quick impact

It is easy to see why restructuring can be so alluring. It has the promise of a quick impact. It will certainly give you that. Yet it should be last option you take in most scenarios.

Most active people have had some nagging injury at some point. Remember that debilitating foot or knee injury? How each movement brought about pain and when things seemed better a return to action brought the injury right back to the fore? When you visited your doctor, he gave two options: a program of physiotherapy over an extended period with a good chance of success or corrective surgery that may or may not fix the problem more quickly. Which did you choose? If you’re like me, the promise of the quick pain with quick solution merited serious consideration. But at the same time, the concern over undergoing surgery with its attendant risks for potential relief without guarantee is hugely concerning.

No amount of physiotherapy will cure a crookedly-healed bone. A good orthopaedic surgeon might perform a procedure that addresses the issues even if painful and with long term recovery consequences.

That’s restructuring. It is the only option for a “crooked bone” equivalent. It may well be the right procedure to address dysfunction, but it has risks. Orthopaedic surgery would not be prescribed to address a muscular dysfunction. Neither should restructuring be executed to deal with a problem person. Surgery would not be undertaken to address a suboptimal athletic action. Neither should restructuring be undertaken to address broken processes. And no amount of surgery will turn an unfit average athlete into a race winner. Neither will restructuring address problems with strategic positioning and corporate fitness. All of that said, a broken structure that results in lack of appropriate focus and political roadblocks can be akin to a compound fracture – no amount of physiotherapy will heal it and poor treatment might well threaten the life of the patient.

What are you dealing with: a poorly performing person, broken processes or a structure that results in poor market focus and impedes optimum function?

Perennial restructuring

Many organisations I have worked with adopt a restructuring exercise every few years. This often coincides with a change in leadership or a poor financial result. It typically occurs after a consulting intervention. When I consult with leadership teams, my warning is a rule of thumb – any major restructure will take one-and-a-half years to deliver results. This is equivalent to full remuneration cycle and some implementation time. The risk of failure is high: the surgery will be painful and the side-effects might be dramatic. Why?

Restructuring involves changes in reporting lines and the relationships between people. This is political change. New ways of working will be tried in an effort to build successful working relationships and please a new boss. Teams will be reformed and require time to form, storm, norm and perform. People will take time to agree, understand and embed their new roles and responsibilities. The effect of incentives will be felt somewhere down the line.

Restructuring is often attempted to avoid the medium-to-long-term delivery of change through process change and mobilisation. As can be seen, this under-appreciates that these and other facets of change are usually required to deliver on the promise of a new structure anyway.

Restructuring creates uncertainty in anticipation

Restructuring also impacts through anticipation. Think of the athlete waiting for surgery. Exercise might stop, mental excuses for current performance might start, dread of the impending pain and recovery might set in. Similarly, personnel waiting for a structural change typically fret over the change in their roles, their reporting relationships and begin to see excuses for poor performance in the status quo. The longer the uncertainty over potential restructuring lasts, the more debilitating the effect.

Leaders feel empowered through restructuring

The role of the leader should also be considered. Leaders often feel powerless or lack capacity and time to implement fundamental change in processes and team performance. They can restructure definitively and feel empowered by doing so. This is equivalent to the athlete overruling the doctors advice and undergoing surgery, knowing that action is taking place – rather than relying on corrective therapeutic action. A great deal of introspection should be undertaken by the leader. “Am I calling for a restructure because I can, knowing that change will result?” Such action can be self-satisfying rather than remedial.

Is structure the source of the problem?

Restructuring and surgery are about people. While both may be necessary, the effects can be severe and may not fix the underlying problem. Leaders should consider the true source of underperformance and practice introspection – “Am I seeking the allure of a quick fix for a problem that require more conservative longer-term treatment?”

Photo by John Chew