Reorganizing a company has all the simplicity of reorganizing a small country (but with more concern about the lack of snacks). It’s no wonder that, without proper planning, the company reorganization process can go very wrong. In fact, it’s not uncommon for upper management to reorganize the entire company on paper with only perfunctory input from HR, issue an announcement about the reorganization in a company-wide meeting or email, and then, when panic and confusion ensues, act confused and indignant about their employees’ reactions.
A company reorganization process must be undertaken with sensitivity, strategy, and foresight. If you’re planning to shake up the work lives and processes of an entire company, the key to success is planning and communication.
Why do companies reorganize?
There are as many reasons for reorganization as there are CEOs, but companies primarily reorganize for the following reasons:
- Something is broken. If your organization isn’t meeting its KPIs, if your processes or employees have become inefficient, or if there are essential tasks that aren’t covered by any position, it may be time to restructure.
- Your company has merged with or acquired another organization.
- An employee in a key position has left, which leaves an opportunity to question the structure.
- You want to make way for a new opportunity, such as launching a new product or capturing a new market.
- The needs of your customer base have changed.
- The organization has grown or is downsizing.
- Managers have too many direct reports.
Occasionally, companies choose to just undergo a departmental reorganization (also known as a department restructuring), which means only a specific department will be affected.
When that happens, the company has identified problems or inefficiencies within just one department, but because a company is heavily interconnected, what affects one department often affects other departments. While it’s certainly easier to reorganize a department, it’s not uncommon for a company to overhaul its entire company structure in one fell swoop.
How to reorganize a department or company
No matter your reasons for reorganizing, consider adding these steps to your company reorganization process.
1. Start with your business strategy
The first component of company reorganization strategy is finding out why upper management wants to reorganize in the first place. Without understanding the new direction the company’s heading or defining the problem the company is hoping to solve, there is nothing to guide the reorganization process and no way to measure its success.
The business strategy will arm you with the goals or criteria you’ll need to meet with this company reorganization plan—if such a plan is even practical.
If your company hasn’t solidified its business strategy yet, take a step back and go through the strategic planning process.
2. Identify strengths and weaknesses
With the strategy in mind, you need to consider where your current organizational structure is failing to meet company goals and where it’s working. If you haven’t already, create an org chart to get an elevated perspective on where your org stands now.
Part of this evaluation process should be to gather feedback. Too many companies undergo reorganization without taking into consideration the people who will be affected by both departmental reorganization and company reorganization plans. Your employees often have valuable insights on what isn’t working and what you should continue doing—it’s up to you to gather those insights and act on them.
It’s easier said than done, though. Without feeling that their concerns and ideas are taken seriously and are truly anonymous, your employees will be reluctant to divulge any feedback. It’s up to you to foster a safe environment in which employees feel their thoughts are valued. Consider sending out an anonymous survey to ask what they would change and how they would approach a reorganization.
It’s also important to listen to key stakeholders in the process and to lean heavily on HR. If you’re in HR, don’t forget to communicate nuances to restructuring that need special approval and consideration. Union agreements, employment contracts, work accommodations, etc. will all need input from appropriate parties.
Make sure to weigh the advantages or profit of a potential restructure against the risk, which includes employees leaving due to change. If the problem won’t be solved through restructure, don’t attempt the reorganization. It’s wasted effort—and a potential loss for your company.
3. Consider your options and design a new structure
After determining the problem with the current company organization, gathering feedback from employees and key stakeholders, and considering all the existing job functions, it’s time to define a new organization model.
Bear in mind that this new model is only a first draft: It will and should change before being implemented. This new structure should include:
- The vertical and horizontal lines of authority
- An indication of who will be making formal decisions within departments
- Attributes of employees, including skills and experience
- The definition and distribution of functions throughout the organization and the relationships among those functions
Consider the pros and cons of different types of organizational structures: hierarchical, horizontal, matrix, etc. (If you’re specifically trying to restructure your sales organization, make sure to check out our guide to sales organization structure, with insights from Jacco van der Kooji from Winning by Design.)
As you’re working through options, the best way to see the layout and interdependencies of your new structure is to create an org chart. Lucidchart has a variety of org chart templates available, and you can even import employee data from BambooHR, Google Sheets, Excel, or a CSV to automatically create an org chart that you can easily adjust.
Don’t attempt a company reorg without a visual to clarify your course of action to employees and keep all parties on the same page.
5. Communicate the reorganization
Once you’ve weighed various options and determined your best path forward, it’s time to show the rest of the company. Don’t spring the change on your employees. Make communication and transparency the highest priority throughout the reorganization—again, an org chart can help create clarity in this situation, especially paired with details about each role's responsibilities. You might need to communicate separately with managers or anyone with a direct report to ensure that they’ll be able to answer questions and help with execution.
At this point, your employees may provide feedback on the new organization. As an HR professional or a manager, this is the time to extol the amount of consideration that went into the reorganization and the benefits it will provide to everyone. Welcome questions—after all, having a successful company reorganization takes the cooperation of everyone involved.
5. Launch and adjust as necessary
The moment has finally arrived to execute the company or department restructuring. Remember that change can be difficult—give employees some time to adjust to the company reorganization to accurately gauge its effects. Think back to your business strategy, and make adjustments if the new organizational structure still doesn’t meet your ultimate goals.
Need help getting employees to accept change? Consider these change management models.
It’s all in the attitude
As a leader, your attitude about the company reorganization strategy sets the tone for how it will be received by your employees and co-workers. If you’re excited about the change, that excitement will be reflected in all involved throughout the process. If you’re somber, expect those affected to be suspicious and maybe even hostile.
The bottom line is that company restructuring can be a fresh start for everyone; it can revitalize a company, reinvigorate employees, and allow for greater career growth. But planning and communication are key—start early, get everyone involved, and stay organized by creating an org chart that can guide your company to a greater, more efficient organization.