by HPA Project Leader Karyn Folland
Organizational change has long been synonymous with cost-cutting – specifically through headcount reduction to mitigate inefficiencies and safeguard a company’s bottom line. But in our experience, we’ve noticed a shift as businesses evolve their organizational structure to tap greater growth. Business leaders are realizing that organizational change is not just about surviving with the reactive restructuring of teams and functions, but about thriving via thoughtful, strategic organizational transformation. It can be a powerful tool for unlocking growth.
But why is this shift happening now? For one, any company that experiences rapid and explosive organic growth – like many tech and online retail companies did during the first couple years of the pandemic – will likely have an existing organizational structure that needs attention to continue to evolve. That’s because, with growth, operations can become under-scaled or clunky, communication channels strained, and inefficiencies widespread. To a certain extent, these growing pains are expected, but make transforming an organization a key step in adapting to present-day challenges and ensuring sustainable growth.
“Reorganization” doesn’t have to be a bad word.
Organizational change often gets a bad rap, and understandably so: most people don’t like change! However, transforming organizational structure isn’t always about cost-cutting and job loss; rather, it’s frequently about becoming more effective and efficient. It can even create jobs; for example, a growing firm may want to establish new foundational pieces with capabilities and functions that didn’t previously exist to continue its growth trajectory.
So, what are the compelling reasons for driving organizational change to achieve sustainable growth?
1. Catching up with recent growth: As mentioned, rapid growth can often outpace a company’s existing infrastructure. A firm that was once well served by its processes and functions may grow to a point where that existing structure no longer works. We see this also for highly acquisitive firms, with a legacy of partly integrated parts and central functions that are not keeping up with the size of the whole. An intentional organizational transformation that optimizes operations, improves collaboration, and empowers decision-making can help unblock bottlenecks and further growth potential.
2. New leadership: It’s not unheard of that a new executive will bring with them a new vision for a company. But what if the company’s existing structures can’t support that new vision? A change to the organization’s structure may be needed to bridge the gap between the leader’s goals and an organization’s capabilities.
3. Strategic pivots: Businesses seek to take advantage of market shifts and new opportunities. Before endeavoring, begin by assessing your existing organizational structure and looking for ways to enhance it. What are the organization’s weaknesses? What technologies and processes are outdated? Are there redundancies, etc.? What new capabilities or skill sets are needed to be able to make a pivot? Identifying these will go a long way in helping companies get on the path to becoming nimbler and more adaptable.
4. Inflection points: Most businesses will experience key milestones like a merger or acquisition, fundraising rounds (if you’re a startup), public offering, and so on. Any of these common “inflection points” call for structural adjustments, including reorganizing existing teams, establishing new functional areas, or adopting new processes or technologies that support efficiency and performance.
5. Technological advancements: New technologies like AI and automation have been innovating entire industries. Companies that proactively adapt their structures and processes to integrate these advancements will bring a competitive edge and propel themselves towards sustainable growth.
Navigating organizational transformation isn’t without challenges.
While the hurdles associated with organizational change vary from company to company, it’s critical to identify and address them to ensure that change is successful.
Here are a few common challenges we’ve seen and some tips on how to deal with them:
A lack of transparency and communication: As with any change initiative, clearly communicating the “why” behind the change, while highlighting the long-term benefits for employees and the organization is profoundly important. Open communication builds trust and enthusiasm about the change and reduces skepticism and resistance. Overcoming the natural human resistance to change is crucial: HPA Senior Advisor Alex Nesbitt shares his thoughts in Keep the Change: Making Business Transformation Work.
A lack of leadership involvement: A successful org design (or redesign) process requires leadership involvement from the get-go. If the enterprise is being impacted, lead from the CEO’ s office. If it’s a functional area like technology, the CFO and/or the functional lead (like the CTO) needs to set the tone. Buy-in is crucial for successful planning and implementation, and they likely have firsthand experience on previous org transformation.
A lack of resources: Organizational transformation isn’t simply about shifting reporting structures, writing RASCIs, changing job titles, and merging teams. It frequently involves new processes and operating mechanisms which, in turn, necessitate upskilling employees and providing them with the tools and technology they’ll need to thrive in the new structure. It’s often a relatively small investment for inspiring advocacy for this change and unleashing growth potential among your people as well as your business.
Embrace organizational change as a tool for growth.
Remember, organizational transformation is as important to growth as cost reduction. Unlocking the growth potential of a change effort requires a strategic approach and proper resourcing. If you’re thinking about how to unlock growth for your organization, HighPoint Associates can share further experiences. Contact us to hear more about how we’ve helped clients through their organizational transformations.
KARYN FOLLAND is a strategy and organizational Project Leader with over 25 years of experience specializing in transformation, PMO, strategy, and large operational initiatives across the technology, financial services, and media sectors. She began her career as a management consultant at Oliver Wyman before joining the finance rotational program at Thomson Reuters. Over her 13-year tenure at Thomson Reuters, she led two major reorganizations and ultimately served as the CFO of the Middle East, Africa, and Russia, and later as the Global Head of Content Transformation.
