Designing an Effective Organization: What Triggers the Need for Organizational Change? (Part 1 of 2)

Designing an Effective Organization: What Triggers the Need for Organizational Change? (Part 1 of 2)

What happens when a giant software company acquires a giant mobile phone business? Thousands of job titles are created, new reporting structures are defined, and plenty of paperwork shows up on HR’s desk to process. Can you guess what happens when that same software company lays off nearly 80% of those new employees in less than 2 years? You bet there’s going to be more organizational changes!

In today’s fast-paced market economy, businesses need to understand which decisions trigger an organizational design change. This blog will cover what a “trigger” is and how decision-makers can accurately identify them in their businesses. It will also lay out key questions leaders need to ask themselves before executing on these triggers. Finally, it will leave the reader with a preview of the “levers” a leader can pull in order to shape their organization to meet their operational needs.

Triggers

A “trigger” is a business decision that can bring about change. In the context of organizational design, it would be an event that results in a company or department reorganization. Below are a few examples of organizational design triggers:

New leadership: Changes to leadership and management are one of the top triggers resulting in organizational change. As highlighted above, one example would be a firm acquisition. The parent company will likely have to create new reporting lines and restructure parts of the business in order to fully integrate the new firm and achieve desired scale and business outcomes.

New technology: Implementing a new system can also have a significant effect on existing organization models. Let’s think in terms of a company purchasing a new ERP: multiple legacy systems will now be combined into one. Not only will some of the previous job titles become obsolete, but there will also be new openings, such as system design and training.

Imposed changes: Industries like finance and utilities are closely regulated and the laws that govern their activities are constantly changing. In order to adapt to new regulations and avoid potential penalties, a company may need to reorganize its business units to address compliance mandates and enhanced practices.

Non-Triggers (“Misfires”)

Given the short-term pressures facing today’s companies, it can be easy to falsely identify an organizational design trigger. Below are a few examples of situations where an organization might “misfire” and attempt to change when it isn’t necessary.

Bad fiscal quarter(s): After experiencing a down quarter, a business might be quick to make changes to get back on track for the remainder of the year. Often times, the poor financial quarter is not the result of misalignment within the company or division. Be sure to identify the root cause of the poor quarter before making painful cuts across the company.

Rapid growth: After experiencing rapid growth, a company may decide that it is time to redesign the organization. However, a company also may choose to keep its overall design intact and add positions proportionally to how they exist today. This approach will allow the company to continue scaling while minimizing change to employee and reporting relationships. As the old saying goes: “If it ain’t broke, don’t fix it!”

 Transitioning from triggers to levers

Now that you’ve become an expert at spotting organizational design triggers, what should you do with the information? Before you open Visio and begin drafting new organizational charts, there are a few questions you need to ask yourself:

  • Why is the company making this change?
  • What is really changing?
  • Where will the immediate pain points be felt in the organization?
  • Who will be affected? Will it only impact one group or will it affect multiple divisions?
  • Has the company undergone a similar change before? How did they handle it? Was it successful? What was learned from the last time?
  • How urgent is the change?

The cumulative answers to these questions can significantly shape the organizational changes you need to make, so be sure to spend ample amount of time addressing them. Once you are confident in your answers, you can begin to pull the change levers.

Make sure to be on the lookout for part 2 of this blog which will cover the levers leaders can pull in order to implement these changes in their business!

4 Comments

  • Geoffrey Richards July 13, 2016 2:36 am

    Love the section on misfires – sometimes getting too immersed in the short-term data can prevent us from seeing the bigger picture and cause us to make flawed decisions.

    • Ty Frost July 13, 2016 11:53 am

      Geoffrey – I agree. Organizational design decisions should be made with the long-run in mind. That way, you can avoid multiple costly reorgs down the road. Thanks for your insight!

  • Ranjit Singh July 26, 2016 10:31 am

    Great article, Ty! It’s interesting to suddenly start noticing and understanding triggers at the company I am interning at this summer. It puts some of the decision-making and supporting processes I have witnessed into better perspective.

    • Ty Frost July 27, 2016 9:25 am

      Ranjit – thank you for sharing your experience. Glad to hear this article helped connect the dots at your summer internship. Stay on the lookout for Part 2 of this topic that will discuss what “levers” firms can pull to execute organization design changes!

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