The 21st Century Is Not About Reorganization

by Jay Deragon on 05/13/2013

charles-barsotti-wentworth-could-i-take-another-look-at-that-reorganization-plan-new-yorker-cartoonBusiness leaders traditional react to change by reorganizing people, processes and products. It is akin to rearranging the chairs on the Titanic thinking that will prevent it from sinking, The problem isn’t in the arrangement of the chairs it is in the very design of the ship.

The fundamental designs of business haven’t changed much over the last hundred years. Sure there have been a few improvements along the way. We’ve learned to squeeze more out of processes, improve productivity with technology, improve the quality of products sold and increase shareholder value. Much of the reorganization efforts of the past have been focused on how to create even more value for shareholders by lowering the cost of labor.  Reorganizations usually always mean jobs will be lost.

The 21st Century Emphasizes Human Capital

Ron Ashkenas writes in Forbes Why Managers Love to Reorganize — But Shouldn’t:  “Managers love to reorganize at almost every level. Whether triggered by a leadership transition, a fundamental change in the business, an acquisition, or poor performance; lines, boxes, and people tend to move around. In fact it’s highly unusual to find an organization that has not shifted its structure in some way within the previous six months.”

But while managers love to engineer reorganizations, most managers (and their people) hate to be reorganized. Much like musical chairs structural changes provoke anxiety, since people know that the “new and improved” design will often have fewer chairs (i.e., jobs). More problematic is the fact that a productive organization is only partly determined by structure. Equally important is the web of relationships that people develop over time to get things done. Reorganizations disrupt those relationships, hindering productivity until connections can be rebuilt within the new structure. As one senior executive said to me, “Every time we reorganized, we lost at least a year of innovation.”

The only thing that really needs to be reorganized in the 21st Century is the way organizations think about what really creates their value.  The successful organization of the future will be organized around value creation that comes from the hearts and minds of people, human capital. Whether formal or informal every organization needs structural and strategic capital designed to support human capital that creates value which sustains relationship capital. Take out, diminish or destroy human capital and there is no need for structural or strategic capital because there are no relationships to build capital to support.

Lets stop reorganizing the organization and lets start rethinking what’s important to the creation of new value that expands a market.


{ 1 comment }

Copi Valdiviez May 15, 2013 at 11:38 pm

The good: It introduces readers to the power of a network in business. I thought I knew what this book was going to be about, but was surprised. Some lightbulbs went off, and it colored in certain ideas that had once only been in black and white.

Comments on this entry are closed.

Previous post:

Next post: