How To Successfully Restructure Your Organization: A 5-Step Process
Change always forces change.
When a big company experiences a change—a new CEO or CMO, a new competitor in the market, a shift in the economic environment (as we saw during COVID)—the organization needs to adjust. Sometimes it’s a single department. Other times, it’s every department all at once.
Ironically, small companies, despite their rapid growth and more agile nature, generally have fewer major organizational changes. Because they are leaner, small companies tend to define job roles more flexibly, and people often wind up wearing multiple hats. Larger companies tend to experience more frequent reorganizations because roles are narrowly defined, so they have to move people around in order to change the way their business works.
Regardless of organization size, as a leader, your job is to identify situational changes in your business, understand the context for those changes, and be strategic about how you choose to adjust.
What has changed, and what needs to change as a result?
I have worked in large organizations for most of my career and experienced my fair share of org restructuring. And now, as a senior marketing executive, I have led several as well.
Here is the 4-step process I have used for years, which will hopefully help you be more confident about determining your best path forward:
1. Audit the organization as it currently stands.
In many situations, people rush to reorganize the business as soon as they’ve identified the trigger for change.
The first thing they want to do is move people around and then, after the fact, change the way they operate. And the reason reorgs are approached this way is because it’s fast.
In reality, you want to do the opposite. It’s better to slow down, audit the way the organization is working today, understand the operating model in the context of the shifts that the business needs to make, and then begin with the end in mind: what new outcome do you want to work toward, and how might a restructuring move you closer toward achieving that goal?
For example, in a large company, there are usually two types of high-level org constructs:
- Integrated: where departments operate end-to-end, but for a portion of the business. Often seen in divisional situations where each division has a small, but complete set of functions that cover strategy through execution.
- Verticalized: where departments support the whole company but are highly specialized in their function and strategy and planning are often segregated from execution, and execution is often split by function and geographic region.
Unless there is a strong understanding of which of these constructs is being used, moving people around only makes things worse. Instead, take some time to consider the overarching organizational construct in which you are operating and rationalize the inputs: corporate strategy, go-to-market strategy, overarching product strategy, product launch plans, stakeholder expectations, even potential career growth and skill development for team members. This process will help you establish a framework of requirements and constraints that need to be accounted for before people are moved out of one role or department and into another.
Audit first. Move second.
2. Compile, prioritize, and synthesize your inputs by naming the key principles around which you want to change your operating model.
As you develop your framework of requirements and constraints, it will be helpful to establish the tenets you want to use to communicate your changes. For example, alignment with other teams might be a core principle. Or, reducing friction and optimizing feedback loops might be a core principle. These core principles are your North Star. Any and all changes that happen as a result of restructuring the organization need to deliberately move the business forward in that direction—without (which is why it’s important to audit first) disrupting other aspects of the business that are working as intended.
The most important part of Step 2 is making sure that changes intended to address a specific requirement don’t impair another part of the business. You don’t want to pull a team apart, only to realize that having all of those people on the same team was what actually made things work.
3. Organize by function, optimize by outcome.
The next step is to break down what each department does in the context of the entire business.
- What are the services we provide?
- What products (outputs) do we deliver?
- What functions are required in order to provide these services and products?
- Which functions are directly tied to revenue (like sales and marketing) versus functions that are tangentially tied to revenue (like internal project management).
For example, the organization I currently lead at SAP offers a range of products and services to our stakeholders. These span from the strategic (a brand architecture, a visual identity system, an annual brand awareness campaign, etc.) to the tactical (image library management, brand training sessions, a PowerPoint presentation wizard, etc.). Some of these, like our awareness campaigns, are big-ticket items that contribute heavily to the bottom line. Others, like the PowerPoint wizard, don’t tie to revenue but instead contribute to the building of brand equity.
Documenting everything being delivered is a powerful exercise, as it reveals the true scope of work—which can then be evaluated against the charter of the organization. By considering which of these services are priorities, it will help you begin to identify the core functions around which you should organize. When you organize by function (like employee enablement, or creative development) rather than domain (like branding or advertising), you gain not only efficiency but also have better clarity around how you can optimize for a specific outcome.
4. Document the current operating model.
Once you have all your different services cataloged, you will quickly be able to identify the way that the people, processes, and tools required to deliver those services work together today—and how potential changes to that operating model will yield different outcomes.
This is where the real work comes in.
Reorganizing a large department (especially within a global enterprise) is like re-wiring a network. Every function is connected to some other function, which is connected to five other functions, and so on. When you make one change, it will have cascading consequences not only within your department but also with every team that your people either support with their work or rely on to deliver their services.
Once you have documented your current operating model, you’re ready to design the new one in the context of the services you provide, your key principles, and your framework of requirements and constraints. This is the longest part of the process because you are trying to navigate a lot of complexity and moving parts—but it’s also the part that’s most worth being diligent about. Do it right, and explaining the resulting changes to your organization will be easy because they support an operating model that has been designed to serve the business.
With your new operating model in place, it’s time to start placing your people.
5. Design your org and execute the change.
The last step is to figure out where everyone goes and then make the moves.
If you’ve worked through all of the other steps diligently, this one is easy. You know your team, their skills and their ambitions. You know what needs to get done and you’ll be able to help them clearly see their role in achieving your organization’s objectives. The right structure, and the right placement of people into that structure will reveal itself very quickly.
But as with every other plan, be prepared to make adjustments once it’s been set in motion. Six months into a new organizational setup you’ll start to see where things might not be working out as expected. Don’t rush to change the organization right away. Instead, go back through this process and test the challenges against the operating model and key principles. Ask yourself if the issue is really going to be remedied by another organizational change, or if tweaking the operating model or renegotiating the scope of a service might be a better remedy.
At the end of the day, the number of different ways you can arrange people within a large-scale organization is nearly infinite. So it’s important that you work with your leadership team to find the setup that meets the needs of the business and supports the growth of your people.
If you go slow, plan deliberately, and stay focused on how you want to operate, you will end up with an organization that will stand the test of time.