During times of economic uncertainty, restructuring is common. While most managers agree that structure should follow strategy, few have a process for moving from strategy to restructuring. Businesses that guide restructuring using a clear and widely understood strategy are able to cut fat, not muscle.
In many organizations, strategy is not formulated or understood in a way that provides a basis for making decisions about restructuring. Often the term “strategy” is used to describe budgets and forecasts. Sometimes the word designates a business objective. Neither of these provide context to determine what work is strategic to the business. We advocate an approach to strategy that involves answering two questions:
- What unique technical and social capabilities will you focus on to create competitive advantage?
- What about your products/services create distinctiveness in the eyes of your target customers?
These questions are not simple to answer, but when answered well, they provide a succinct strategy that informs what work is strategic and provides context for effectively structuring the business.
One of the first signs we encounter that indicates nonstrategic restructuring is across-the-board cuts. When the business strategy is clear, it makes more sense to be targeted in where you cut and why. You should be able to answer the following questions about an organization’s work:
- What work should be the object of our most intense improvement efforts?
- Which work activities need to be improved together, and which can be improved separately?
- What work should be eliminated?
- What work should we outsource?
- When is efficiency (i.e., doing things right) and when is effectiveness (i.e., doing the right
things) the most useful driver of improvement efforts?
Strategy clarification assists restructuring by establishing a basis for prioritizing organizational work. Businesses that are successful at restructuring are able to identify and protect the work that creates competitive advantage.
Mark Nyman is a principal of The RBL Group, a strategic HR and leadership systems advisory firm. He is co-author, with four senior partners at RBL, including Dave Ulrich, of “HR Transformation.” His expertise is in large systems change, organization design and alignment, change management, strategy development processes, executive coaching, large group intervention, team based organizations, and merger and acquisition design.