The Idea in Brief
Reorganizations are popular with chief executives, who believe that making big structural changes will lead to better performance. But a Bain & Company study of 57 reorganizations found that most reorgs had no effect—and some actually destroyed value.
In reality, a company’s structure results in better performance only if it improves the organization’s ability to make and execute key decisions better and faster than competitors. If you can sync your organization’s structure with its decisions, then the structure will work better and performance will improve.
To reorganize around decisions, focus on six steps. First, be clear about which decisions are most important. Second, figure out where in the organization those decisions need to be made. Third, organize your structure around sources of value. Fourth, figure out the level of authority your decision makers need, and give it to them. Fifth, adjust other parts of your organizational system to support decision making and execution. And sixth, equip your managers to make decisions quickly and well.
Many CEOs assume that organizational structure—the boxes and lines on a company’s org chart—is a key determinant of financial performance. Like generals, they see their job as putting the right collection of troops in the right places. If the battle is about innovation, for example, then the CEO’s duty is to create the best possible structure for channeling resources towards innovation.
