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 Case Study
11 May 2012 | ITSM
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Six Critical Factors for Reorganization Success
According to a new report there are six critical factors that can make all the difference in achieving reorganization success...

Rapid change requires companies to reorganize more frequently, more fundamentally, and faster than ever before. Yet the odds of failure are high.

The good news is that companies needn’t resign themselves to the statistics. By incorporating six factors into their approach, they can reverse the odds and achieve reorganization success.

Organization of the Future—Designed to Win: Flipping the Odds for Successful Reorganization, a new report by The Boston Consulting Group (BCG), describes these six critical success factors in detail, offering practical strategies for incorporating them into a reorganization effort. The report is part of a broader study by BCG and 12 global partners on the role of organizational capabilities in business success. The study was based on a survey of approximately 1,600 executives from more than 35 countries.

The six critical success factors that BCG has distilled—some tried and true, others perhaps less well known—represent a mix of behavioral, design, and process capabilities. “Until now, their impact on reorganization success has not been well understood,” said Andrew Toma, a partner in BCG’s New York office and the research leader for the study. “We’ve now been able to demonstrate statistically the impact of these factors, including their aggregate impact.”

Among the report’s key findings:

  • When synchronizing organization design with the business’s strategy was the top design criterion, companies had a 5:1 rate of reorganization success.
  • Companies that clarified roles and responsibilities using a clear, systematic process experienced a 6:1 success-to-failure rate.
  • Seventy-four percent of companies with highly capable leaders achieved reorganization success.
  • Layer-by-layer design was found to be more effective than top-down CEO-only reorganization design. Companies that followed this approach experienced four times the rate of reorganization success.
  • Discipline in execution was found to be the most critical factor in overall reorganization success. Seventy-nine percent of companies that executed with rigor achieved total overall success.
  • The odds of success when reorganizing under duress were only 50/50; during periods of strength, they jumped to 21:1.

In addition, the study reveals a multiplier effect: the more success factors that companies implemented, the greater their success rates. Eighty-eight percent of organizations with five or more success factors in place reported complete reorganization success. Furthermore, it’s not just a matter of doing things right; performing the opposite of a success factor actually increases the odds of failure. Organizations that adhered to any five “antithesis” factors realized only a 7 percent rate of reorganization success.

Finally, these findings have economic implications, as well: 68 percent of companies that adhered to any five factors achieved superior economic performance—three times the proportion of those in the “antithesis” group.

Responding to the report, Christopher Kinsella, Acting Chief Executive of the Chartered Management Institute, one of the partner organizations, said “Due to the current economic and global instabilities it is now, more than ever, that organizations must change and adapt in order to survive.  This report helps to provide a route map towards successful organizational change.  It clearly recognizes that those companies who harness the talent of highly capable leaders and managers at all levels are the ones who are most likely to thrive in today’s turbulent times”.

As reorganization increasingly becomes part of the continuous process of transformation for companies, the stakes become increasingly greater. By putting these success factors in place, organizations can flip their odds of success to ensure they realize the broader goal of reorganization: driving competitive advantage.

For additional information or to view the report “Flipping the Odds for Successful Reorganization” click on the link.

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