Redesigning a Company’s Organizational Structure
See how BCG helped a consumer goods company build a simpler, faster organization with fewer layers and lower costs.
Our client is a leading consumer goods company headquartered in Europe. The company operates in about 100 countries. For this project, we reorganized the company's food-service business-to-business unit, which has approximately 4,500 employees.
Multiple layers in the company separated the board from the business on the ground. Key strategic battles were not explicitly recognized in the top structure.
BCG was approached for advice on how to create a simpler, faster, and more effective organization with lower indirect costs. Our client needed to have an organization that could efficiently deliver the business model and its strategies in order to weather the economic downturn.
BCG's challenge was to help the company increase speed of execution, improve efficiency, and enhance its ability to maintain focus, consistency, and therefore quality through many handoffs.
We applied four diagnostic lenses to assess the current organization.
Organizational behavior interviews: We conducted about 40 interviews, which raised two questions: Is the organization too complex? Does the company implement fast enough?
Organizational sociology diagnostic: Understanding "why people do what they do" in their decision and action patterns, and the combined effect on performance, allowed the team to identify the root-cause issues in structures and performance management
Span-of-control and layer analysis: We benchmarked the client against much larger businesses and found too many layers and a low span of control in comparison to the market
Benchmarking engagement survey results: Employee surveys highlighted relatively low engagement versus benchmarks
Cost benchmarking and "right-sizing" analysis: We determined the cost interventions that would be necessary to support the strategic intent and reduce over-management
Our diagnosis indicated that the client had a good strategy, but execution needed to speed up. We identified two key issues:
There were too many layers. The client had more than six layers, which led to insufficient value added by managers
Span of control appeared low in relation to benchmarks, and this high complexity was costing time and money
The BCG team implemented revisions to the operating structure, including changes to the top structure, a country/cluster top-structure blueprint, a marketing setup within the new structure, performance management, and the alignment of human resources.
The BCG team designed a plan that captured how and where cost savings could be realized, as well as a change-management and implementation plan that included thorough communication.
The implementation of the accelerated performance design is now in full swing.
The new focus of the entire organization—which includes fewer layers and a higher span of control—not only lowers indirect costs, but also prevents indirect costs from building up in the future.
The client has been able to remove layers while still remaining within the limits of manageable span. This makes for a faster, simpler, and more effective organization at a lower cost.
The client is also on pace to achieve several goals:
Remove more than 20 percent of costs (nonmarketing, nonallocated, regional, and global costs)
Reduce the number of full-time employees in marketing by 25 percent
Bring the functional organization in line with targets by cutting support staff by about 15 percent
Eliminate up to 15 management roles in sales