Organization Design

More than half of companies in fact rate their reorganization initiatives as “mostly” or “very” unsuccessful. BCG has identified six key factors that distinguished the successes from the failures. Companies that employed these factors have a significantly higher chance of experiencing faster growth and higher profits than their peers:

• Agile ways of working
• A value-adding corporate center
• Clearly delineated profit and loss (P&L) responsibilities
• A flat management structure with a strong frontline focus
• Effective use of shared services
• Strong support for people and collaboration

BCG incorporated these success factors into our award-winning approach to organization design.

We focus on shaping employee behavior: the underlying driver of a company’s performance. The Smart Design for Performance approach uses a wide variety of organizational levers (see graphics below) in combination and creates a conducive and engaging context for employees so that it is in their own individual interests to adopt and develop the desired behaviors. The context changes the way that people act, interact, and make decisions, resulting in higher organizational performance.

When it comes to reorganizing, companies have little room for error. The following six factors are critical to flipping the odds of success in a reorganization:

1. Synchronize design with strategy. Regardless of the precipitating factor, the reorganization must align with the organization’s strategy and business priorities in the simplest way possible.
2. Clarify roles and responsibilities. Of all the organizational capabilities most required for a successful reorganization, this set—clarifying roles and responsibilities, assigning accountabilities, and determining decision rights—is one of the most difficult to get right.
3. Deploy the right leaders and the right capabilities. In reorganizations, a common pitfall is tailoring the redesign around the individual capabilities of a few important executives. Another pitfall is overlooking the capabilities required for the new design to succeed.
4. Design layer-by-layer, not just top-down. A cascading approach to design puts companies in a better position for success. Address the needs of each layer, according to consistent design principles, rather than using a top down-only design approach.
5. Lower execution risk. Execution is by far the most important capability for achieving a successful reorganization—applying a step-by-step, disciplined approach to implementation is crucial to avoid missteps.
6. Don’t wait for a crisis to reorganize. Reorganizations that take place prior to a crisis have a much better chance of success. During a crisis, the odds of a successful reorganization are only 50/50.