THE DECISION DRIVEN ORGANIZATION

IN BRIEF
This article is based upon Bain & Company study of 57 companies reorganizations
Carried out for time interval of 2000 to 2006
It was found that fewer than one-third produced any meaningful improvement in
performance.
The message of the article is:
When companies are looking to improve performance, particularly after the
appointment of a new CEO.
The temptation is to see reorganization as the answer.
Without fully considering the decision making processes within the company.
Such reorganizations are therefore often based on a superficial assessment of
processes and people and can become turf battles rather than the basis for
improvement.
REORGANIZATION
To change the way the organization is organized.
An important function of the chief executives.
Responsible for making the structural changes that will lead to better
performance.
Reorganizations are characterized by a change in organizational structure.
The creation or elimination of departments.
A reallocation of responsibilities.
The reassignment or repurposing of employees.
PURPOSE OF REORGANIZING
Cost cutting
Promoting growth
Shaking culture
Shifting strategic focus
Better and faster decisions
WHAT DRIVES PERFORMANCE
Organizational structure is not the only determinant of performance.
A profound misunderstanding about the link between structure and performance.
Contrary to popular belief, performance is not determined solely by the
Nature.
Scale.
Disposition of resources, important though they may be.
An armys success depends at least as much on the quality of the decisions its officers
and soldiers make and execute on the ground as it does on actual fighting power.
A corporations structure, similarly, will produce better performance if and only if it
improves the organizations ability to make and execute key decisions better and faster
than competitors.
It may be that the strategic priority for your company is to become more
innovative. In that case, the reorganization challenge is to structure the
company so that its leaders can make decisions that produce more and
better innovation over time.
Sometimes companys structure to meet a particular strategic goal can
actually exacerbate problems rather than help solve them.
For example, an organization struggling to innovate may try to gather
more and more creative inputand end up getting too many people
involved, thereby slowing the pace of decision making and stifling
innovation.
CONDUCTING DECISION AUDIT
For most companies, this requires a fundamental rethinking of their approach to
reorganization.
Instead of beginning with an analysis of strengths, weaknesses, opportunities, and
threats, structural changes need to start with what is a decision audit.
The goals of the audit are to :
Understand the set of decisions that are critical to the success of companys
strategy.
To determine the organizational level at which those decisions should be made and
executed to create the most value.
The company can align its organizations structure with its decisions, then the structure
will work better, and companys performance will improve.
OBJECTIVES
Clarifying roles.
Establishing more appropriate spans of control (the ratio of employees to
supervisors).
Moving low-performing workers out of the way.
Stimulating fresh thinking.
EFFECTS
No change
Gain from such reorganization
Losses from such re organization
Completely destroying the organization

STEPS TO DRIVEN REORGANIZATION
Identify your organizations key decisions.
Determine where in those organization those decisions should happen.
Organize the macrostructure around sources of value
Figure out what level of authority decisions makers need.
Adjust other parts of the organization system to support decision making.
Help managers develop the skills and behaviors necessary to make and
execute decisions quickly and well.
CHRYSLER
US auto giant Chrysler restructured its organization three times in the three
years preceding its bankruptcy and eventual combination with Fiat.
Each time, executives proclaimed that the company was on a new path to
profitability. Each time, performance didnt improve.
None of those reorganizations had much effect.
REORGANIZATION AT ABB
A new ABB CEO, Jrgen Dormann, analyzed the decision failures and then cut through
the tangled web by consolidating divisions and centralizing profit-and-loss accountability
The reorganization worked
It restored ABB's ability to generate fast, competitive bids
Because Dormann's team knew that the purpose of the new structure was to support
and smoothen the progress of those decisions and others that were equally
important.

Why are decisions so central? When you think about it, an organization's performance is
really no more and no less than the sum of the decisions it makes and executes.

YAHOO!
Some years ago, for instance, Internet company Yahoo! reorganized itself into three
groups:
Audience
Advertisers
Publishers and Technology.
But important decisions got bogged down, and Yahoo! executives wound up having to
create new roles and management levels to coordinate the three units.
Product development slowed, and costs increased.
FORD
Ford's recent reorganization under Alan Mulally.
Mr. Mulally had already mapped out a simple schematic depicting the key decisions that had to be made at each
stage in Ford's value chain.
Along with the infrastructure required to execute them effectively.
Every week, he and his team tracked their progress in making and executing these decisions.
They divested non-core brands such as
Aston Martin
Jaguar
Land Rover
Volvo
Reduced the number of production platforms, began consolidating both suppliers and dealers and so on.
Along the way, they decided to reorganize the company, moving from a structure based on regional business
units to a global matrix of functions and geographies.
This new structure enabled Ford's leadership team to make some of those critical decisions better and faster:
creating global car platforms, for instance, which had been painfully difficult under the old structure.
Ford still faces challenges, of course, but so far, Mulally's approach has helped Ford ride out the hurricane that
lashed the global auto industry and turn in a stronger performance than its US competitors.

XEROX
Xerox turnaround launched in 2001 under Anne Mulcahy.
Xerox moved from Global customer structure to a simpler country structure.
This structure helped Xerox eliminate several layers of middle management, increase local
accountability.
And the company was able to save $1billion in just 2 years.
BRITISH PETROLEUM
The BP case study was different and shows the other side of Tony Hayward, their recently
resigned CEO.
When he took over the job he found highly complex structures that had built up over the
years as a result of numerous acquisitions and reorganizations.
He led a simplification process based on removing layers of middle management and
returning decision rights to the appropriate people.
This also had the benefit of reducing overheads by a third.
BRITISH GAS
British Gas assessed the decisions in their various segments that created the most value
and created structures that allowed such decisions to be taken effectively.
Bain argue that, in addition to assessing value, it is also important to distinguish between
different timescales, separating the one-off major investment decisions from the day to
day judgments that need quick and flexible responses.
DELL REORGANIZATION
Dell announces a significant company-wide reorganization
Including a hiring freeze
Reducing travel expenses
Voluntary severance
Time off without pay

REORGANIZATION AT NOKIA
Nokia announces reorganization of devices and services business
Nokia announced a reorganization of the company structure designed to increase
competitiveness
Three units in the Nokia devices and services business, including Mobile Solutions, Mobile
Phones and Markets were introduced.


CONCLUSION
Reorganization can communicate an executive's dissatisfaction with the status quo,
demonstrate responsiveness, and shake people up
It rarely sets a business on the path to profitable growth
Company should not reorganize unless we has evidence that a structural deficiency is
among the causes
Reorganizations are among the
Most time-consuming
Costly
Productivity-sapping
Internally focused changes an organization can implement.
In addition, they raise expectations. If these expectations are not met, once morale and
productivity could sink lower than they were before the change.