One of a CEO’s essential responsibilities is leading the effort to reconfigure their organization after recognizing that its structure is no longer optimal for creating and delivering value. Some redesigns are major companywide overhauls, such as Procter & Gamble’s creation of six industry-based sector business units in 2019, which its CEO described as “the most significant organization change we’ve made in the last 20 years.”1 Other redesign efforts have a narrower scope, focusing on a particular division, function, or issue.
For a CEO, organization redesign is different from other large-scale change initiatives. In a corporate strategic reorientation, for instance, the CEO is bound by the decisions of the board of directors and follows a strongly analytical approach. In a functional initiative, such as setting the company’s digital strategy, the CEO can delegate the lead to someone on the management team and assume a supervisory role. But in a corporate organization redesign initiative, the CEO must actively take the lead, both because of the profound impact that the resulting changes will have on the culture and employees and because only the CEO has the all-encompassing view required to reduce the risk of serious unintended and undesirable consequences from any particular redesign choice.
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We have witnessed many redesign initiatives in our work with organizations over the years and have confirmed that the CEO’s leadership of these efforts is key to their success. But we continue to be surprised by how many CEOs still struggle to get to effective outcomes. We’ve found that plans frequently go astray or run into dead ends despite the abundant and often sensible advice in the management literature. Here are some examples:
- The new CEO of a business services provider wants to reconsider the role of the corporate center and the organization more broadly.
1. “P&G Accelerates Pace of Change for Shareholder Value Creation,” Procter & Gamble, Nov. 8, 2018, https://news.pg.com.
2. Good examples include J. Roberts, “The Modern Firm: Organizational Design for Performance and Growth” (Oxford: Oxford University Press, 2004); and A. Kates and J.R. Galbraith, “Designing Your Organization: Using the STAR Model to Solve 5 Critical Design Challenges” (San Francisco: Jossey-Bass, 2007).
3. M. Raveendran, “Seeds of Change: How Current Structure Shapes the Type and Timing of Reorganizations,” Strategic Management Journal 41, no. 1 (January 2020): 27-54.
4. H. Vantrappen and F. Wirtz, “When to Decentralize Decision Making, and When Not To,” Harvard Business Review, Dec. 26, 2017, https://hbr.org.
5. D.J. Collis, “Lean Strategy,” Harvard Business Review 94, no. 3 (March 2016): 62-68; and H. Mintzberg and J.A. Waters, “Of Strategies, Deliberate and Emergent,” Strategic Management Journal 6, no. 3 (July-September 1985): 257-272.
6. H. Vantrappen and F. Wirtz, “A Smarter Process for Managing and Explaining Organization Design Change,” Strategy & Leadership 46, no. 5 (2018): 36-43.
7. S. Heidari-Robinson and S. Heywood, “ReOrg: How to Get It Right” (Boston: Harvard Business Review Press, 2016).
8. J. Stouten, D.M. Rousseau, and D. de Cremer, “Successful Organizational Change: Integrating the Management Practice and Scholarly Literatures,” The Academy of Management Annals 12, no. 2 (June 2018): 752-788.
9. K. Harigopal, “Management of Organizational Change: Leveraging Transformation,” 2nd ed. (New Delhi: Response Books, 2006).