Are you concerned that your organization is losing out on potential revenue?
Revenue misses put you among the 70 percent of businesses that fail by year five.
One reason this happens is organizational mismanagement. That's why it's important to assess your organization's structure to ensure it is efficient and aligned for success.
Here are 10 of the critical reasons that an organizational restructuring might be necessary and how it can be used to improve business performance.
1. A Changing Business Environment
A new or changing business environment means there are probably simultaneous changes happening with markets, technology, or even customer behaviors. These can have a significant impact on your business, making it more difficult to sell your products and services as well as bring new competitors into the market.
You should look at your current organization's leadership and see if your current staff may not be equipped to carry your company through this changing economy.
For example, if many predict that the economy is heading into a recession, consider if you might need people in leadership who have had experience guiding companies through a recession or a challenging market.
If you only have leadership that has managed companies when the economy is booming, will they have the insights and perspective that you need to survive?
Will you need to find leaders who can think outside of the box and be able to make quick changes as the market continues to evolve?
2. Organizational Growth
If your organization has grown over the past few years, that's normally a good thing. It can help you improve your revenue and the reach of your company.
However, this new growth may mean that there are people in departments or positions that don't make sense anymore.
For example, if you originally had your marketing team working with the product team and reporting to the head of production, it may have worked well when you were smaller with fewer products and customer segments. But as your company grows and you build out a larger marketing team, it could well make more sense to restructure your company and create a marketing director or VP who reports to you and have the marketing team report to that person.
When you take the time to reassess the hierarchy in your business, check to be sure that functions are arranged so attention and focus is properly aligned with corporate goals. When everyone is in the right place it will make your business more efficient and effective.
3. Poor Performance
Has your business been missing the numbers that you anticipated for the fiscal year or quarter? This may be a sign that you need to reassess your business environment and structure.
When you take the time to assess alignment of functional requirements and your management structure, you can identify any areas that might need to change.
For example, if the product marketing team that we mentioned in the example above is performing poorly, it might be due to the fact that they're working hard but they are more aligned with production function goals rather than marketing function goals.
Moving them over to a separate marketing department would give them properly aligned goals and the resources they need.
4. High Employee Turnover
High employee turnover can be costly, especially when it costs $4,700 to hire a new employee. If many of your employees are quitting each year, it’s a sign something isn’t right.
One way you can slow down this turnover is by taking a look at your organizational structure. For example, people might be quitting because they have poorly trained managers or are frustrated by the reporting structure and feel their concerns and voice is not being heard.
They could be frustrated because there are few or no options for progress in their career because of a lack of structure or a misaligned reporting hierarchy in your company. All of this can lead to unhappy employees who will quit.
If you're unsure why you have high turnover or aren't sure how to fix the issue, send out an anonymous survey and encourage employees to answer honestly. However, if you send out a survey, make sure to follow up with action…or you may see an even higher turnover.
5. Increased Competition
Increased competition can make it harder for your organization to grow. If you want to keep up with the competition and stay competitive, you'll need to make sure that your company is agile and adaptable.
You'll need a leadership team that can quickly respond and make changes according to what the competitors and the market are doing. When you take the time to review your leadership and organizational structure, you'll be able to meet your customers' needs better, which makes you stand out against your competitors.
6. Recent Mergers or Acquisitions
If you recently acquired a business or merged with one, it’s likely you'll have duplicates of some functions. For example, you might find that you have two heads of marketing. You should consider if you need to restructure your hierarchy and consolidate the two departments.
After an acquisition or merger, it can be a great time to move people around to better address areas of your business plan or improve the skill level of your team in some areas. For example, if a company you acquire has a customer success team but you didn't, this is a great time to find a way to fit them into your organizational structure.
When you take the time to plan out the structure before you actually merge or acquire a business, you can make the integration as easy and seamless as possible. That said, realize that you may not know enough about the new team to do this well, so move with caution after you’ve had time to observe and assess the people in action. Doing this wisely and explaining your moves so everyone understands the need for changes will help decrease the number of employees who will quit out of fear and frustration.
7. New Leadership
If you've recently hired some new leaders or managers, take a second to ask them to assess what they think of the organization and structure. Sometimes having an outside perspective can help give you insights into how you can improve your business.
Their insights might be what you need to achieve your goals. These new leaders can help pave the way and create a good foundation that will set you and your business up for future success.
8. The Rise of New Technologies
If you've been reading the news and staying up to date on the latest technology, you've probably heard how popular ChatGPT and AI are becoming. But this is just one of the new technologies and products coming onto the market every day.
Businesses can leverage these new technologies to make them more efficient. Some can be huge game changers.
For example, if you are using a new technology, you may need to create a new team or department so you build the technological knowhow and how to apply it (think internet). Because it’s likely that you will be hiring people who have those specific skills, your organizational structure may need realignment.
9. Cultural Shifts
Each company has a culture, whether or not it intentionally creates it. This culture can change over time, along with the leadership and new employees. It can also change according to the market and the needs of the customers.
However, if you don't have the right culture in your organization, you may want to start by looking at your business plan and leadership. For example, if you want to foster a diverse and inclusive culture in your company, is that baked into your corporate values? It’s a leadership and C suite problem.
Do you have intentional diversity there? If not, you may want to reassess the structure and the people that you've hired and reassess if you are hiring the best people for the role, losing out to unconscious biases. This is important because customers are now starting to care about a company's values and mission statement.
Plus, having a good culture at your company will also help reduce employee turnover.
10. Geographical Changes
If your organization is growing and expanding into new regions, you might want to hire new management and leadership to accommodate for that.
For example, if you're opening a new brand in the United Kingdom, you may need to hire someone to run that branch who knows about the local business practices, regulations, and laws.
You may also want to add an international team to support the new addition to your organization so that other employees aren't overworked and stressed trying to deal with situations they are ill equipped to handle.
Discover More Reasons to Assess Your Organization's Structure
Organizations are challenging and complex, especially if you have a bigger business. However, to achieve your goals you must take time to assess your organization's structure.
When you have the right structure, you'll also have the right leadership, motivation, and accountability in place to have a successful business.
If you're interested in taking a snapshot of where you are and discovering areas for improvement, try our free business scorecard. Would you like to improve your leadership’s ability to do a great job, make your sales force more productive, and the sales produced more predictable? An outside perspective of your business's culture and business plan can help your business be more focused and productive.
Would we be crazy to suggest that you schedule a talk with a coaching and consulting firm for an outside look and suggestions? Contact us today and let’s discuss your company and your goals – we promise you’ll go away with some important insights and ideas… and it costs nothing.
Let’s set up a time to talk. Brian Tracy USA: 877.433.6225 Email Me feedback@focalpointcoaching.com
