The Outdated Approach to Restructuring

The looming words of recession are all over the place, which means as a business you’re sitting on the edge of your seat wondering what uncomfortable decisions you’re going to have to make over the next few months. And let’s be honest, the most uncomfortable one of all will be people related.

“Cutting the bloat” or “trimming the fat”, whatever you want to call it, is the default approach most businesses will take in order to save their business. In times of uncertainty businesses immediately look to cut costs, and the two things at the top of that list are office space and people.

The trouble is, there are only so many cycles of this a business can keep going through before it has to realise that this outdated approach leaves very little to be desired, and eventually causes more stagnation than innovation. After all, it was only two years ago during the covid-19 pandemic that companies were holding on for dear life to make it out the other end. But did any of them learn from it?

Restructuring is sometimes necessary, let’s not be naive. But I want to explain why the default approach to restructuring doesn’t need to be the only way. And by using new ways of working, you can build a business that is far more agile to the ever-changing world we live in, rather than one that coils back in fear at every new global event.

Let’s begin with the biggest beast in the room, your organisational structure….

The depths of why a traditional hierarchical organisation is bad for business could be an entire blog post in itself. But for this feature, I want to particularly highlight the structure of a pyramid hierarchy and how it deeply limits a company’s ability to be agile.

A pyramid hierarchy is built on power and control. You have managers who oversee the doers, and top dogs guarding company information and making all the big decisions.

However, inevitably hierarchies lead to organisational silos that become barriers to communication. The sharing of knowledge and data is restricted, and even worse, people are constantly caught up in internal politics rather than the purpose of the organisation. Key departments become competitive rather than collaborative, fighting over the small budgets and pots they’re given. Lack becomes the default mindset in every respect.

With so many controls and unnecessary bureaucracies, people can’t move quickly to get things done. There are rules, controls and procedures that must be adhered to. Some are so benial they don’t even make any sense!

The trouble comes when change happens externally. Let’s take a global pandemic or a recession as the ideal example. Suddenly your yearly forecast is about as relevant as yesterday’s newspaper, and you’re sitting in a conference room crunching numbers.

In a highly bureaucratic company, mobilising into action becomes a farce. There has to be a meeting about a meeting before you can then have a company-wide meeting. Then you need to make a PowerPoint presentation, and let’s not forget that there then needs to be a document to document the situation and new process. Urgh!

The red tape, and keeping everyone’s egos happy is where the energy goes, and little is left for acting and responding to the situation.

Every company has a limited amount of energy created by its teams. An effective organisation has to optimise this energy into work and reduce the energy lost to working around silos and internal structures.

Much of what a hierarchy does, is restrict flow. For a volatile, unpredictable world, you need more flexibility than what a traditional hierarchy can provide.

Aside from the complete lack of agility that strict structures and bureaucracy create, you have to also be mindful of ‘Organisational debt’.

Few companies realise how much their way of operating has led to ‘Organisational debt’ which has contributed to their lack of productivity.

If you’ve never heard of organisational debt before, this is a term defined by guru Steve Blank and made common by workplace pioneer and Brave New Work Author Aaron Dignan.

Organisational debt is the interest companies pay when their structure and policies restrict productivity.

And we’re not talking about direct financial interest. This is like a silent killer, slowly suffocating the organisation.

The best example of organisational debt is a world-renowned case study from the brass foundry Favi. When their then-CEO Jean-Francois Zobrist took over he was walking the factory floor when he noticed a machinist waiting at the locked stockroom. He asked the machinist what he was doing. The machinist explained that he needed new gloves but had to wait for the stockroom to be opened as all equipment was behind lock and key. He then went on to explain that in order to get the new gloves he had to have a signed slip from his manager, then take the old gloves and the slip to the stockroom manager, and then wait for the stockroom manager to open the stockroom.

This entire process took 30 minutes for the machinist to get new gloves. When Zobrist asked his CFO how much the gloves cost the company, he told him that it was 5 euros. And so Zobrist then asked, how much it cost the business to have that machine not operating for 30 minutes. The CFO told him 5000 euros.

THAT is organisational debt. Your process is literally costing your business money.

The process was quickly abolished at FAVI, and everyone had free access to all tools and equipment in the stockroom. But the original process created at FAVI is a similar story to many companies. You create a process out of distrust. In this instance, the people weren’t trusted not to steal company property. But in doing so it cost the business more money.

Now let’s move on to why a company can get bloated in the first place. 

Commonly as the company grows people are added into areas to support the workload. Departments may suddenly see an upsurge in demand. For example customer service or sales. Then more managers get added in to manage all these people. 

You then of course have the heavy demands of people who need to be promoted, just because they’ve been there for a while. 

Gradually, everything gets bloated. In some cases, you even have companies with so many people, even the people don’t know what their job is or what they’re working towards. 

Before you know it, you have an extremely bloated organisation. Then disaster strikes. There’s a new competitor on the block taking customers, or there’s a recession. Something unpredictable happens. And what’s the first thing that goes – people! 

By default in this situation, a company often decides to roll out a “strip back” approach. “Let’s centralise everything and cut back because that’s the most efficient thing for us to do right now.” 

After all, you don’t need a team of 30 customer service reps when you don’t have customers, and that means you can then cut back on all those managers you hired as well. 

This is the same old story that gets repeated time and time again. 

It happens because roles are fixed in a traditional company, and when that role is no longer needed it’s cut. Like a spare part that’s no longer required to keep the machine running. 

Companies are so busy trying to meet demand they don’t ask questions about the longevity of the role or project, and they certainly don’t consider the whole person and how they can contribute in other ways to the organisation. 

If you scaled sensibly you wouldn’t be stockpiling talent in one arena. And if you created a network of teams you would be more agile to the flux of peaks and troughs your business will have to move through. 

By all means, this doesn’t mean that networks will completely reduce the unfortunate event of redundancies. But it certainly reduces the need for unnecessary cutbacks which could have been avoided to begin with. 

Sometimes what’s best for the collective is not best for the individual. We have to be realistic that restructuring is sometimes a reality we have to face, and people have to move on. But what we must do is consider how we approach this in terms of our behaviour and mindset.

Too often redundancies and restructuring is done so in-humanely, it’s as if all care for people is completely removed. As if these people never mattered, or their work never had any purpose. The way we do this in most organisations is quite frankly soul-destroying.

A cold, hands-off approach is usually the way things go. It’s all hush-hush and carried out like an execution.

But it doesn’t have to be this way.

Instead, if we treated people like adults, and supported their transition out of the company; we would create such a different experience for both the people leaving and the people who are left within the company.

After all, that’s what businesses often forget. How you make people redundant then creates a rupture in your company culture. Psychological safety is shaken, and people spend more of their energy in worry and fear than in creation.

If you can first handle the emotions that a restructuring will bring, perhaps shame, disappointment, embarrassment etc. Then you can move on from there and hold space for the compassion that is required.

What’s sad is, most of these ‘people processes’ have lost all relevance to the people part. We don’t coach or guide people through restructuring, we move and remove without any consideration for the person.

The approaches shared here may feel radical, and that’s because this new way of working requires a change in your perspective.

Structural agility means a shift from seeing businesses as “machines that use humans as resources”, to “living systems made of humans.” Living systems are far more agile and complex, and can adapt to the environment around them. To lead in a living system you need to create conditions for the system to flourish, unlike a machine that we seek to control.

Predicting the future is impossible for any organisation. Even though people certainly try. But nobody can foresee all the ways in which a business may need to adapt. Which is why now more than ever, it’s vital businesses can take in new information, make sense of it, and apply it quickly.

In summary, here are three core areas I would recommend any business to look at in order to become more agile, and avoid falling back into the outdated restructuring cycle. All of these practices are well-known within the new ways of working realm, and are used by companies around the world. 

Remove rigid hierarchy and build networks. 

By removing the bureaucracy and the silos that manifest in a traditional pyramid structure, you can focus on building more autonomous networks that are more collaborative and agile. 

Leaders will naturally be created in this environment, and the culture rapidly becomes more leaderful. 

Switch from titles to roles. 

Title based roles are deeply limiting to the organisation’s needs, and to bringing our full potential to work. Rather than have rigid titles that put people in boxes, create roles and responsibilities that are open to being moved around. Like wearing multiple hats. You can add a hat, or drop one. 

Shift your mindset

Adopting a new mindset towards work, and your organisational life cycle isn’t always easy. Especially when we’ve been conditioned for decades that this is “the way things are.” But by moving your perspective to where organisations are living systems, and embracing an agile approach, you can create a business that is far more resilient to uncertainty.