7 strategies for leading a crisis-driven reorganization

The Covid-19 pandemic has forced countless companies to reorganize at an accelerated pace. To understand what makes a crisis-driven reorganization succeed or fail, we drew on our own 15 years of experience advising companies on organizational change, as well as on a database compiled by Quartz Associates and harvard Business Review documenting over 2,500 reorganizations. The database shows that crisis-driven reorganizations are a net benefit in just two-thirds of the cases; 19 percent actually damage the company, and only 8 percent fully deliver everything they aim to in the time planned. What can leaders do to increase their chances of success?

Whether a reorganization is motivated by cutting costs or by growth, our research found seven actions companies can take to maximize their chances of delivering the intended outcome in the time planned while minimizing disruption:

1. Move quickly, but always with a plan

Time is of the essence. if a crisisdriven reorganization takes longer than 6 months, it is significantly more likely to fail. After all, the longer it takes, the more likely it is that the business context will have changed (especially in a rapidly developing crisis situation), making the new model irrelevant.

Of course, moving quickly does not mean rushing ahead without a plan. Only a third of companies pursuing a crisis-driven reorganization develop a detailed plan; another third have just one milestone that everyone needs to hit; and a final third have no plan whatsoever. The data shows that the latter two cases have much lower success rates.

2. Analyze your human capital resources

The vast majority of companies’ human capital analysis capabilities are not nearly as substantial as their financial analysis, leading them to sacrifice either speed or rigor in their reorganization.

Our data, however, suggests that internal benchmarking analysis (e.g. “Why is my operations team more efficient in Region X than Region Y?”) is key to success. internal benchmarking enables companies to move fast, understand what is driving differences, roll out best practices to other areas and more effectively challenge naysayers with detailed evidence.

3. Set differentiated targets and consider making focused investments

Saving 20 to 30 percent across the board is not always the right answer—perhaps some organizational units should be cut by 50, 80 or even 100 percent, while others might need focused investment. in fact, companies that are able to reinvest a portion of their cost savings into building up their internal capabilities are significantly more likely to succeed, even if this means cutting costs more deeply elsewhere to afford it.

When we worked with a logistics company to reduce costs in their quality control department, we found that an expensive success framework in use actually made performance worse. We decided to close down that team and invest some of the savings into growing the department’s coaching team, which did have a demonstrated record of success.

4. Involve your full leadership team

The Quartz/hbr data set clearly shows that the most successful reorganizations involve the whole leadership team in the decisionmaking process, often with some staff input as well. Our experience tells us that this is because the entire leadership team will have to support the execution of the plan, so each member needs to buy into it.

Unfortunately, the data shows that this approach is not very common. instead, crisis-driven reorganizations are most frequently designed by just the leader and a few of their most trusted colleagues.

This is even worse than a single dictator deciding, because executives who feel excluded from the inner leadership circle are more likely to resist later.

5. Allow some flexibility

in 50 percent of cases, crisis-driven reorganizations fail to deliver because leaders resist a centrally mandated solution. Companies that allow leaders some flexibility in deciding how the changes are implemented are far more likely to succeed.

For example, when we reorganized a division of an oil and gas company, we agreed that if a geographic business unit was below a certain level of revenue and/or activity, it would not need to make all the changes that we expected of larger business units, but could instead adapt the reorganization design to match specific circumstances. instead of deciding on every last detail in advance, prioritize designing guard rails for what is acceptable, targets for costs and a process for local leaders to fill in the details. it turns out that this is far quicker and more likely to lead to a workable outcome.

6. Communicate the changes as quickly—and humanely—as possible

in everyday reorganizations, faceto-face communication has a much greater correlation with success than communicating via email. in crisis-driven reorganizations, however, electronic communication is far more likely to correlate with success—probably because in a fast-moving situation, employees would rather receive news quickly than be left in the dark.

Ultimately, the most important thing for leaders to remember is that reorganizations are not only about numbers—they’re also about people. Friends and colleagues will lose their jobs. You have a duty to treat each individual fairly and sympathetically. mass, impersonal layoffs by video conference without any forewarning are unlikely to win you accolades.

A better approach is to tell all employees what is happening and why, and then have managers or hr personnel who know the people affected speak to them directly. even when things happen quickly, employees need to understand why, when and how changes will happen.

7. Create a positive feedback loop

NANCY MCKINSTRY, the CEO of Wolters Kluwer, told us: “it is unrealistic to expect the new organization to work perfectly from the beginning. You have to live with it and digest it, and rapidly course correct when you find issues.” Crisisdriven reorganizations that have formal mechanisms for feedback (such as a system for managers to escalate issues, staff surveys or a formal review 3-6 months after completion) are much more likely to be successful, while reorganizations without clear processes are most likely to fail.

interestingly, while growth driven reorganizations consistently benefit from surveying employees about implementation issues, our research suggests that this approach is less effective for costcutting reorganizations. This may be because cost cutting is by nature divisive, so staff may take longer to embrace the changes. nonetheless, companies that have completed a cost-cutting reorganization should not neglect other formal means of assessing organizational performance after the launch.

Delivering organizational change in a crisis is never easy, and Covid-19 poses unprecedented challenges. But armed with the seven guidelines listed above, you are much more likely to succeed.

Peter Buchas is the managing director of the Quartz Efficiency Driver. Stephen Heidari-robinson is the managing director of Quartz Associates, a visiting fellow at Oxford University and co-author of Reorg—how to get it Right and 10 must Reads— managing in a Downturn. Suzanne Heywood is the chair of Quartz Associates, managing director of Exor, chair and acting CEO of CNHI and co-author of Reorg—how to get it Right and 10 must Reads—managing in a Downturn. Matthias Qian is an associate of Quartz and an Oxford University academic.