As you can detect from the limitations described for each of the organizational structures, there are risks attached to the restructuring process. Those identified here are obviously generic risks; however each organization will need to identify the specific risks associated with moving from one structure to another. The management therefore needs to understand fully the nature of these risks. As a concrete example we have included in the box excerpts from a risk assessment generated for a medium-sized company that had decided to move from a function-oriented organization to a divisionalized structure incorporating five product-based business units together with a centralized ‘shared services’ and financial control unit.
RISKS OF NEW STRUCTURE
Structure and interdependencies
Business unit structures will require some level of consistency (shape, size, roles and responsibilities, reporting lines, etc) amongst themselves to ensure that they can be adequately serviced from the centre.
Being very clear about the boundaries of the businesses we are in. That is, boundaries of the markets and boundaries between the business units.
There needs to be clarity of role and responsibility between the central services, shared services and business units.
Shared services/central service effectiveness
Shared services and, to a slightly lesser degree, central services need to be closely aligned culturally and process-wise with the business units that they interact with, to encourage efficient and effective management across the boundary.
How support services are devolved, shared and centralized requires careful planning to ensure cost-effective, efficient and productive functions.
Corporate identity
The corporate identity will be dissipated and may not be replaced.
In some areas staff’s ‘affinity’ will be significantly diminished – how can this be managed?
Synergies
Synergies may be harder to exploit (eg deploying e-commerce solutions across business units).
Cost
Costs are likely to increase if we move to devolved support functions – what are the specific proposals that will increase income?
Cost inefficiency is a risk – the structure will inevitably lead to some duplication of costs across the business units. The structure is not ideal from a cost point of view.
Root cause
We may not address some true causes of problems that we have by thinking that we are dealing with them by restructuring.
The task for the management team was to generate an honest list, assess the degree of risk (probability x impact) and agree actions to minimize the risks. In addition, and as an example of good practice, a risk assessment was also completed for the process of managing the change as well as the changes themselves, as listed in the box.
RISKS INHERENT IN MANAGING CHANGE
Management of change
The organization will spend another six months to a year with the ‘eye off the ball’.
There is a lack of change/implementation expertise and skills.
The executive management team tends to get ‘bored with the detail’ quickly and therefore may lose interest and impetus and let both the transition and the transformation peter out.
Communications
Staff may see this as ‘yet another restructure’ not tackling the real problems, and therefore become demotivated.
People
We need to ensure the best people possible for each job. We need to ensure that we keep the people we want to keep.
Management of synergies
Loss of knowledge – we need to capture and transfer knowledge of, for example, strategy formulation and implementation.
We need to ensure best practice in one part of the company is transferred across the company.
Roles, responsibilities and interdependencies
Risk of business units declaring ‘UDI’ and not fully engaging with central services and company-wide issues.
We need to ensure those in the centre are motivated and their performance measured. We need to establish levers other than the policeman role and the threat of regulators etc.