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Essentials On Managing Reorgs

Today, two constants managers and employees are dealing with are a changing business environment and too little time to effectively manage it. Company reorganizations are a common response to change. But stunningly, 80% of reorgs fail to deliver the desired results. Managers want results and want them in a hurry. But there are few shortcuts and everyone is looking for a silver bullet. A good strategy is critical, but it isn’t enough. As Richard Clark the former CEO of Merck observed, “You can have a good strategy in place, but if you don’t have the culture and the enabling systems that allow you to successfully implement that strategy, then the culture of the organization will defeat the strategy.” As the saying goes, “Culture eats strategy for breakfast”, and it then proceeds to eat process for lunch, and finally, structure for dinner. Addressing the culture component is essential in the reorganization process, as it looks at both readiness and capability for organizational change.

The technical part of a reorganization is not all that hard. The most challenging part of a reorg is the preparation which requires a well articulated strategy which addresses culture, readiness and capability. Having established a effective strategy, some of the techniques for reorganizing can then be approached with an expectation of success. These techniques include things such as headcount and census reporting. With the right tools modeling the organization to stay within headcount and budget targets becomes straightforward.

An employee headcount report, sometimes called an employee census, contains information about employees for an employer or an organizational unit. The information can be sorted many ways; job status (active or inactive employees) or by characteristics such as race, gender, years in the job, age, salary or tenure. Human resources information systems, or HRIS, typically feature applications that enable employers to generate reports based on any number of variables. An employer’s ability to generate reports simplifies human resources planning functions and tasks.

Anyone who has been an employee for a significant amount of time has usually felt the effect of a company reorganization, or reorg. In today’s fast moving business world, they are becoming more frequent. A whopping 60 percent of executives surveyed by McKinsey said they’d experienced some sort of organizational redesign in just the last 2 years.

The first step to a successful reorg, experts say, is a plan that takes into account current strengths and weaknesses. Before jumping into planning a new organizational structure, it’s fundamental to understand holes in the current one. Research shows that the benefits of a reorg can take 3-4 years so it pays to take the extra time to assess, plan and get it right the first time. Teams not performing to their potential, groups overladen with management and disparities in performance can all point to the need for change. To start attacking this complex task, an org chart which clearly displays basic but important key data points is a great place to start.

Headcount

The headcount metric answers the basic question, ‘How many, and what ‘mix’ of employees do I have in my organization and its divisions?’ Headcount calculations form the basis of all other workforce performance ratios. To realize this in a hierarchical context the analytic in OrgChart is used to visualize headcount, and it throws instant light onto where groups, divisions or geographies might be bloated or anemic, or certain managers overburdened by direct reports.

Headcount may differ from Full Time Equivalent (FTE) in that FTE may be represented as a fraction or decimal. Headcount is normally expressed as a whole number or integer. OrgChart makes these calculations automatically once name and hierarchy are entered.

Job Type Census

Reorganizations are often a reaction to a need for a change strategy in industries beset by constant disruption. As strategy changes, so does the balance of skills required of the workforce. The Job Type Census metric in OrgChart calculates the number of employees, and contractors, by area of expertise, throughout the organization or in a particular group. Totals are determined for each type of job such as analyst, programmer, HR manager and finance manager. Being able to review these buckets of competencies, and see them in the context of the overall organizational structure can form the basis for a solid plan for a pending reorg.

Salary and Headcount Rollup

Commonly the largest investment of an organization is in its people. The ability to understand and react to the costs associated with labor are unavoidable in making reorg decisions. OrgChart’s Salary and Headcount Rollup automatically totals employee salary cost by the entire organization as well as by
business unit, division or department. Salary rollups are commonly broken into employee and
contractor/third party totals to distinguish those distinct employee cost categories.

Surprisingly, many organizational restructures result in small benefits or in some cases a worse performance. The chances of these negative outcomes occurring can be mitigated by careful planning and a pragmatic, enlightened approach. OrgChart can facilitate the reorganization process by presenting a clear up-to-date analysis of where the organization is today and is an important first step to executing a healthy reorg.