Management Fix: Company Reorganization

A MngtFix is an actionable solution for a problem with pros and cons to be evaluated by a human manager. Every other week we share a little bit of our knowledge base on social media and our newsletter. This week’s MngtFixis…

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Description

This week’s “Company Reorganization” is a very tough solution, so it can’t be decided lightly.

By definition, company reorganization could be a change in the structure or ownership of a company through a merger or consolidation, spinoff acquisition, transfer, recapitalization, or change in identity or management structure. Such an endeavor is also known as “restructuring”. (Extracted and adapted from https://www.investopedia.com/terms/r/reorganization.asp)

A business organization makes changes in personnel and departments and can change how workers and departments report to one another to meet market conditions. Some companies shift organizational structure to expand and create new departments to serve growing markets. Other companies reorganize corporate structure to downsize or eliminate departments to conserve overhead. Often new owners or managers rearrange business structures to create a familiar business model.

Changing Strategy

The business climate dictates many changes in organizational structuring. Company directors often reorganize corporate structure to accommodate the market shifts. Managers often pull employees out of regions where sales are declining to concentrate on operations in thriving markets. Some companies create new divisions to facilitate new products or product lines. Some companies have trimmed production staff and increased sales departments due to surplus production. Internet sales often drive companies to add technical departments.

Changing Structural Types

Companies often rearrange business structure to follow a new business model. A small company with a functional organizational structure changes to a product division model once it has significant sales for a number of different products. Some businesses shift organizational structure to a regional model to assign local managers to different markets affected by regional factors. Other companies create a matrix grid to place the same key managers over all the various departments and divisions.

Downsizing

Companies commonly downsize to remain functional during a loss of revenue. Most companies draft a skeleton model of essential personnel, materials, and facilities to remain in business. A CEO will close departments, drop product lines, lay off managers and sell facilities to keep a company afloat. Top managers reorganize business structure to meet the needs of the new organization at its smaller size. Remaining managers typically oversee more departments with fewer employees in each.

Expanding

Corporate expansion demands the creation of new departments to accommodate new products or new facilities. Any company that opens new facilities to produce new products or house additional departments has to rearrange business structure to include the new staff. The new company managers must report to new upper-level managers responsible for the new company branch facility. Companies often make changes in the basic organizational structure type to reassign the management throughout the expanded structure. (Extracted and adapted from https://bizfluent.com/facts-6951648-flexible-organizational-structure.html)

All these changes must be accompanied by change management and the mandatory communication to the stakeholders.

Known Associates

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This MngtFix has been mentioned concerning several MngtBugs such as…
“Change Resistance”,
“People Leaving the Company”,
“Undefined Responsibilities”,
“Lack of Focus”,
“Lack of Company Strategy”,
and of course “Overlapping Responsibilities”!

Call to action

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Check some of the previous issues https://mailchi.mp/humanmngt/previousissues

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Have a nice week and remember…
Human Managers should strive to be humans while managing and be managed as humans!

Written by

Eduardo Espinheira is a Consultant, Facilitator, Manager, Public Speaker, Creator of the Management Bugs&Fixes and the Machiavellian PM Stories

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