#organizational restructuring

Well, it certainly doesn't feel like 8 months has gone by. But, by Tumblr's count, that's exactly what has happened since my last post. 

DoTA2? I've sorta given up on it. Not for any reason with the game itself, I just get easily distracted and while fun to learn, I'm going to give the game some more development time before trying it again. Somewhere in the back of my mind still lives the fun thought of becoming adept at DoTA2, but without heavy dedication, that just isn't going to happen. Life got busier; I picked up a second job on top of my initial job and volunteering hours, so what free time I had has been severely gutted. Also, add into this mixture buying Guild Wars 2 and falling heavily into it for further evidence of time slipping away.

In the context of organizational restructuring, especially if it lasts for several years, and involving the need for some people have to leave the company, a threat environment is created. This environment provokes uncertainty in people’s minds, as they may have a constant unconscious thought of whether they are going to leave the company or not.

This situation causes a difficulty in using properly the capacities / features of the Pre Frontal Cortex (PFC) – people are driven mainly by the perceptions and fear of what can be happening to them over the course of the restructuring. Planning, strategizing, having the ability to focus on what’s really needed and important to do to keep the business going on, albeit what is going on around people, becomes immensely difficult.

People unconsciously start to use more the reflexive (automatic) system (driven by the amygdala and limbic system – Ventromedial Prefrontal Cortex and basal ganglia are also regions more active), than the reflective system (driven by medial, lateral and dorsomedial prefrontal cortex, and medial temporal lobe).

Generally corporations direct people and organizations / business units to start acting in the new way of doing things, using mainly a top down imposed approach, deciding at a top level the new organizational hierarchies, drawing “boxes” where they are going to put the directors, executives, managers, etc., most of the times without consulting / hearing operational people that really know how to do the job, and what’s important for it to be done properly.

Without a common purpose / the involvement of some of the implicated people, restructurings become more an imposed exercise, than an engagement exercise.

Impositions coming from the top, combined with the stress usually attached with uncertainty / lack of proper / timely communications are a powerful combination for restructurings not to provide the results forecasted and desired at the top.

People are mainly functioning in autopilot (basal ganglia working), doing things in their known and habitual way, being very sensitive and giving emotional responses very quickly, some that they might regret later. People are “victims” of their limbic system – “survival” (finding a new job / finding ways to escape being fired) becomes the underlying driver of people’s behavior.

Learning to do things in the new way, having the capacity to pay focused attention on what are their assigned tasks is almost humanly impossible.

Yet, people at the top deciding reorganizations keep doing things the same way, in spite of all the signs of their internal climate surveys and the results of more than 4 decades of research on such situations of organizational change – consistently only around 30% of such change initiatives succeed.

 If the C level people, deciding for reorganizations, were aware of how the brain works in such environment they hopefully would start to conduct things in a different way.

Knowing that this threatening environment automatically makes people move “away” from the persons or situations that cause a perceived or real threat, they would understand that with the PFC not working properly, what reigns are the fight or flight responses – the brain prepares the motor sensors for survival related action(s) – heart and lungs get an extra supply of blood and oxygen, reducing the amount of such substances in the brain, especially in the PFC.

With fewer resources to work according to its natural functions, the PFC reduces its leading role in the brain, causing people’s focused attention to become scarcer.

Attention can be defined as the ability to focus on a particular sensory input while inhibiting the urge to focus on distractors on the environment. In an organizational restructuring environment, since threats are “in the air”, they act as distractors all the time, making attention to be directed towards stimuli that can signal that a threat is about to happen. The brain is always scanning the environment and neurons are always active to decide if and how to respond.

  Even if people are directed to keep their focus on the business and ignore the “noise” caused by the restructuring, the brain mechanisms needed to pay attention to what is relevant have difficulty in doing their job, as inhibiting “irrelevant” (named as such by top level directors / managers) stimuli it’s almost impossible, as threats can be everywhere. Attention is focused not on the business goals, but on the individual’s personal goals – usually related to survival instincts.

  During such restructuring phases, cortisol, the stress related hormone, is spread across the whole body and brain, and if restructuring lasts for a significant period of time, people’s brain’s start to physically change in response to the attention being constantly driven to scanning the environment. An overactive amygdala also inhibits other important and useful hormones to be released and able to do their job properly. The so called “feel good hormone” – dopamine - that normally acts on virtually every part of the brain in order to modulate neuronal activity, making us positive, motivated, engaged and able to work towards goals, reduces its flow. This again has implications on the organizational environment – demotivated, disengaged people produce and perform much less, are more prone to errors, and have more difficulty in relating in a normal way with managers, colleagues and also clients. The negative Impact in the service to clients, can be just another spark towards negative financial impact to be occurring, as since organizations are typically more concerned to what is happening inside (dealing with the reorganization), they start serving clients as if they are not the reason the company exists for. In a quick summary – people in high alert for internal organizational threats, means less focus, less collaboration, less attention, disengament, demotivation, poor client service, clients leaving or not renewing contracts, negative financial impact.

  Memory, a key component in learning new things, the new way of doing things dictated by the top, is also negatively impacted, as with the amygdala taking the lead, there is a negative impact to the hippocampus, inhibiting new memories to be formed. Learning is therefore more difficult, if not impossible. Training courses start to be only a way to spend money, keeping people busy and not focused on the business priorities, as people are in an away mode.

What is helpful in such restructuring environments is for people with responsibility to decide the restructuring initiatives, to consider including programs that can help people become less stressed (work life balance programs – partially financing gyms / health club attendance, massage at work, meditation, mindfulness and yoga, etc.). Also important is to start providing people some more personal assistance in the form of personal / leadership development programs – including coaching and mentoring. This will start to restore people’s confidence in themselves, reduce anxiety and cortisol circulation, lifting off possibilities for increased motivation and engagement, creating more certainty and less “noise” in their brains.

With the brains working in a more quiet environment, solutions, alternatives and insights are more likely to appear, as people start to direct their  attention and actions to possibilities than problems, becoming a possible first step towards increasing the likelihood of successful organizational and financial results to happen, as it is the goal of each restructuring initiative.  

 © José de Sousa

   Chief Success Officer

Connecting and developing great minds.

Lisbon, Portugal

email [email protected] LinkedIn pt.linkedin.com/in/japsousa/

Rohnel de Rozario

India Inc. has got so used to dealing with uncertainty in the business environment – that we forget how recent some of these changes have been. Globalization has altered competitive landscapes across markets, restructured supply chains across industries, and redefined skill sets required of leaders to succeed. Despite these challenges, many companies are opting for Organizational Restructuring in a bid to position themselves for success.  

What drives the need to reorganize work, jobs and structures? It could be a line manager, a middle manager or a CEO who recognizes that groups are not cohesive or engaged. Or, it might come from an external source—an upcoming M&A—or anticipated growth, a new management team with new strategies or regulatory changes that will seriously change how work is done. Working with organizations of varying sizes and scale, we have found that success in organization restructuring hinges on a few key factors.

A few years ago, a new CEO in a large utility company who, determined to cut costs, slashed the HR budget, thus eliminating services HR provided. Soon, organization charts were discarded because executives believed as long as everyone knew what they were doing the company would continue to travel the course. The reality was that job accountabilities were vague, and no one understood the structure. Inevitably, things began to slip. One executive described the situation as “5-year-olds playing soccer.” Clearly, this proved the basic need for articulating the challenges that restructuring is expected to solve.

Further, a key challenge is to focus on the new governance – how the enterprise is run and where key decisions are made. When a U.S. firm acquired a European competitor to gain access to international markets, we found that no unified sense of purpose existed. Between marketing and production, communication was about squabbling for resources. But after reorganizing into business units—each with globally unified product and market accountabilities—management was again focused on profitability. It became clear why roles existed, how they added value, how they could share data, what their common goals were, and why they had to work together for success.

It has been found that many CEOs use a top-down approach to redesigning – they restructure the top three levels and leave the cascade to middle-level managers. On the contrary, successful restructuring requires a step-by-step approach. It pays to have different teams anchoring different activities: Senior Team to provide direction and decision signoff; Design Team to conduct diagnosis, clarify the design intent, and develop structure; Action Group detail design work; and Implementation Team as the agent of change. This will also ensure that informal networks, which are a source for information flow and culture dissemination, are not forgotten during re-design.

With the structure in place, the onus is on job design, as the most direct way for managers to maximize organizational ROI on total rewards. Research has showed that when jobs have clear accountabilities, people take initiative and appropriate risks and they innovate, as they understand how their work relates to that of others in the organization. Moreover, organizations must take a pragmatic decision on the skills needed and if they can be acquired from the market; then focus on building the rest of them. For example, when an organization moves from a functional structure to a business unit structure, skills needed in the new organization are more about general management as opposed to functional expertise, making staffing for the new roles difficult.

Finally, the restructuring is woven together by the softer aspects – simply creating an environment in which everyone is able to perform to the best of their abilities can have a huge impact. Our research shows that climate improvement programs can translate into a 30 per cent improvement in profitability. Additionally, a collaborative approach to work and leadership is absolutely necessary to build endurance to see this through. For instance, our research on the Best Companies for Leadership 2010 found that Siemens has linked 20 per cent of its top executives’ discretionary bonus payments directly to collaboration, as part of its One Siemens approach.