No quick fixes with restructuring

Change for change's sake is how world-weary employees frequently see corporate restructurings. Executives, on the other hand, often see structural reorganisation as the quickest way to address poor performance.

by The McKinsey Quarterly 2006, No 1
Last Updated: 23 Jul 2013

But this study of under-performing global companies suggests that executives are unwise to assume that restructuring is a quick fix. A group of underperformers that made no structural changes improved their performance (measured by total returns to shareholders) a full year earlier than those that embarked on major restructuring.

The research supports the view that restructuring is often a distraction from improving business performance. The study also finds that companies that deviate from the common organisational structure of their industry are more likely to underperform. This suggests that companies should reject the default structure only if they have clear evidence that it is linked to their underperformance, and that makeovers involving unusual structures are unlikely to turn around poor performers.

Source: When organisation isn't enough
Cathy H Fraser and Warren L Strickland
The McKinsey Quarterly 2006, No 1

Review by Steve Lodge

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