For new CEOs, knowing whether to restructure their company isn’t always easy. When you’re brought into the role as an external person, it’s likely to be because your predecessor underperformed, or the company didn’t post the results its board and investors had expected.
In this situation, it’s easy to walk in the door with a preconceived idea about transformation. The trouble is, transformation is not always necessary.
In this article, you’ll learn how to make sure that your earliest decisions about company structure are robust and sustainable.
A restructure isn’t always necessary
It’s true: New (externally recruited) CEOs are brought in primarily because an organisation is underperforming. It’s rare for a high-performing company to appoint someone externally. Whether the organisation requires a restructure is another matter.
Your first task is really two-fold:
- to assess whether or not the company is effective in the short term, and
- to assess whether or not the shape of the company is strong enough to carry it into the future.
Your destination is a time when the business is strong again, leaving you to spend more time thinking about the long-term than the short-term. Your senior executive is then accountable for your short-term results.
This doesn’t change the fact that, as a new CEO, your success will likely be determined by three things:
- your ability to decide fast, and with confidence
- to be proactive and engaging, so that you create maximum impact while adapting to the environment
- making sure that you meet your board’s (and other interested parties’) expectations in terms of delivery.
More importantly, just because you can restructure, it doesn’t mean that you ought to.
Remember: A restructure is expensive, time-consuming, disruptive, and stressful. It is also not guaranteed to deliver the result you’re after. A restructure must occur when it serves the big picture, not the short-term.
‘A reorganization has to aim for something bigger -‘ wrote John MacDuffie, co-director of Wharton’s Jones Center for Management, Policy, Strategy and Organization, ‘such as changing culture, incentives, and values of the organization – and trying to get people to behave differently. If all you are changing is one lever, it won’t be very effective.’
BCG’s ebook from 2016 argued that transformation is actually a full reboot, from values to culture.
Restructures – transformations – whatever you want to call them, are fundamentally about remaking the business.
Look to your leadership when deciding what steps to take
For you to understand whether or not a restructure is necessary, you must be clear about whether your senior leadership is robust. If this most-critical team is failing, then the company’s poor performance may be simply because it is poorly led.
I agree it’s easy for me to say: I’m a consultant who works with CEOs to make necessary (and often very difficult) change; I don’t sit in the hot seat. Senior leadership is often a highly political environment. There are those who are good at playing the politician, and those who are not. One of your most critical soft-skills is the ability to ascertain, political adroitness aside, whether someone is an effective leader.
Beyond this, gaining familiarity with culture may take you more time than you feel you have.
Therefore, here’s something that you can do. Right in the very beginning of your new role, understand whether your senior leadership is causing you to waste time and energy. Look for things that you don’t need to be doing. The Harvard Business Review identified this waste as a critical factor in CEO success after it studied 7000 of its readers.
My point is: If you’re always distracted by non-essentials, then it’s a red flag that your leadership team may require intervention.
To assess your leadership team you also need to:
- understand whether it is accountable and responsible
- be clear about whether it is afraid to put disciplines in place when called for
- get a sense of any unnecessary, bureaucratic baggage.
If your leadership team isn’t accountable or responsible, isn’t putting disciplines in place, and isn’t streamlined, then it’s a good indication that the structure is not at fault.
Rather, your leadership team is not doing its job effectively.
As business author Ron Ashkenas wrote:
‘Most organisations can be made to work if leaders set the right goals, hold people accountable, streamline end-to-end processes, and put in place appropriate disciplines. In the absence of these (and other leadership actions) any structure can appear dysfunctional.’
The challenge for new CEOs is that the board may have a different view, because it is one step removed from seeing how senior leadership functions. If, as a new CEO, your plan is to shake up the senior leadership team, get evidence to support your plan. It isn’t just important from a Human Resources perspective: It’s necessary if you’re going to be supported by your board.
One way you can do this is to assess the blockers in your organisation.
There are many ways your organisation can be stopped from being effective. At a structural level, there are four primary blockers. Each one stops at the leadership team.
- A structure that isn’t aligned to the corporate strategy. Strategies change over time, and old methods of organising teams can become a hindrance.
- A structure that doesn’t match the purpose of the organisation, but has been shaped to fit personalities instead. Companies that are structured around personalities tend to bend their requirements so they don’t offend people, rather than putting people where they can play to their strengths.
- High levels of bureaucracy. Too much bureaucracy really means too many levels of sign-off, which may be symptomatic of not enough responsibility or accountability among managers.
- Poor information flow, which stops the CEO from doing his or her job properly.
Point four is one of the top three key challenges for a new CEO, according to Kissel and Foley. These authors suggest that the CEO’s job is ultimately to ensure that information flows upwards and outwards, to stakeholders and board members. They argue that this role is one of a CEO’s most critical, stating: ‘To manage up well, A CEO needs to translate intuitive business decisions into a logical framework that fits with the explicit knowledge that board members have accumulated’.
If you are mired in unimportant details, can’t get the information you need, or find that the organisation isn’t achieving its strategy or its purpose, a transformation is probably unnecessary. What you need is a new leadership team.
Now you know what you need to do to get started. To be effective, ‘adopt an investigative and analytical mindset’ so that you can gird yourself with the information needed to make good decisions.
Once you have done that, and have assessed (or changed) your leadership team, you’ll be in a stronger position from which to develop a plan for long-term, sustainable transformation.
Your key takeaway is that, as a new CEO, your success depends on being unafraid of spending time in analysis. Happily, it will also help you to become visible and to stay engaging: After all, you can’t answer questions without talking the people in your organisation! This is the only way that you can be confident about the direction of your company’s growth.
Once you’re in this position, you’ll have the information you need to gain support from your board and your investors. The decisions that you make quickly will be robust, and you’ll have the right team alongside you to carry your company forwards.
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