Vantrappen & Wirtz 2023
Vantrappen & Wirtz 2023
Vantrappen & Wirtz 2023
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a couple of offsites with the management team lead to a literature focuses on either upstream aspects of an initiative
number of major decisions, including plans for sharing (for instance, identifying the company’s purpose, values, and
resources and broadening the CEO’s span of control. But vision) or downstream aspects (such as execution and
after some backroom maneuvering, decisions are undone. change management). Less is said about the midstream core
of the discipline — that is, the hard stuff, such as structure,
• The founder-CEO of a family-owned engineering and processes, and systems. A good framework should
construction company retires, handing over the reins to rehabilitate this essential midstream part while integrating
one of his children. The new leader has plans to it seamlessly with the upstream part (by considering the
professionalize the company’s business processes and drivers of change) and the downstream part (by ensuring
governance, but the retired founder keeps fnding ways to readiness for the go-live on Day One).
short-circuit the CEO, undermining any effort to improve
The framework that we have gradually developed through
the company’s functioning.
our work aims to overcome those two shortcomings by
respecting the dynamic nature of change and focusing on
When we looked back on the major organization redesigns the hard organization design variables. Starting from the
we’ve accompanied in the past 30 years (see “The Research”) frst principle, it brings together the building blocks of
and refected on why some initiatives were less effective than organization design thinking into a logical fow, from
others, we recognized that CEOs can fall into one of two understanding an organization’s drivers of change to the
traps: failing to use an appropriate framework, and, quite options for concept design, the operationalization in detail
simply, failing to maintain sufcient leadership throughout design, the implementation at the transition stage, and the
the process. In this article, we’ll present a systematic course corrections necessary during the reorganization’s
approach to organization redesign that CEOs can follow, actual performance. (See “The Organization Redesign
and address specifc behaviors that executives must guard Guide.”)
against if they are to retain full ownership throughout the
organization redesign and implementation processes. CEOs at the front end of an organization redesign need to
be aware of fve overarching principles that stand out in this
framework:
A Framework for Tackling
1. Organization is a means to an end. Managers change an
Organization Redesign organization design with the expectation that the new design
will better enable the company to achieve its business goals.
Many scholars and consultants have developed frameworks
That expectation is based on the assumption that those goals
that support systematic thinking about organization
will be made explicit, embraced by the management team,
design. 2 The framework we are presenting here
endorsed by stakeholders, and remain reasonably stable. A
emphasizes two aspects that are often underexposed.
company whose goals are vague or fuctuating is likely to
First, the framework recognizes that managers never start cycle through disruptive organizational rearrangements
with a blank slate when redesigning their organization. without much improvement in its performance. That’s why
There is always an existing organization in place that heavily our design framework starts with identifying both the
informs any redesign. 3 Even if the existing design has external and internal drivers of change.
become dysfunctional, there are usually good reasons why it
2. The best possible design is unknowable. Making
was adopted in the frst place, and those reasons shouldn’t
organization design choices is arguably more difcult than
be ignored. As a consequence, a good framework needs to
making business strategy choices. A strategy choice comes
incorporate a dynamic link between the past and the future.
down to selecting the one of various alternatives that
Second, much of the current advice in the management maximizes the defned objective — say, EBITDA growth.
With strategy, leaders weigh the available information, the
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assumptions and uncertainties, resource constraints, and design goes live and the redesign starts to have a direct
their own appetite for risk. Not so for organizational choices. impact on the daily functioning of a large number of people:
They do not fow from a mathematical optimization but what they do, how they do it, and with whom. As little
from a judgment about the weight of the arguments in favor as possible should go wrong, for the sake of managerial
of and against each of a number of design alternatives. That credibility, respect for people, and impact on the business. 7
is why the design framework encourages CEOs to consider That is why it is crucial to start a careful change management
alternative organizational concepts. process well ahead of Day One. 8 No employee should be
left in the dark about their place in the redesigned
3. Concept design precedes detail design — and only the organization.
latter is participative. At the concept stage, the principles
for the new design are defned. Those involve fundamental
organizational variables, in particular the architecture (for
Why the CEO’s Continuous
example, what to centralize and what to decentralize). 4
After considering alternative design concepts, one is selected
Engagement Matters
and taken forward for detail design (for example, the roles In strategy formulation exercises, it may be perfectly
of various functions in an end-to-end business process). The adequate for the CEO to stay involved through ad hoc
detail design can and should be done with the broad interventions spaced over time, such as participating in an
involvement of the managers and people directly concerned: executive offsite, leading the steering committee, or
They know best what works, will have to operate within presenting to the board of directors. In organization design
the design outcome, and can act as change ambassadors. exercises, on the other hand, we fnd that the most effective
However, such a participative approach is rarely advised for CEOs keep their fnger on the pulse of the process on an
concept design, which tends to require familiarity with the almost daily basis, from start to fnish.
company’s (often still confdential) vision and strategic
options, freedom from conficts of interest concerning the One reason they do this is that it provides them the
fate of various company functions, and speed. opportunity to form their own ideas about a ft-for-purpose
design and to possibly shift their mental model quite
4. An organization design evolves through a pattern of radically. They take their time to allow their thinking to
deliberate leaps and emergent hops. The notions of mature, as there is no single best design and the eventual
deliberate and emergent strategy are well entrenched in the choice is a largely qualitative judgment about a number of
discipline of strategy formulation: Guided by the company’s valid alternatives.
deliberate strategy, managers at all levels in the organization
make myriad decisions every day that gradually alter the They also consistently engage because they realize that the
exact form of that strategy. 5 A similar pattern is observed organization design process is quite unforgiving. Each phase
in organization design: Senior management deliberately builds on the choices made in the previous phase, gradually
decides on a major rearrangement (leap) of the organization, involving more and more people. The number of explicit or
after which a series of adjustments (hops) are made to implicit micro-commitments made along the way — about
compensate for the inevitable imperfections of the original roles, borders, lines, people, head count, and other factors
design. This leap-and-hops pattern is totally normal and — keeps growing. Having to backtrack is painful, in part
even desirable, since the perfect design is elusive and a because it is widely visible. If strategy formulation is like
company’s environment changes all the time. 6 That is why planting trees, organization design is like sowing grass: Its
the design framework shows loops that feed imperfections effect is immediate, all over the place, and in need of
back into the design so that they can be addressed. attention.
5. The proof of the design is revealed only after Day One. A third reason for daily engagement is to help build buy-in
Day One refers to the moment at which the approved detail for the new design within the organization. Effective CEOs
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insist on participating fully in communications about the help people adopt the changes. 9 However, CEOs can go
outcomes of the design exercise, not so much through the overboard when it comes to inviting people’s involvement,
proverbial “memo to all staff ” as by talking with people in which can result in an excessively complex process with too
the feld. They can only do so credibly and convincingly if many steps, participants, and approval points. For example,
they have immersed themselves in the actual design work. inviting more comments instead of deciding and freezing
the process can drag out the design phase. Appeasing
Most importantly, CEOs involve themselves in the process behavior aimed at demonstrating a willingness to listen is
daily because they recognize that people and interactions often well intentioned and meant to function as stakeholder
will eventually make (or break) the organization. Fully management — but it can also refect the CEO’s own
participating in the design process gives CEOs a unique uncertainty about the design concept.
opportunity to observe and infuence the people side of the
business beyond their direct reports. The indecisive CEO. The decision-inept CEO who fails to
make decisions or stick to frm decisions is rare but not
How Leadership Weakness extinct. A typical symptom is the CEO giving in to a late-
stage “over my dead body” threat by a manager who
Can Derail Redesign disagrees with a well-thought-out executive team decision.
CEOs will sometimes compromise in the fnal stretch out
In situations where we’ve observed a leader’s inability to of a fear of negative fallout. In such organizations, things
remain fully in control of the redesign process as laid out happen in spite of the CEO.
above, their weaknesses have tended to refect one of four
characteristics: half-heartedness, appeasement, The incapacitated CEO. Defective governance can make it
indecisiveness, or incapacitation. We’ve distilled the hard for the CEO to keep a grip on the redesign throughout
following four archetypes from our observations of the entire process. In companies where the CEO is not also
organization redesign efforts that have faltered: the chair of the board of directors, the board might interfere
with the CEO’s handling of the organization redesign. In
The half-hearted CEO. Whereas the trigger of a strategy privately owned companies, powerful board members such
formulation exercise tends to be clear, an organization as retired founders can meddle in the design and short-
design exercise may be prompted by lobbying by certain circuit the CEO, protecting old favorites or otherwise
stakeholders rather than a clear business need. In some disrupting an orderly process. Such impairing of the CEO
cases, a member of the management team or the board of — whether during the concept design, detail design, or
directors may raise a concern. The CEO might not initially transition phase — is often visible at lower levels and highly
fnd that concern important or be inclined to initiate change, damaging.
but they might want to satisfy that stakeholder to end the
debate and thus agree to consider organization redesign — CEOs planning an organization redesign would be well
with the private thought that the plans will go nowhere. advised to consider these patterns of weak leadership. They
Or the CEO may be confused, unclear, or cagey about the should assess their own vulnerability in terms of both their
motivation for a redesign, leaving it to the project team to own traits and the contextual factors that hamstring their
fll in the blanks. In still other cases, the CEO might be on leadership, and then consider how to overcome them.
their way out, voluntarily or involuntarily. In all of those
situations, the CEO lacks a full-throated commitment at the They can begin by asking themselves four questions:
inception of the project, getting it off to a bad start.
1. Do I fully believe in this initiative?
The appeasing CEO. Every transformation requires careful
2. Will I listen to the right people without letting the process
change management, with deliberate activities to move the
go off track?
company from its present state to the desired future state and
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3. Am I prepared to make tough decisions where needed and any deviation from the concept would have to pass
stick to them? through the committee again.
4. Am I in control of all the levers I will need to pull? • The CEO encouraged the company’s divisions and
functions to each appoint an ambassador for the
transition phase. These representatives were on the
Such soul-searching is important because once CEOs
management team of their respective divisions and
understand where their leadership of this critical change
effort may be weak, they can work to mitigate those functions and had participated in the detail design phase.
weaknesses. (See “How CEOs Can Diminish Their They met with the chief change ofcer monthly to share
Vulnerability.”) Imagine a CEO who knows they tend to be progress information in both directions.
appeasing. They might recognize that during the concept
• A simple tracker was used to monitor progress toward
phase, they should consult with a restricted group of senior
a range of specifc transition targets in advance of the
managers, and during the transition phase, they should
adopt a kind of comply-or-explain process (when any go-live. The percentage-of-completion statistics were
deviation from the concept design must be explained and regularly reviewed by the CEO and openly published
can only be accepted after approval by the governance body based on division and function. This generated some
that had approved the concept) and freeze the design, healthy peer pressure and helped the process maintain
reassuring employees that the company will make course traction.
corrections after launch as needed.
We worked with the CEO of an industrial company who The example demonstrates that it pays for CEOs to do some
acknowledged that he had some elements of the upfront, explicit, and honest introspection about their visible
incapacitated and indecisive archetypes. He was able to behavioral tendencies and the actions that can prevent the
compensate for the tendencies that might have otherwise redesign exercise from derailing.
derailed the process, in a few smart, specifc ways:
Continual organization redesign is a fact of corporate life.
In most cases, there are good business reasons to consider
• Because the CEO traveled almost constantly, he appointed
a redesign, despite the signifcant extra time, resources, and
a chief change ofcer with complementary skills who
emotional energy it tends to consume. But the CEO’s full-
worked closely with him and took care of day-to-day
on engagement is needed to make the redesign succeed.
project matters at the head ofce. However, the CEO
Even then, however, redesign exercises often go astray. CEOs
remained in charge of the effort.
may lack an appropriate design framework or simply fail to
maintain sufcient leadership throughout the process. They
• The CEO proposed having the company’s nomination
should start with an assessment of their vulnerabilities —
and compensation committee act as a steering committee
both their own behavioral tendencies and governance-
during the concept design phase. This provided a
related constraints. And they should fnd ways to
managed channel to the board chair, whose frequent
demonstrate that they are full-hearted, conclusive, decisive,
intervention in operational matters sometimes
and, ultimately, in control.
undermined the CEO.
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heads The Little Group, advising companies on organization 4. H. Vantrappen and F. Wirtz, “When to Decentralize Decision Making,
and When Not To,” Harvard Business Review, Dec. 26, 2017,
design issues worldwide. Vantrappen and Wirtz are the
https://hbr.org.
authors of The Organization Design Guide: A Pragmatic
Framework for Thoughtful, Efcient and Successful 5. D.J. Collis, “Lean Strategy,” Harvard Business Review 94, no. 3 (March
Redesigns (Routledge, 2023). 2016): 62-68; and H. Mintzberg and J.A. Waters, “Of Strategies, Deliberate
and Emergent,” Strategic Management Journal 6, no. 3 (July-September
1985): 257-272.
References
6. H. Vantrappen and F. Wirtz, “A Smarter Process for Managing and
Explaining Organization Design Change,” Strategy & Leadership 46, no. 5
1. “P&G Accelerates Pace of Change for Shareholder Value Creation,”
(2018): 36-43.
Procter & Gamble, Nov. 8, 2018, https://news.pg.com.
7. S. Heidari-Robinson and S. Heywood, “ReOrg: How to Get It Right”
2. Good examples include J. Roberts, “The Modern Firm: Organizational
(Boston: Harvard Business Review Press, 2016).
Design for Performance and Growth” (Oxford: Oxford University Press,
2004); and A. Kates and J.R. Galbraith, “Designing Your Organization:
8. J. Stouten, D.M. Rousseau, and D. de Cremer, “Successful
Using the STAR Model to Solve 5 Critical Design Challenges” (San Organizational Change: Integrating the Management Practice and
Francisco: Jossey-Bass, 2007). Scholarly Literatures,” The Academy of Management Annals 12, no. 2
(June 2018): 752-788.
3. M. Raveendran, “Seeds of Change: How Current Structure Shapes the
Type and Timing of Reorganizations,” Strategic Management Journal 41,
9. K. Harigopal, “Management of Organizational Change: Leveraging
no. 1 (January 2020): 27-54. Transformation,” 2nd ed. (New Delhi: Response Books, 2006).
The Research
This article draws on the dozens of major organization redesign exercises the authors have accompanied in the past 30 years
across continents in a wide range of sectors, including B2B (such as payroll services) and B2C (such as fast-food retail), products
(such as automotive) and services (such as engineering), and for-proft and nonproft.
Copyright © Massachusetts Institute of Technology, 2023. All rights reserved. • Reprint #65104 • sloanreview.mit.edu
MIT SLOAN MANAGEMENT REVIEW
Copyright © Massachusetts Institute of Technology, 2023. All rights reserved. • Reprint #65104 • sloanreview.mit.edu
MIT SLOAN MANAGEMENT REVIEW
Copyright © Massachusetts Institute of Technology, 2023. All rights reserved. • Reprint #65104 • sloanreview.mit.edu
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