Change Management WalkMe TeamUpdated February 1, 2023

5 Tips on Managing Changes to Organizational Structure

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5 Tips on Managing Changes to Organizational Structure

Managing a changing structure is not simply the re-arrangement of an organizational chart. Introducing change to organizational structure requires careful planning, strategic implementation, and expert guidance. Even though every corporate structure example is different, leaders can learn from change management professionals to avoid the most common pitfalls.

Small businesses only grow into big companies unless when have a clear and effective organizational structure. Many start-ups will begin with a small number of people solving problems and delegating tasks as they come. But as a company grows, the chain of command becomes more complex, creating confusion and disarray.

In medium and large companies, organizational structure can dramatically change employee experience. The pre-existing structure determines who has the freedom to work on their own initiative and not a single maverick manager. Likewise, the proper structure can help staff at every level enjoy their work. Moreover, the appropriate structure can also support improved profits by creating the right balance between innovation, conformity, risk-taking, and efficiency.

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As one element of organizational change, organizational structure change often involves a degree of risk. It can easily disrupt the existing team dynamics and affect how well people work together. As such, when making changes to an organizational structure, it is important to have clear communication throughout the process and ensure that all stakeholders understand the stakes involved.

This article will give an introduction to the challenges and opportunities that go with changes to organizational structure. It will start by explaining the organizational structure and why structures sometimes need to change. It will go on to describe different types of organizational structures, including matrix organizational structure, functional structure, and divisional structure. 

After explaining the factors involved in deciding on a structure, it will suggest five strategies to ensure that structural change management is successful.

What Is Organizational Structure Change? 

What Is Organizational Structure Change_

Organizational structure change is a process of reshaping the way an organization is set up.

Any medium or large company should have a clear organizational structure. A clear organizational structure helps to allocate working responsibilities across the whole staff body. It will also show who is responsible for making decisions at different levels. Although the organizational structure is a bureaucratic aspect of a business, it is also essential for smooth operations. The smallest entrepreneurial companies may get away without a clear structure, but a structure is necessary as soon as they start growing.

As a result, making changes to an organizational structure is a significant task.

Organizational structure change involves changing how work gets done, who reports to whom, and which departments or teams are responsible for different tasks. This can include creating new roles, re-assigning existing ones, or restructuring entire departments and teams. Through organizational structure change, an organization can become more efficient, agile, and better respond to changing market conditions.

Changes in organizational structure are often the result of a need for growth or a response to external challenges. For instance, major technological advances may require increased staff or departments that specialize in certain areas. Similarly, new regulations from the government may require an organization to restructure its departments.

Why is Organizational Change Management Important?

Why is Organizational Change Management Important_

Changes to the organizational structure have ripple effects across a wide variety of business functions. 

The risks of these changes make change management essential. There may be pushback from employees, Damage to core business metrics, culture clashes, and uncertainty.

On the other hand, managed change can garner significant returns, such as decreased costs, Improved morale, Lower failure rates, and Reduced employee frustration. As with any other change management principle, a sophisticated, well-structured approach is the key to success.

In a recent guide, Gartner reported that over 80% of companies surveyed were going through some kind of major structural redesign. The percentage will have increased since then, so there’s no better time to keep up with the latest organizational structure change management developments.

Types of organizational structures

Types of organizational structures

Organizational structure comes in many forms, each of which necessitates its change management method. The optimal structure for an organization will depend on various factors. Even within one niche industry, diverse structures may be observed. For instance, Gartner’s 2022 benchmarks for the research and development industry reveal that R&D companies are almost equally likely to have centralized or decentralized organizational structures.

Leaders who want to make sensible plans for the future will, therefore, get to know their options before deciding the best organizational structure for their company.

Matrix Structure

In a matrix structure, employees are organized into functional and project-based teams to balance the needs of the project with the needs of the functional groups. This structure allows for more flexibility and can help organizations respond quickly to changing market conditions. However, as Gartner’s HR glossary points out, “matrix organizations are structured such that employees report to more than one manager,” which may confuse employees when they may have competing loyalties to different managers.

Functional Organizational Structure

The functional structure is the most traditional organizational structure, where employees are grouped based on their specialized functions, such as marketing, finance, or operations. This structure is typically more efficient and cost-effective, as it allows for developing technical skills and expertise. However, it can also lead to silos, where communication and collaboration between different functional groups are limited.

Divisional Structure

A divisional structure divides the organization into smaller, semi-autonomous divisions based on product, geography, or customer type. Each division has its management and resources and is responsible for its own profit and loss. This structure allows for more localized decision-making and can be especially effective for organizations operating in multiple geographic locations or markets. However, it can also lead to competition and duplication of effort between divisions.

Centralized structure

In centralized organizational structures, decision-making authority and responsibility are concentrated at the top management level. This structure offers many advantages, including improved efficiency, better control over operations, and increased coordination among departments. It also has drawbacks, such as reduced innovation and decreased employee flexibility.

Decentralized Organizational Structure

Decentralized organizational structures are the opposite of centralized structures. Decision-making authority and responsibility are delegated to lower levels of management. This structure allows for greater employee autonomy, increased innovation, and better utilization of local resources. However, a decentralized structure may lead to lower efficiency and higher costs if it is poorly managed.

Flat organizational structure

A flat organizational structure is a type of organization in which authority and decision-making are distributed throughout the company rather than concentrated at the top. This structure reduces bureaucracy, increases employee engagement, and allows for quicker response times to changing market conditions.

Network structure

A network structure is an organizational type in which a company relies heavily on external relationships, such as partnerships and alliances, to pursue its strategic objectives. This type of organization can offer many advantages, including increased flexibility and access to resources, but it also carries certain risks, such as the disruption of key partnerships.

What Causes Organizational Structural Change? 

What Causes Organizational Structural Change_

Structural change is necessary when the current organizational structure no longer helps to achieve the organization’s goals and objectives. When an organization faces challenges such as declining performance, increased competition, or difficulty adapting to changes, a structural change may be necessary to address these issues and improve the organization’s overall effectiveness.

Some of the key issues that motivate structural change are as follows.

Technological Advancements

Organizations that want to stay competitive and take advantage of new opportunities must keep up with the latest technology. This can include new software, hardware, and systems that can help to improve operational efficiency, communication, and data management. As these new technologies are adopted, the organization’s structure may need to change to accommodate them. For example, new technologies may require different skill sets among employees or may necessitate the creation of new roles and responsibilities.

Market Conditions

The external environment in which an organization operates can change rapidly, and organizations must be able to adapt to remain competitive. Factors such as increased competition, changes in consumer demand, or a shift in industry trends can drive organizational change. 

For example, if a new competitor enters the market and begins offering a similar product or service, an organization may need to restructure to compete better. Or if there’s a decline in demand for a particular product or service, the organization may need to change its structure to focus on different areas.

Mergers and Acquisitions

Mergers and acquisitions can have a significant impact on an organization’s structure. When two organizations merge, they may have different operating methods, and the new organization’s structure must be created to accommodate these differences. This can include changes to the organizational hierarchy, division of labor, and communication channels. Mergers and acquisitions can also lead to changes in the overall size and shape of the organization.

Organizational Growth

As an organization grows, it may become necessary to restructure to maintain efficiency and effectiveness. For example, as the organization expands, it may need to create new departments or roles, or it may need to reorganize existing departments to better align with the organization’s goals and objectives.

Leadership Changes

A change in leadership can bring new ideas and priorities and may lead to changes in organizational structure to align with those goals. A new leader may want to restructure the organization to better achieve the goals and objectives of the organization or to create a more efficient and effective organization.

Internal Factors Affecting Organizational Structure 

Internal Factors Affecting Organizational Structure

Internal factors often play an essential role in decisions about organizational structure.

The number of staff within an organization will usually determine the breadth of an organization’s structure. If an organization has a smaller team, fewer roles may be needed, and a more flat structure could work well. On the other hand, if an organization has a larger team, it will likely need to create specialist roles and departments to function effectively.

The organizational culture is also important when making decisions about structural change. A hierarchical structure may suit organizations with a formal internal culture, while a more flat structure could work well for organizations with internal creative cultures. 

Organizational values and strategies are also critical internal factors that can affect the choice of organizational structure. For example, if an organization has an internal strategy for rapid expansion, it may need to implement a new structure better suited to a larger workforce.

External Factors Affecting Organizational Structure

External Factors Affecting Organizational Structure

External factors also feed into decisions about organizational structure.

For example, if the external demand for a company’s products or services increases significantly, the organization may need to restructure its departments to meet that demand. Similarly, external market changes can make an organization need to adapt its structure and roles to remain competitive.

Issues in regulation and compliance may also affect organizational structure. For example, external constraints such as health and safety standards or data protection laws may require organizations to create new departments specializing in those areas. Moreover, unlike other parts of the business, those departments may take on a decision-making role.

Finally, external stakeholders such as investors can also impact the choice of organizational structure. Investors may impose certain requirements or expectations on an organization’s structure, which could affect how it is organized and managed.

The 6 Types of Organizational Structure Change

Changes to organizational structure, like any other change, can be classified in various ways based on the specific circumstances in which they occur. While companies can prepare for planned changes, such as strategic ones, their ability to adapt to unexpected changes is crucial. When a company chooses to alter its organizational structure, it is likely to fall into one of six primary categories.

  1. Unplanned Change 
1 Unplanned Change

Unplanned change refers to changes that occur unexpectedly, often due to external factors beyond the organization’s control, such as natural disasters, economic downturns, or political instability. These changes can significantly impact the organization and can be difficult to predict or prepare for. The goal of dealing with unplanned change is to minimize its negative impact on the organization and its operations and quickly adapt to the new situation.

  1. People-Centric Organizational Change 
2 People-Centric Organizational Change

People-Centric Organizational Change is a type of organizational change that focuses on the employees and their needs, values, and expectations. It aims to improve employee engagement, motivation, and productivity by creating a positive working environment and culture.

To complete this structural change, employees must be involved in the change process. The ultimate goal of people-centric organizational change is to improve the organization’s overall performance and effectiveness by aligning the employees’ needs with the organization’s goals.

  1. Structural Change
3 Structural Change

Structural change refers to changes made to an organization’s formal and informal design. This type of change can include changes to the organizational hierarchy, division of labor, and communication channels. It can also include changes in the overall size and shape of the organization, such as mergers and acquisitions, divestitures, and spin-offs. The goal of structural change is to improve the efficiency and effectiveness of the organization by aligning the structure with the organization’s strategy and goals.

  1. Remedial Change 
4 Remedial Change

Remedial change refers to changes made in response to a problem or crisis within an organization. These changes are typically implemented quickly and are designed to address specific issues or challenges that have arisen. The goal of remedial change is to quickly and effectively resolve the problem and return the organization to a state of stability and normal operations. It is important to note that the remedial change is not a long-term solution but a short-term solution that aims to resolve the immediate problem and prevent it from happening again.

  1. Technological Change 
5 Technological Change

Technological change refers to adopting and integrating new technology within an organization. This can include hardware, software, and systems used to improve operational efficiency, communication, and data management. The technological change aims to improve the organization’s competitiveness by increasing customer productivity, quality, and responsiveness. The new technology can also lead to new products and services, new ways of working, and new growth opportunities.

  1. Strategic Change 
6 Strategic Change

Unplanned change refers to changes that occur unexpectedly, often due to external factors beyond the organization’s control, such as natural disasters, economic downturns, or political instability. These changes can significantly impact the organization and can be difficult to predict or prepare for. The goal of dealing with unplanned change is to minimize its negative impact on the organization and its operations and quickly adapt to the new situation.

Three Strategic Steps To successful Organizational Structure Changes 

Three Strategic Steps To successful Organizational Structure Changes

No major change project happens by magic. Organizational structure changes can make a company especially vulnerable to risks and problems, which is why many businesses will use consultants to support their work. Nonetheless, anyone commencing a project should take the following steps: getting a clear understanding, planning carefully, and planning for a smooth transition.

  1. Gaining a Clear Insight Into Your Problems and Objectives 

The first step to successful organizational structure change is understanding the problems and what the change project hopes to achieve. This involves identifying both internal and external factors that are influencing the organizational structure, as well as understanding how those factors interact with one another.

Many change projects fail simply because they are not built on solid foundations. Understanding the company’s issues is difficult, but doing so means that the plans and implementations fit the situation.

  1. Strategizing, Crafting, and Disseminating

It is important to plan the change strategies carefully because a well-planned change strategy can increase the likelihood of success and minimize the negative impact of the change on the organization and its employees. Additionally, a well-planned change strategy can help to manage the risks associated with the change and to mitigate any potential negative consequences.

Moreover, a well-planned change strategy can also help ensure the change is sustainable. By considering the long-term implications of the change and developing a plan for ongoing monitoring and evaluation, the organization can ensure that the change is not only implemented successfully but also becomes a permanent part of the organization’s culture and operations.

  1. Guaranteeing a Smooth Transition

The third step is to ensure a smooth transition from one structure to another. Assuming the organization already has an excellent plan in store, this step relies on good communication with all stakeholders, especially staff members. Employees must understand the reasons behind the changes and how they will be affected. Employees must have sufficient time to adapt and make necessary changes in their roles or responsibilities. There must also be a period of training and guidance to ensure that the new structure is fully understood.

Five ways to manage Change to Organizational Structures

Organizational structure determines so many of the business decisions in a company. As such, it’s essential to take extreme caution with any structural change project. This section describes five proven strategies that can help to support excellent organizational change strategies.

Large companies often seek external help for their organizational change projects, whether from management consultancies, a digital adoption platform, or other members of a business consortium. And although a good change project manager should know how to handle any eventuality, any leader can take advantage of these steps.

1. Understand the Big Picture

1 Understand the Big Picture

A positive restructuring project will start with high-quality and accurate information.

For example, a merger is one major cause of company restructuring. The change team must understand what caused the merger internally, what market conditions led, and who made the final decision.

After all, knowing the cause of a change helps you restructure appropriately. Restructuring an organization is no small feat. Deep analysis of the reason can include everything from market analysis to understanding business intelligence. This will inform and improve the final structure.

A good change leadership program should explain these reasons to employees. Clear communications between frontline staff and C-suit executives will make the job easier.

A well-built change project requires reliable, thorough information. A big-picture analysis will help you design effective roadmaps to change and overcome obstacles.

2. Sell the Benefits to Employees

2 Sell the Benefits to Employees

The decision to start a structural change project will inevitably come from the company’s top. Even if some companies involve employees in the planning process, when it comes to the final word, businesses are most often part of the 80% in which decisions are made by those in charge, according to the 2019 Gartner guide linked above.

Put simply, employees want to know what’s in it for them, and it’s up to management to explain. After all, they require more work, time, and effort for every change project. Organizational restructuring projects are even more daunting. 

Employees have to:

  • Integrate into new teams
  • Start from scratch when it comes to relationships and office politics
  • Learn new skills and workplace dynamics
  • Adapt to new work cultures and atmospheres

In some cases, restructuring a workplace is like can feel like everyone is changing their jobs at the same time. To reduce stress and resistance, sell employees the benefit of the restructuring. Explain how it benefits the organization, team, and individual person.

3. Design a Multi-channel Communication Campaign

3 Design a Multi-channel Communication Campaign

Communication is critical during any change project. It can be even more important during volatile restructuring projects. To counter the negative emotions produced by this uncertainty:

  • Communicate the causes for the change program in depth. Explain why it’s happening and the adverse effects of not changing.
  • Start early and finish late. Start employee onboarding well in advance of the change. The earlier you start, the easier it is for people to adjust.
  • Invite total participation and create feedback mechanisms. Don’t just encourage feedback. Proactively solicit it. This will help you identify resistance and diffuse it.
  • Create a multi-channel campaign. An email blast or a meeting is not enough. Create multiple resources, online and off, so everyone can engage with your project at their convenience.

Make sure that company leaders get involved, not just the project managers, for the change project—the more open, transparent, and democratic the process, the more involved the people.

4. Engage in extensive team-building.

4 Engage in extensive team-building

A change in the organizational structure could have a major impact on everyone. Not only will the organizational structure chart look different, but the everyday experience of employees will also be altered. As such, a new organizational culture must be built.

One way to do this is through communication campaigns, as mentioned above. Another way is through team-building, such as:

  • Social Events – Social events are an excellent way to break the ice and introduce new group dynamics. Starting with social events helps people initiate relationships without thinking about work. 
  • Meetings and Workshops – Work meetings help people “dip their toes into the pool” by introducing new dynamics without plunging them headlong into the new work environment. 
  • Team-Building Exercises – A company should also consider team-building and change management exercises. Unlike social events, they compel people to work together as a team … which they will inevitably do once the restructuring is underway.

As change managers know, a stage-based approach is essential to gaining employee support. Team-building activities such as these can help employees feel at ease, which will decrease frustration and stress.

5. Roll out incrementally, review as you go, and continually improve

5 Roll out incrementally, review as you go, and continually improve

Most organizations can choose the speed at which they roll out a new structural project. However, many change practitioners find that an incremental rollout can provide great opportunities to review and improve while the implementation is in process.

There are a few reasons for this:

  • Smaller changes are easier to implement than larger ones
  • It reduces shock, stress, and resistance to change
  • Relationships take time to develop – giving people time to prepare, even mentally, helps them adjust early on
  • Incremental rollout helps you learn at each stage, then incorporate that information into the next rollout

A stage-based project roadmap will help to clarify goals at each stage. Then, based on the results of that point in the journey, leaders can make adjustments before the project’s next stage.

Look to the Future with a new Organizational Structure 

Introducing structural changes to a company can be a daunting. It requires a significant amount of effort and resources to implement effectively. However, it’s often likely to come simultaneously with other changes, such as a digital transformation. Companies that engage with emerging technologies may need to change their structures to ensure that they are maximizing their value.

Looking to the future, it’s likely that we will see several new issues that lead to more organizational structure change projects. For example, in January 2022, McKinsey suggested that sustainability organizations could benefit from re-design of organizational structure as “Sustainability-focused reorganizations tend to be particularly multifaceted, and priorities can shift quickly.”

Companies that can anticipate and adapt to these changes will be in a better position to thrive in an ever-changing business landscape. By embracing new technologies and re-evaluating their organizational structures, companies can ensure that they can remain competitive and continue to deliver value to their customers.

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