10 Common Mistakes to Avoid in Restructuring Your Organization

Over 70% of restructuring efforts fail to achieve their objectives.

Why? Because restructuring is often approached from a technical perspective, focusing on downsizing and reorganizing, while disregarding the human side of the equation. While the technical aspects are important, it’s how well the emotional, cultural, and leadership challenges are handled that determines the success or failure of a restructuring effort.

In this article, Jacques Fischer draws on over 30 years of experience leading organizations through cultural change to identify 10 common mistakes that cause most restructuring efforts to fail.

Jacques provides a new perspective for developing your restructuring strategy and offers suggestions you can apply to help make your restructuring effort a success. The methods presented are based on CulturalChange ’s Pulscipline? Cultural-Change System , which boasts a 100% success rate in achieving clients' change objectives.

Ten Common Mistakes Made in Restructuring Initiatives

1.???? Believing a technically oriented strategy can succeed

2.???? Not developing needed competence in change management

3.???? Not having a plan to handle the emotions

4.???? Not having a strategy to overcome resistance

5.???? Not “restructuring” the leadership style and company culture

6.???? Not having a post-restructuring strategy

7.???? Not including the human side of change in your strategy

8.???? Skipping a step in the change process

9.???? Measuring success by cost savings alone

10. Doing it on your own

Mistake #1: Believing a Technically-Oriented Strategy Can Succeed

Most organizational restructuring initiatives are designed to fail. The fatal mistakes are incorporated into the change strategy, project setup, and implementation plan.

This can be puzzling, considering that most restructuring strategies are created by the organization’s top managers, often with the help of renowned consulting firms specializing in restructuring organizations.

Yet a study by McKinsey, "Realities of Organizational Restructuring Revealed," estimates that 70% of restructuring efforts fail to achieve their intended objectives. Similarly, a Harvard Business Review article, “The Secret Behind Successful Corporate Transformations,” used a meta-analysis to determine that only 22% of companies in their sample were successful.

If top consulting firms are aware of the high failure rate of corporate transformations and are experts in designing new structures, why can’t they improve the success rate?

To understand this, we first need to understand the three phases of a restructuring initiative and the mindset and expertise needed to succeed in each phase.

Three Phases of a Restructuration Initiative

1. Restructuring Phase?

-? Downsize the workforce?

-? Change the organizational structure

2. Rebuilding Phase?

-? Heal the wounds caused by restructuring

-? Rebuild effective teams

3. Performance Improvement Phase?

-? Evolve the leadership style and company culture?

-? Improve the performance of the organization

Some Reflections Relative to the Restructuring Process

-? The mindset and expertise needed for restructuring are diametrically opposed to those required to rebuild and improve performance.

-? The restructuring consultants who advised on who to let go do not have the trust of the remaining managers to effectively coach them in rebuilding their teams and developing their leadership effectiveness.

-? The restructuring consultants lack expertise in managing emotions, overcoming inhibitors of change, and implementing cultural change.

-? The organizational change experts lack the expertise in designing a new organizational structure and are seldom involved in that process.

When putting these factors together it is easy to understand why most restructuring strategies focus solely on the technical aspects of the first phase—downsizing and structural changes—while neglecting the human side of change.

So why can’t the restructuring consultants improve the success rate? Because the success of restructuring efforts is determined by how well the organization handles the human side of restructuring and their managers’ ability to lead their people through the change—not by the quality of the technical strategy.

Mistake #2 – Not Developing Needed Competence in Change Management

The lack of experience in change management leads managers to make inadequate decisions when setting up the change project and directing their organization throughout the change.

Most organizations don’t go through major changes often, meaning most managers will only face one or two restructurings in their entire careers, leaving them inexperienced in designing quality change strategies and implementation plans.

Restructuring requires a different mindset and skill set than day-to-day operations. For example, the content, sequence, and timing of events in the implementation plan of a restructuring initiative are based on the management of energy, not activities. While management teams are skilled in implementing large technical changes, most rely on project management principles that are ineffective for managing emotions, removing inhibitors, and implementing cultural change—all crucial components for a successful restructuring.

Over the past 30 years, we’ve rarely encountered a management team with the expertise in change management necessary to set up an effective restructuring project and make quality decisions throughout the transformation journey.

After leading our first few companies through cultural change and having to overcome unnecessary difficulties due to inadequate decisions, we realized the need to start a change initiative by developing a deep understanding of change management, which the leadership team needs to make quality decisions throughout the change process.

How We Develop Competence in Change Management

To address this, we created the "Directing Organizations through Change " and "Overcoming the Inhibitors of Change " training programs. At the beginning of the change project, we integrate these programs into a two-day workshop where we help design the change strategy, support structures, measurement tools, and implementation plan. The result was a dramatic improvement in the quality of the change strategy, project setup, and implementation plan, which allowed us to focus on overcoming resistance, implementing the change, and improving performance. This also significantly reduced the time and resources required to achieve the change objectives.

Mistake #3: Not Having a Plan to Handle the Emotions

Is your restructuring plan prepared to manage the emotional fallout from the structural changes?

Restructuring and downsizing stir up strong emotions that can take over the work environment. If not handled properly, they can hurt the company’s reputation, damage trust in leadership, and disengage employees, ultimately dragging down performance.

During the time when top leaders are developing the restructuring strategy, the emotional energy builds and is turbocharged when the new structure is communicated and people are asked to leave the organization. This creates emotionally charged working environments dominated by strong negative energy: attention shifts away from performance, people quit unexpectedly, and turmoil ensues.

These highly emotional work environments are a primary characteristic of restructured organizations. If not managed correctly, the emotions will generate a flow of inhibitors that will cripple leaders’ ability to rebuild the organization and improve efficiency.

The ability to manage these emotions is a critical success factor for rebuilding the company. Without the skills to manage and channel emotional energy, restructuring efforts will struggle throughout the rebuilding process and fall short of their potential.

A Technique We Use to Help Plan for the Emotions

One of the techniques that we use, and is simple to replicate, is to walk the management team through their implementation plan and predict the emotions each step will trigger. We then identify strategies to address these emotions and map them out on a parallel timeline alongside the technical implementation plan. This way, we can address and mitigate emotional reactions swiftly and effectively. It’s a proactive approach that helps the management team anticipate emotions and plan for them.

Mistake #4: Not having a Strategy to Overcome Resistance

Is your team equipped to handle resistance and remove the Inhibitors of Change? If not, brace yourself for a bumpy ride.

It is the Inhibitors of Change that cause corporate change efforts to fail. They resist change, derail the project, consume needed resources, and wear out leaders. They are the enemy of success and the adversary you must defeat. The ability to identify and remove the inhibitors of change is the primary success factor for restructuring initiatives and corporate transformations.

There are two types of inhibitors. First, there are those that naturally resist any form of change and are present in every organizational transformation. Then, there are those created by strategic mistakes that derail change projects and are the focus of this article.

Each inhibitor has its own way of resisting change and causing problems. However, the real challenge with inhibitors lies in their ability to combine their forms of resistance and energy to create walls of inhibitors with one purpose: to resist change, derail the project, and kill the restructuring effort. The strongest wall of inhibitors of any corporate change initiative is at the beginning of the implementation process. In restructuring initiatives, this wall is reinforced by emotionally charged inhibitors created from the negative energy and chaos generated by downsizing and restructuring the organization. When faced with this wall of inhibitors, most leaders feel overwhelmed and unsure how to break through it.

Without an in-depth understanding of the inhibitors of change associated with your change initiative and having a method to break through the initial wall of inhibitors, the restructuring initiative will likely stall at the foot of the wall and be added to the other 70% of restructuring initiatives that fail to achieve their intended goals.

How We Discovered Inhibitors

During the second organizational change effort we led, the management team made a series of decisions that unnecessarily complicated the transformation process. It became clear that we needed a deeper understanding of the various forms of resistance and problems caused by poor strategic decisions—what we now call the “Inhibitors of Change.”

Over the next two years, we focused on identifying these inhibitors, studying their impact, and developing methods to overcome them. This work led to the creation of our Inhibitors Model and the development of the “Overcoming the Inhibitors of Change ” training program.

While we were working on the training program, we were asked to unblock a corporate change initiative that had been stalled for two years and was currently being managed by experts in project management. When listening to the problems the project management experts were having, it became evident that the primary role of the change architect and those directing the change effort is to identify and remove inhibitors from the path of change, enabling teams to implement the planned actions and achieve the intended results.

For the management team to be effective in their role of identifying and removing inhibitors, they first need an in-depth understanding of the Inhibitors of Change. We accomplish this by delivering our “Overcoming the Inhibitors of Change ” training program and then helping them design their Inhibitors Strategy which defines the roles, responsibilities, methods, and systems for identifying and removing inhibitors throughout the change effort. A good Inhibitors Strategy simplifies the implementation of the change and significantly increases the probability of success.

How We Create the Inhibitors Strategy

We create the Inhibitors Strategy with the management team during the strategic step of the change process. We begin by facilitating an exercise to identify the probable inhibitors the project will face and design a change strategy and project structure that either eliminates the identified inhibitors or provides ways to overcome them. Of course, there will be strategic inhibitors we will miss, along with other inhibitors that will arise throughout the transformation process to resist the change. For these inhibitors, we design a system to identify and remove them throughout the transformation process. However, the biggest challenge always lies in breaking through the initial wall of resistance. Next, we help the management team understand the characteristics of this wall and develop a methodology to break through it. Once we have these three elements of the Inhibitors Strategy in place—eliminating strategic inhibitors, managing emerging resistance, and breaking through the initial wall of resistance—we are confident we can overcome the inhibitors throughout the project and successfully achieve the change objectives.

Mistake #5 – Not “Restructuring” the Leadership Style and Company Culture

Is your organization’s inefficiency due to structural issues, or inefficiencies in leadership style and company culture? The answer is often “both.”

If the goal of restructuring is to improve efficiency and cut costs, it’s critical to not only restructure the physical and financial aspects of the organization but also “restructure” the leadership style and company culture. An organization’s culture and leadership style have a greater impact on performance than its structure.

A restructuring strategy that focuses solely on structural changes and downsizing while ignoring leadership and cultural development will deliver limited results. The issues that prompted the restructuring effort will remain. The restructured organization will operate within the same inefficient culture, and the leaders will still lack the skills needed to rebuild the teams and develop a high-performance organization. Over time, this will lead to unsatisfactory results that may prompt key stakeholders to initiate further cost-cutting or another restructuring.

How We Evolve the Leadership Style and Company Culture

We start by identifying the weaknesses in the leadership and culture of the organization. Once the change strategy is designed, we immediately deliver our “Leading People Through Change ” program, which develops the leadership skills necessary to guide people through change and improves overall leadership effectiveness. We leverage insights from these programs to fix problems identified in the leadership style and create the desired leadership culture. With these new capabilities in place, it is relatively easy to implement a process that can fine-tune the company culture or significantly change it, one step at a time.

Mistake #6: Not Having a Post-Restructuring Strategy

Does your restructuring strategy end with the announcement of the new structure?

If it does, how are you planning on healing the wounds caused by the restructuring, and rebuilding a stronger organization?

Most people think restructuring ends with downsizing and a new structure, this is just the beginning of the process to increase organizational efficiency and results obtained.

Putting the new structure in place is often the easiest part of a restructuring initiative. The real challenge lies in what comes next: healing the wounds from restructuring, overcoming emotional barriers, and making critical changes in leadership style and organizational culture to improve performance.

If an organization needs restructuring, it’s usually a sign of deeper issues with leadership effectiveness and culture. Without a comprehensive post-restructuring strategy that addresses these areas, the gains from structural changes alone will likely be limited and disappointing. In the end, it’s what happens after restructuring that truly determines its success or failure.

Let me illustrate this with an example of a successful organizational restructuring initiative.

Case Study –Implementing a Post-Restructuring Strategy

When British American Tobacco (BAT) acquired Rothmans, both companies had a headquarters and factory of equal size in Switzerland. It was decided to shut down one factory, reduce the workforce for each headquarters by 50%, and merge into a single, restructured headquarters.

After BAT Switzerland declared they had implemented the new structure and achieved the “hard” objectives, they described their situation as follows:

Note: the lists below were taken from a presentation the General Manager and Jacques made in an international conference on change management, where they shared the case.

Work Environment

-? Disorientation after 10 months of waiting on restructuring actions

-? Distrust in management

-? Survival syndrome

-? Demotivation, lack of energy

-? Many CVs on the market

-? Self-oriented

-? Market de-focus

Leadership Gap Analysis

-? Two opposing leadership styles

-? Dysfunctional top team

-? Lack of teamwork

-? Dysfunctional lower leadership

-? Lack of Belonging / Motivation / Integrity

-? Often lack of the desired leadership style

-? Leaders seen as “one” with the old company culture and values

Implementing a Post-Restructuring Strategy

Faced with a quickly deteriorating situation, BAT Switzerland asked us, to lead the post-restructuring effort with the following mission: “To heal the wounds caused by the merger and establish the foundations of the new organization as quickly as possible.”

Some Objectives Were:

-? Improve the teamwork and effectiveness of the management team

-? Redirect the negative energy

-? Implement a new set of company values

-? Create a work environment that is challenging, dominated by a strong team spirit and sense of belonging to the organization

-? Build strong teams at all levels

-? Develop the attitude and skills employees need to work well together and implement the change

Some Results Obtained after 10 months:

-? Trust in Management

-? Reduced demotivation and increased energy levels

-? Shared business strategy and clear business objectives

-? Market re-focus

-? Enforced improvement process for managers: Walk the talk!

-? Climate survey: visible improvement

-? More fun!

It was the success of both the restructuring and post-restructuring strategies that allowed the company to quickly recover from the restructuring and shift the focus to increasing market share.

Mistake #7: Not including the human side of change in your strategy

Does your restructuring strategy balance the human and technical sides of change?

If not, how are you planning to overcome the emotions, stabilize the organization, and restore a positive work environment critical for rebuilding the teams and improving performance?

Most restructuring strategies prioritize technical actions, such as moving people, downsizing, and cutting costs, but leave out one critical area: the human side of change.

In our experience, when leaders dive into planning for the restructuring, they often become emotionally and physically unavailable to create strategies to handle the human side of change. They only realize the importance of these people-oriented strategies when faced with the emotional fallout and mess the restructuring created.

The most successful restructuring efforts have strategies to help their employees quickly recover from the structural changes and develop the skills and mindset needed to build a stronger organization. Their strategies contain elements needed to:

-? Heal post-restructuring wounds

-? Rebuild trust, loyalty, and engagement

-? Create positive work environments

-? Evolve the leadership style and company culture

-? Improve performance

The Human Components We Add:

Our approach adds strategic components to the restructuring strategy that actively manage emotional energy, heal the organization, evolve the culture, and develop leadership skills critical to creating a stronger organization that improves results. We accomplish this by adding the following components to the restructuring strategy:

Energy Management Strategy, which includes:

-? How to manage emotions generated by the restructuring

-? How to create a positive environment for change

-? How to manage the momentum of change

Inhibitors Strategy, which includes:

-? How to overcome the initial wall of inhibitors

-? How to overcome resistance to change

-? How to identify and remove inhibitors throughout the change process

Leadership Development Strategy, which includes:

-? How to develop the skills for managing emotions and rebuilding teams

-? How to develop the competence to implement change

-? How to support managers in leading their people through change

Cultural-Change Strategy, which includes:

-? How to evolve the company culture

-? How to leverage the culture to strengthen competitive advantage

-? How to create a high-performance culture

Performance Improvement Strategy, which includes:

-? How to rebuild teams and improve performance

-? How to identify and remove performance barriers

-? How to create a high-performance organization

Change Management Strategy, which includes:

-? How to measure the progress and effectiveness of the change effort

-? How to use “next step” strategies to guide the organization through change

-? How to direct the organization through change

Any missing or weak component in your restructuring strategy will create a set of inhibitors that you will need to confront and overcome to successfully rebuild the organization and improve performance.

If your goal is more than a surface-level restructuring and you want to improve the efficiency and performance of the organization, it’s essential to balance the human and technical aspects of change as quickly as possible.

Mistake #8 – Skipping a Step in the Change Process

Does your implementation plan include a step to heal the wounds caused by the restructuring?

If not, expect more good people to quit. Or worse, does your organization have a plan to rebuild as a whole, or is each department left to figure things out on its own?

Restructuring with the goal of improving the efficiency and performance of the organization requires a company-wide implementation plan. The challenge is in creating a master implementation plan that weaves together rebuilding teams, developing leadership, channeling energy, removing inhibitors, adapting the culture, and removing performance barriers into a single timeline.

Each action in this plan must move the process forward while laying a foundation for what comes next. Coordinating these actions across the entire company is critical. It is almost impossible to change an aspect of a company’s culture if different departments are working on the same things, but at different times.

The Steps of Change

After leading our first three companies through cultural change, we began seeing patterns in the flow of change and started developing our change process. As we led the next 30 companies through change, we refined this process into “steps of change”, which is a core part of our Pulscipline? Change System . For restructuring projects, we had to add two extra steps to handle the emotions and chaos that restructuring generates.

The 7 steps to rebuild a restructured organization and improve performance:

Step 1.? Fine-tune the Implementation Plan

Step 2. ?Develop Leaders

Step 3. ?Heal the Wounds Caused by the Restructuring

Step 4. ?Rebuild High-performance Teams

Step 5. ?Engage Employees

Step 6. ?Evolve the Company Culture

Step 7. ?Build a High-Performance Organization

Skipping a step in the implementation process might give the impression of faster progress, but eventually, the inhibitors caused by this shortcut will surface and force you to return to the missed step to establish the foundation needed for future steps.

How to Regain Control of a Restructuring Effort

If your restructuring effort isn’t moving forward as expected or starts slipping out of control, it’s time to fine-tune the implementation plan.

When organizations are faced with this situation and ask us to help them regain control of the change process, we prioritize the immediate rollout of our “Leading People Through Change ” training program to develop the leadership and change management skills necessary to get back on track. While awaiting the start of the first program, we fine-tune the implementation plan with the management team, helping them identify inhibitors blocking progress and develop missing elements in their strategy.

This creates a fundamental shift in the organization’s mindset and energy, moving it away from the negative cycle of firefighting, self-protection, blame, and mediocre performance. Instead, it fosters a positive environment for change, where people are focused on using the situation to build stronger teams, remove chronic performance barriers, develop themselves, and create a high-performance organization.

Mistake #9: Measuring Success by Cost Savings Alone

Are your restructuring objectives focused solely on structural changes and financial improvements? If so, you might be missing out on many of the potential benefits that restructuring can bring.

It’s critical to take a broader view of the restructuring process. With this new perspective, you can leverage the positive aspects of the restructuring, set a wider range of objectives, and manage the implementation process more effectively to achieve these added benefits.

Results you can expect when restructuring is done right:

Improve Leadership Effectiveness

-? Develop leaders who can motivate and empower people to achieve excellent performance

-? Build a more effective leadership culture (e.g., decision-making, delegation)

Create Healthy Work Environments

-? Develop work environments that are challenging, fun, and bring out the best in people

-? Decrease burnout and absenteeism

Improve Employee Engagement

-? Increase employee empowerment and engagement

-? Boost pride and the sense of belonging to the organization

Improve the Company Culture

-? Strengthen the company culture

-? Remove chronic problems and barriers preventing employees from reaching their full potential

Improve Performance

-? Improve teamwork and reduce silos

-? Improve the effectiveness of execution

Improve Results

-? Increase results obtained

When you shift to this broader perspective, you gain a clearer understanding of the range of advantages restructuring can offer and how to achieve them. This allows you to develop a positive mindset, spread positive energy, and communicate a motivating vision. Without this mindset, restructuring can easily turn into a massive cost-cutting exercise that drains employee morale. Employees end up feeling squeezed, demotivated, and disengaged.

A positive mindset in the management team is essential for turning the negative energy of restructuring into positive energy, engaging employees, and driving performance improvements that can achieve the added objectives that benefit everyone in the organization.

Mistake #10 – Going It Alone

Emotions lead people to make poor decisions, and top managers are no exception.

In restructuring efforts, emotions cloud judgment, causing managers to overreact to employee feedback and impairing their ability to analyze situations objectively and make sound corrective actions.

When leading Philip Morris International’s R&D through cultural change, about a third of the way through the transformation journey, we ran a workshop to teach the management team how to use the PulseSurvey to determine the “next step actions” for the change process. We asked them to analyze another organization’s data and determine the next steps. After reviewing the results, I asked the top leader, “Why is it that when you analyze another organization’s PulseSurvey data, you get the right answer, but when you analyze your own, you don’t?” He quickly replied, “Because I don’t have emotions when I analyze their data.”

In my experience coaching hundreds of top leaders through organizational change, I can confirm that every manager will go through moments when they’re emotionally charged and incapable of making sound decisions.

The presence of strong emotions combined with the lack of experience in change management creates the need for external experts who can analyze situations without emotions and provide clear solutions. External experts bring the experience, methodology, and coaching required to help managers navigate the emotional journey of change.

Organizational change is a coaching-intensive process. When we lead a change effort, we provide the top leader with regular advice on how to guide the organization through the change. Directors receive periodic coaching on how to build change systems, adapt the culture, and manage their functions through the change. We also provide all leaders with periodic training to develop the mindset and skills necessary to guide their teams through the next step of the change process.

Conclusion

As we’ve seen throughout this article, the mistakes that derail restructuring efforts are often avoidable. Whether it’s underestimating the importance of emotional management, failing to develop a robust change strategy, or overlooking the post-restructuring phase, the issues that arise in most initiatives tend to follow predictable patterns.

The key takeaway is this: restructuring success isn’t just about getting the technical aspects right. It’s about leading people through change, addressing the emotional fallout, and building a culture that can support the new structure. The technical plan alone isn’t enough. If the human side of restructuring is neglected, the entire effort is at risk of failure.

By recognizing and addressing these common mistakes early on, you can avoid becoming another statistic in the 70% failure rate. With the right perspective—one that balances both the technical and human elements of change—you can turn your restructuring project into a success story.

At CulturalChange.com , we've spent over 30 years perfecting our leadership development and organizational change methods, and our 100% success rate speaks for itself.

If you're looking for expert guidance to ensure your restructuring achieves its objectives, we're here to help. Reach out today, and let’s create a customized plan to implement your restructuring and achieve the outstanding results you deserve!

Contact us at [email protected] .