The Decision-Driven Organization

Publication Date: June 01, 2010

CEOs tend to believe that company structure is closely tied to performance, so it makes sense that nearly half of all CEOs reorganize their companies during their first two years on the job. But Marcia W. Blenko, Michael C. Mankins, and Paul Rogers of Bain & Company report that of 57 reorganizations they studied between 2000 and 2006, less than one-third saw significant performance improvement. This failure, they believe, is rooted in a misunderstanding about the link between structure and outcome. In truth, a company’s structure only results in improved performance if it allows the firm to make key decisions better and faster than the competition. Making sure this is the case requires a shift in the way we manage organizational change. We must start with an audit of assets, capabilities, risks, and weaknesses and move toward a decision audit, in which the goal is to understand which set of decisions are key to the success of the company’s strategy and at what organizational level they should be made. If there is alignment between structure and decisions, then the organization will work better and performance will improve. To reorganize around decisions, leaders should follow six steps: Identify their firm’s key decisions, figure out where in the company those decisions should happen, organize the macrostructure based on sources of value, determine how much authority decision makers need, align the rest of the organizational system with that related to decision making, and help managers acquire the skills they need to make decisions quickly and well. The new normal means constant change. Companies must reinvent themselves if they want to survive. This HBR Spotlight section looks at organizational change through two very different lenses-the first examining the connection between restructuring and improved performance, the second making the case for reorganization as a means of keeping a company’s structure in tune with the human dynamics that drive creativity and innovation. A third article suggests new ways to keep overworked employees engaged and productive in an economy struggling to recover from global recession.

Pages: 10

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The Decision-Driven Organization

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