How & When To Reorganize Your Team Effectively | Ep 212
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- What's up guys, welcome back to Build. And today we wanna get super tactical and we are gonna talk about reorganizing your team. So today is a very tactical episode for business owners specifically. And that is okay because I really wanna talk about it because I think it's really important. I wanna tackle a topic that makes many people nervous, leaders and employees both, which is team reorganizations, okay?

So what is a reorganization? It's when you reorganize the structure of your team, the incentives, the compensation, the reporting structure, the titles to better fit the organization's needs now. Really interesting, which is, this is a stat from McKinsey, 74% of organizations that underwent a reorg in the last three years experienced significant delays or budget overruns. Actually only 11% reported even achieving their intended benefits.

But here's what I want to talk about today. Why did those 11% get it right? This is something that I have had to do time and time again in my business, and I will tell you why. There are really only four reasons why people do a reorg. And I have fallen into one of these categories many times, if not multiple.

First one is that your current structure doesn't support your strategy. So the way that your department or your company is organized does not help you achieve your strategy. 80% of companies internal strategy, meaning how they structure their people, does not support their external strategy. The 20%, whose it does, make three times more profit.

And I think they grow, it's something like five to six times more revenue. It's ridiculous, right? And this is why I put so much emphasis on making sure that my infrastructure supports my external infrastructure. So the first one is that your current structure doesn't support your strategy. The second is that you're seeing significant changes in the market.

Okay, so say that you need to change your product, you need to change what kind of business you are, et cetera. And then you say, okay, I think I need to reorg. It could also be that you see that there's changes in the employee market and in the workforce. And so you're like, I can't keep hiring the way I am, or I can't keep making jobs the way they are. They need to change the nature of the job, right?

The third is that there's a lot of redundancy or inefficiency. So you're noticing that people have very low output. You're noticing it's very inefficient. You're noticing that there's like the same people doing the same things. And you're like, what the fuck does people even do in here? Right? And the last one is that you're experiencing rapid growth or decline. So I would say that in my business career, I have fallen into all of these buckets.

You know, in the beginning, I really didn't understand how to build a team that supported my strategy. So I had to over time change that. I've seen changes in the marketplace and then we've had to change our products, which then changed our internal teams. I have gone and kind of dove into teams and I noticed that they got really big, really fast and realized they're really inefficient, overhired. And I would say the most common one that I've had to deal with is like we've grown really, really quickly. And so then we have to reorganize how we are structured.

And so those are the most common reasons that people do quote a reorg. And so for you, how do you know if you like need a reorg, right? If it feels really fucking hard to get shit done. If it feels really hard to get work done as a team, you may not be organized the right way.

You may not have the right reporting structure. You may not have the right compensation. You may not have the right jobs, job titles. You may not have the right internal stuff to help make the external stuff happen. That's really the bottom line. And so I really want to cover a few things in this episode, okay? Why do reorgs fail? Because I have advised many people through reorgs and it is a bear. And so I want to make sure that you guys understand how to avoid those pitfalls so you don't have to deal with that.

The second is the critical first 30 days. In the first 30 days that you do a reorg, what are the things that you really need to focus on? The third is how to maintain that momentum after you've made the change. And then most importantly, how to keep your top talent through this entire process. Because the last thing you want is to lose the best people on your team when you're making all these changes. So the first part, why do reorgs fail? Okay, let's look at a case study. Okay, so in 2012,

Adobe underwent a reorganization. They needed to shift from selling box software to a subscription model. And this wasn't just like a structural change. It actually meant completely reimagining how their teams work together to be able to support the external change. Now, before the reorg, Adobe's recurring revenue was 19%. Not that good. Three years after the reorg, 70% recurring revenue. How did that happen?

Okay, they didn't just change reporting lines, they realigned incentives, they modified the team structures, they redid the titles, they redid the job descriptions, and they rebuilt their entire product development process. So everything from the process to the people to the compensation to the titles, it all changed. And so what you'll notice here is that a lot of times when people are looking to do a reorg, right?

they don't change all the things needed to make sure that it's going to be successful. What you want to think through is you really want to think through three things. You want to think through the people, the processes, and the projects. Okay, so like what has to change with the people? What has to change with the processes? And then what has to change with the projects that the department takes on?

Now you could add product to that because if you're changing product, then that's definitely a reason. But the reason that they were successful is because they actually changed every single thing that touched each of those things that changed. And a lot of times what happens is people do quote a reorg and it's basically like they make different people, they make people report to different people. Or they throw in a new compensation structure. Or they change titles.

The reality is, is it's a lot more fucking work than that. Most of the time, you need to change all those things. You've got to change the compensation. You've got to change the titles. You've got to change the job descriptions. You have to change who people report to. You have to change what teams they work with. And you have to change the processes that they use to work. And so a lot of the times what I've seen is just like people only do one and then expect they're going to get the same result as Adobe did. They're like, oh, I'm hoping that if I just, you know, make this person report to this person instead, it's going to work. It's like, no, it's a complete overhaul.

And so the key is that you don't just change one piece, but you change all the pieces that are tied together. The second piece in this is that what you're going to see is that with any organization, people don't like change. Okay, just like fundamentally, I know I can't believe it's, I can't believe I said it, but like people don't like change.

People like to remain the same and it's a lot of times when you are going in and needing to do a reorg, it's not going to make people happy. You're not gonna get buy-in until people see it working. And so just don't expect people to be stoked about it. However, we wanna make sure that we do the best we can in the first 30 days to ensure that we are set up for success. Okay, so in 2013, Microsoft did a reorganization. Okay, here's what they got right about doing their reorg. Before they announced any changes,

They spent months mapping out dependencies between teams. Okay, and so this is what they found out, which is really fascinating. They found that 84% of their employees regularly worked with people that were not within their team. So what did that do? That caused them to say, you know what, let's create horizontal teams. It cut across traditional vertical structures. Okay, and then their employee satisfaction increased by 27% after that.

And so what they did is they investigated before they installed change, right? They didn't just make assumptions. They got curious and they got their hands dirty and they looked in there to say like, what actually, how do these people actually work? Let's understand current state before we change stuff. This is similar to when you bring in somebody from the outside as a leader. If they come in and before they understand how the business works, they just change everything. It's like, well, that's not useful because like we know that there's stuff that's working.

Right. How do we know what you're putting in place is going to work more? But if we take the time to investigate, we can probably actually come up with a better strategy than we had before. And so that is why a lot of people use what we call the communication triangle. This is actually a triangle that Cornell came up with and they did a study of reorganizations, which is basically it's a framework for how to gather communication or use communication when you're doing reorg. Right. And so it's really called up, down and out.

Up is what you tell your bosses and stakeholders. Down is what you tell your team. And then out is what you tell adjacent teams and departments, okay? And so companies that followed that distribution were almost three times more likely to have a successful reorganization. Now, what does that mean? Up, 25% of your effort should be communicating upwards the changes for the reorg. Down is 45% of your effort should go down into communicating to that specific team, the reorg.

And then out is what you tell adjacent teams and departments. And that's where about 30% of your communication should go. And this is based on the study by Cornell. And so companies that follow that distribution are almost three times more likely to have a successful reorganization. And so what that really tells us is that most of your communication should go towards your team. You need to be keeping them in the loop, explaining to them what is going on when it comes to reorganizing this department. The next amount of effort should go into planning.

Communicating with the departments that communicate with that department what is going on so that they know how to interact with the department based on its new structure. And then lastly, it's communicating upwards to people that are above those departments in departments that interact with them, you know, what's going on. And so really what it means, put the most effort into the team that you're reorganizing. Put the second most effort into the teams that interact with that team so that people know how to interact given the new structure.

Speaking of communication, here's what you want to think through when you are doing a reorg, right?

The first is that you want to have a narrative ready. You need a clear reason why you are reorganizing a department. When you have a clear story and you have a clear narrative for people, and by the way, state the facts and tell the truth. It should just be the real reason why you're reordering. Like, please do not sugarcoat it for people. Organizations that do that are three times more likely to actually have success. Because here's what happens, guys. If people don't know why you're reorganizing a department, they're just going to assume it's bad.

I promise you this, I've had to reorg departments multiple times and we have just grown way too fast that we've basically outgrown the structure that they had and people always think it's bad. And I'm like, no, it's not bad, but what is bad is remaining the same and we know a better way to do things. And so be sure that even though people are gonna be uncomfortable, that you have a good story that you're gonna be able to tell everybody and what you're going to say to everybody when they're undergoing all that change. The second thing you wanna do, and this is really important, is identify the key people.

Okay, you want to retain your high performers. And during a reorg, often what happens is that, you know, maybe the low performers that you're reorging and reorging

getting rid of or whatever are spooked, but also you spook the high performers because here's the thing, high performers often don't even know they're high performers because high performers are usually insecure and constantly don't think they're good enough. And so when you're doing a reorg, they are sometimes the most weary people. Identify the people that you need to keep in what I call like your close circle that you want to be communicating with on a daily basis while you're making these changes and letting them know the why behind everything.

This doesn't just have to be leaders. This can be anybody on the team that you're reorging to make sure that they're in the loop and they understand what's happening. The third thing is you want to map out wins. Okay, so what you want to do is know what you want to achieve in the first 30 to 60 days. Because if you can achieve more in the beginning, you will be set up for success in the long term.

And so figure out what is a quick win for you? Is it redoing the process to create a product? Is it shortening the time to create a piece of content by seven days? Is it responding to customers in the first 24 hours? Like what are the objectives of the reorg? If you have those objectives, it's going to help the team because they need to understand what the goal is. And the hardest part about a reorg is like you're changing all the ways that people do things. You want to make sure that people understand where are we working towards?

Like where are we trying to go? What are we working towards? And what does the end goal look like? And the last piece to that is over communicate. Okay, so when you're doing a reorder, we talked about the up, down and out communication. Create a communication calendar if you need to. Like the best organizations and businesses, and this is not just meaning for a big business, this can be 20 people. They have been very structured in their communication.

When I'm undergoing a reorg, I have reminders in my calendar to reach out to people, to send messages to teams, et cetera, to make sure that I am doing those things and getting them done. A lot of the times I actually have a checklist that goes through what communication needs to go out when.

And the reason for that is I know that people, when there's so much change in an organization, they just get scared. It doesn't matter if the change is good or not. It's just like, they just get scared. And so if you want people to not be scared and to do their best work, you have to over-communicate. So what does over-communicating look like? Well, 89% of successful reorgs do daily standups within the first month.

Okay, so that means they are meeting with the team every single day to get through the change. I have an initiative I'm leading right now where I'm making a large change in organization. And so what did I do? I put in daily stand-ups. It is one of the easiest things to do. This is for a reorg, but if you're just starting a department from scratch, daily stand-ups are like one of the best things that you can do. The second thing that you can do, especially in those first 30 days, is document and share the new processes in the first week. You need

documentation. When everything has changed, people easily default to what they have done. If you do not document all the things that have changed, it's going to be very difficult to get a successful reorg. And lastly, you're doing the stand-ups, you've got the documentation, ask for feedback.

Okay, so ask for feedback in that first month from the people on the team so that you can figure out what's working and what's not working. We want feedback quickly. Now, that's the first 30 days. What about after that so we can maintain momentum, which brings me to my third point. How do we maintain momentum? One, celebrate your wins. Okay, remember those quick wins we talked about? The reason those are so important is that we want to celebrate quick wins that align with our goals of the reorg.

If you were inefficient, celebrate efficiency. If you took too long to get back to customers, celebrate getting back to them faster. If people had no work, celebrate people working hard, right? Celebrate all the wins because you're gonna see a huge increase in engagement within your teams if you are celebrating what has gone right during this process. The second thing is that after the first 30 days, you still wanna have structured check-ins

to make sure that things are going. You go from basically like daily standups to I would say probably twice a week.

And so you still want to have check-ins that are super structured, but you want to start reducing the frequency or the duration. So maybe you had 30 minute standups every day, you could reduce it to 15 minutes a day or 10 minutes a day, or you could do twice a week for 30 minutes. But you want to make sure you still keep those new routines and those new communication lines open so that you can make sure that you can get through the reorg and people understand that it is still happening.

And then the last thing that you can do, and I think this is my favorite piece that I have done ever, is have everyone document what they learned. I know this sounds crazy, but it's like after it's been like 60 to 90 days, you could say like a quarter, and you've done a reorg,

You know, a lot of times in the beginning, the team is like scared. They're like, we don't know what's happening. They're reorganizing everything. They're changing everything. What are we going to get paid? What are our titles? What are our roles? Who are we reporting to? There's all this fear. You need to have people reflect to say, what have I learned? What valuable lessons have I learned from this process? And how can this help me move on and be better for the next one, right? Or how can I help my teammates if they have to go through this? And the last thing I want to say is this.

I know that this can seem daunting. And when you're listening to this podcast, you're like, wow, things do feel hard. Maybe it's within your whole company. Maybe it's within one department. Maybe you just actually haven't thought about this before. And now you're like, actually, this does make sense. It's something to do. Do your homework. Study. Understand how things work. Understand what people's workflows look like. Understand how people communicate with each other. Understand how people talk to each other before you make changes.

Don't rest on your laurels. A lot of people, what they do is they innovate their products, they innovate their marketing, they innovate their sales, but they don't innovate the inside of their company. And that's really what this is. A reorganization is a revitalization of your team. The team that you started with when maybe you were doing a million dollars a month is not the team you're gonna have when you're doing $10 million a month. Meaning it doesn't look the same, it doesn't operate the same, they don't communicate the same.

And so in order to achieve that, you have to be able to say, you know what, starting from scratch, if I were building this department today, how would I build it? I hope you have a fantastic rest of your day.