SOURCE: The Boston Consulting Group

The Boston Consulting Group

April 25, 2012 00:01 ET

New Study Shows Companies Can Reverse the Odds and Achieve Successful Reorganization

Six Critical Factors Can Make All the Difference in Reorganization Success, According to New Report From The Boston Consulting Group

BOSTON, MA--(Marketwire - Apr 25, 2012) - Rapid change requires companies to reorganize more frequently, more fundamentally, and faster than ever before. Yet the odds of failure are high.

The good news is that companies needn't resign themselves to the statistics. By incorporating six factors into their approach, they can reverse the odds and achieve reorganization success.

Organization of the Future -- Designed to Win: Flipping the Odds for Successful Reorganization, a new report by BCG, describes these six critical success factors in detail, offering practical strategies for incorporating them into a reorganization effort. The report is part of a broader study by BCG and 12 global partners on the role of organizational capabilities in business success. The study was based on a survey of approximately 1,600 executives from more than 35 countries.

The six critical success factors that BCG has distilled -- some tried and true, others perhaps less well known -- represent a mix of behavioral, design, and process capabilities. "Until now, their impact on reorganization success has not been well understood," said Andrew Toma, a partner in BCG's New York office and the research leader for the study. "We've now been able to demonstrate statistically the impact of these factors, including their aggregate impact."

Among the report's key findings:

  • When synchronizing organization design with the business's strategy was the top design criterion, companies had a 5:1 rate of reorganization success.

  • Companies that clarified roles and responsibilities using a clear, systematic process experienced a 6:1 success-to-failure rate.

  • Seventy-four percent of companies with highly capable leaders achieved reorganization success.

  • Layer-by-layer design was found to be more effective than top-down CEO-only reorganization design. Companies that followed this approach experienced four times the rate of reorganization success.

  • Discipline in execution was found to be the most critical factor in overall reorganization success. Seventy-nine percent of companies that executed with rigor achieved total overall success.

  • The odds of success when reorganizing under duress were only 50/50; during periods of strength, they jumped to 21:1.

In addition, the study revealed a multiplier effect: the more success factors that companies implemented, the greater their success rates. Eighty-eight percent of organizations with five or more success factors in place reported complete reorganization success. Furthermore, it's not just a matter of doing things right; performing the opposite of a success factor actually increases the odds of failure. Organizations that adhered to any five "antithesis" factors realized only a 7 percent rate of reorganization success.

Finally, these findings have economic implications, as well: 68 percent of companies that adhered to any five factors achieved superior economic performance -- three times the proportion of those in the "antithesis" group.

As reorganization increasingly becomes part of the continuous process of transformation for companies, the stakes become increasingly greater. By putting these success factors in place, organizations can flip their odds of success to ensure they realize the broader goal of reorganization: driving competitive advantage.

A copy of the report can be downloaded at www.bcgperspectives.com.

For more information or to arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.

Partner Organizations

BCG worked with 12 partner organizations worldwide who distributed the online survey to many of their members in more than 35 countries. The partner organizations are:

The Conference Board
Asia Academy of Management
American Management Association
Confederation of Indian Industry
Chartered Management Institute
German Society for Organizational Topics
The Brazilian Institute of Corporate Governance
Austrian Society for Organization and Management
Swiss Association for Organization and Management
The Institute of Organization in Business
Russian Managers Association
Japan Management Association

About The Boston Consulting Group

The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 75 offices in 42 countries. For more information, please visit www.bcg.com.

About bcgperspectives.com

Bcgperspectives.com is a new website -- available on PC, mobile phone, and iPad -- that features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management's agenda. It also provides unprecedented access to BCG's extensive archive of thought leadership stretching back almost 50 years to the days of Bruce Henderson, the firm's founder and one of the architects of modern management consulting. All of our content -- including videos, podcasts, commentaries, and reports -- can be accessed via PC, mobile, iPad, Facebook, Twitter, and LinkedIn.