Why reorganizations (almost always) fail

Reebok cut its sales forecast by 33% earlier this year. That means good news for the company that prints its business cards — there will be a lot of job title changes.

When sales forecasts decline, the typical corporate response is to lay off some people and reorganize. To that end, Matt O’Toole, Reebok’s chief marketing officer, announced that

Earlier this year we announced the reorganization of the Reebok Brand team into six core Business Units (Training, Running, Walking, Studio, Classics, and Kids), designed to deliver against our ambition to become the leading fitness brand. Today, we continued this reorganization with the implementation of a new global-direct operating model between the global organization in Canton and our markets, and streamlining our satellite creation activities. These changes, which will go into effect January, 2013, will increase our effectiveness, our speed to market and our efficiency.

Now, I’m not exactly sure what “streamlining satellite creation activities” means. But I do know that reorganizing a brand team — or any team, for that matter — seldom results in a big increase in sales.

I’ve been involved in numerous reorganizations myself, and never once did they affect our sales. We moved desks, we got new business cards and job descriptions, we had different people in our meetings, but the product didn’t change. And I predict that’s exactly what will happen with Reebok.

Reorganization is a typical corporate knee-jerk reaction to a problem that’s poorly understood. If you approach the problem of falling sales from an A3 mindset — really trying to understand the nature and root causes of the problem, and to design a suite of countermeasures — you’d see that that changing people’s seats has about as much chance of improving the situation as changing the Weather Channel has of improving your actual weather. Why? Because consumers don’t give a damn how you’re organized internally. They buy products that meet their needs and wants, regardless of who works in what department or what their title is. And I can guarantee you that the product isn’t going to change just because Classics is now a “core Business unit.” The countermeasure doesn’t tie back to the root cause of the problem.

Moreover, you may not even have the right people and necessary skills to staff the new organization. In one company that I worked for years ago, we split our product marketing team into business units to increase focus and sales in each category — but we didn’t have enough people to completely staff each business unit. The result? After a few months, we ended up doing pretty much the same work as before, and within 18 months, we reorganized again right back to where we started.

Let’s also not forget the destruction of relationships, experience, and tribal knowledge that helps expedite decision-making and improve productivity. Reorganizations bulldoze those accumulated assets into oblivion, ensuring that for six months at least, the company will be operating much less effectively.

Reorganizations that work best don’t just reshuffle the boxes on an org chart. They’re strategically designed to take cost out of a process, or bring products to market faster, or expedite decision-making. Most of all, they’re precisely targeted to address the root cause of the problem.

Otherwise, the only company that will see a sales increase is the one printing the business cards.