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Restructures - 19 January 2012

Back in 1968, a 56-year-old lady named Ivy Hodge woke up early one morning in May. She lived on the 18th floor of a brand new building (the one pictured on the left) in a corner apartment overlooking the city. It was approximately 5:45am and she walked into her kitchen to make a cup of tea. She lit a match to light the stove and … BANG.

The force of the gas explosion threw Ivy Lodge to a different room. The walls crumbled and the entire side of the building collapsed. Remarkably, Ivy survived, as did a young mother who stood on a small ledge while her loungeroom disappeared.

Similar events have occurred elsewhere. In 1993, a building in Malaysia came crashing down when water from a nearby creek weakened the foundation. And, as seen in an astonishing video, a building in the Philippines fell as its residents fled for safety. Thankfully, nobody died.

The above examples encapsulate much about structure and how it works. Engineers can design what they think is a secure building – but there are other factors, usually subtle under-the-radar factors, which play a more significant role in whether or not a building is secure.

A similar thing happens in the corporate workplace. Executives initiate restructures in the hope of increasing effectiveness. They change the structure with the belief that new reporting lines and different departments will make a big difference on the organisation’s success.

What many executives don’t realise is that – more often than not – restructures don’t work.

Research conducted by McKinsey consultants verified that restructured organisations experience slower rates of performance improvement than organisations that don’t restructure. But why does that happen?

It happens because the restructure of an organisation is a formal undertaking. Anybody can take an organisational chart and rearrange a few things here and there, some of which may be successful and others totally inconsequential. But the real talent lies not in redesigning the formal structure but in leveraging the informal structure – the subtle under-the-radar stuff that either makes or breaks the whole thing. Just like an unstable building being threatened by problems that haven’t been factored into the architectural plan.

A well-functioning informal structure consists of four elements: behaviours, relationships, norms, and networks. If there’s a formal restructure currently underway in your organisation, perhaps one you don’t have any control over, it’s important to make sure these four informal elements are in place.

  • Behaviours: Are employees still able to think and act in the way that feels most natural and effective for them?
  • Relationships: Can their connections still be maintained, even if their closest colleagues have moved on to other departments?
  • Norms: Is there enough flexibility in the new system so that they’re still able to develop their own practices?
  • Networks: Do they still know (and have access to) the right people from whom they can get information, training, and support?

Stay on top of those four aspects of the informal structure and it doesn’t matter what a new organisational chart looks like. What will matter is that the new restructure, no matter how unnecessary, is unlikely to come crashing down.


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