Adopt Change Management Practices & Succeed at IT Organizational Redesign

The perfect IT organizational structure will fail to be implemented if there is no change management.

Analyst Perspective

Don’t doom your organizational redesign efforts

After helping hundreds of organizations across public and private sector industries redesign their organizational structure, we can say there is one thing that will always doom this effort: A failure to properly identify and implement change management efforts into the process. Employees will not simply move forward with the changes you suggest just because you as the CIO are making them. You need to be prepared to describe the individual benefits each employee can expect to receive from the new structure. Moreover, it has to be clear why this change was needed in the first place. Redesign efforts should be driven by a clear need to align to the organization’s vision and support the various objectives that will need to take place. Most organizations do a great job defining a new organizational structure. They identify a way of operating that tells them how they need to align their IT capabilities to deliver on strategic objectives. What most organizations do poorly is invest in their people to ensure they can adopt this new way of operating. Brittany Lutes Research Director, Organizational Transformation Info-Tech Research Group

Executive Summary

Info-Tech Insight

Implementing your organizational design with good change management practices is more important than defining the new organizational structure.

Your challenge

This research enables organizations to succeed at their organizational redesign:

• By implementing the right change management practices. These methods prevent:
  • The loss of critical IT employees who will voluntarily exit the organization.
  • Employees from creating rumors that will be detrimental to the change.
  • Confusion about why the change was needed and how it will benefit the strategic objectives the organization is seeking to achieve.
  • Spending resources (time, money, and people) on the initiative longer than is necessary.

McKinsey reported less than 25% of organizational redesigns are successful. Which is worse than the average change initiative, which has a 70% failure rate.

Source: AlignOrg, 2020.

The value of the organizational redesign efforts is determined by the percentage of individuals who adopt the changes and operate in the desired way of working.

When organizations properly use organizational design processes, they are:

4× more likely to delight customers

13× more effective at innovation

27× more likely to retain employees

Source: The Josh Bersin Company, 2022

Common obstacles

These barriers make implementing an organizational redesign difficult to address for many organizations:

• You communicated the wrong message to the wrong audience at the wrong time. Repeatedly.
• There is a lack of clarity around the drivers for an organizational redesign.
• A readiness assessment was not completed ahead of the changes.
• There is no flexibility built into the implementation approach.
• The structure is not aligned to the strategic goals of IT and the organization.
• IT leadership is not involved in their staff’s day-to-day activities, making it difficult to suggest realistic changes.

Don’t doom your organizational redesign with poor change management

Only 17% of frontline employees believe the lines of communication are open.

Source: Taylor Reach Group, 2019

43% Percentage of organizations that are ineffective at the organizational design methodology.

Source: The Josh Bersin Company, 2022.

Change management is a must for org design

Forgetting change management is the easiest way to fail at redesigning your IT organizational structure

• Change management is not a business transformation.
• Change management consists of the practices and approaches your organization takes to support your people through a transformation.
• Like governance, change management happens regardless of whether it is planned or ad hoc.
• However, good change management will be intentional and agile, using data to help inform the next action steps you will take.
• Change management is 100% focused on the people and how to best support them as they learn to understand the need for the change, what skills they must have to support and adopt the change, and eventually to advocate for the change.

"Organizational transformation efforts rarely fail because of bad design, but rather from lack of sufficient attention to the transition from the old organization to the new one."

– Michael D. Watkins & Janet Spencer. ”10 Reason Why Organizational Change Fails.”

Info-Tech’s approach

Redesigning the IT structure depends on good change management

Common changes in organizational redesigns

Top reasons organizational redesigns fail

1. The rationale for the redesign is not clear.
2. Managers do not have the skills to lead their teams through a change initiative like organizational redesign.
3. You communicated the wrong messages at the wrong times to the wrong audiences.
4. Frontline employees were not included in the process.
5. The metrics you have to support the initiative are countering one another – if you have metrics at all.
6. Change management and project management are being treated interchangeably.

Case study: restructuring to reduce

Clear Communication & Continuous Support

Situation

On July 26th, 2022, employees at Shopify – an eCommerce platform – were communicated to by their CEO that a round of layoffs was about to take place. Effective that day, 1,000 employees or 10% of the workforce would be laid off.

In his message to staff, CEO Tobi Lutke admitted he had assumed continual growth in the eCommerce market when the COVID-19 pandemic forced many consumers into online shopping. Unfortunately, it was clear that was not the case.

In his communications, Tobi let people know what to expect throughout the day, and he informed people what supports would be made available to those laid off. Mainly, employees could expect to see a transparent approach to severance pay; support in finding new jobs through coaching, connections, or resume creation; and ongoing payment for new laptops and internet to support those who depend on this connectivity to find new jobs.

Results

Unlike many of the other organizations (e.g. Wayfair and Peloton) that have had to conduct layoffs in 2022, Shopify had a very positive reaction. Many employees took to LinkedIn to thank their previous employer for all that they had learned with the organization and to ask their network to support them in finding new opportunities. Below is a letter from the CEO:

Shopify, 2022.

Forbes, 2022.