Reorganization and restructuring

In plain terms

A reorganization changes the structure of an organization: the units, the reporting lines, the roles and who makes which decisions. Merging two departments, splitting a function by region, removing a layer of management and cutting headcount are all reorganizations. The reviews cited below use the word restructuring.

A reorganization is often treated as a drawing exercise, a new chart with new boxes. The people in the boxes experience it as a change to their work, their manager, their status and sometimes their job security. Most of the research below is about that second experience.

Where it came from

In Strategy and Structure (1962), the business historian Alfred Chandler examined four large U.S. industrial firms from the 1900s to the 1940s and the executives who devised the decentralized, multidivisional structure. The Harvard Gazette credits the book with making the maxim "strategy precedes structure" a staple of corporate management in the 1960s and 1970s (Chandler, 1962; Harvard Gazette, 2007). See organization design for the field that grew up around designing structure.

The studies this page draws on, from 1991 to 2024, look at what restructuring does to the people inside it. Interviews with HR managers in large firms in Japan, the UK and the USA found that most of their firms had downsized and delayered, that promotions had become scarcer and sideways moves more common, and that middle managers were generally resentful (Hassard et al., 2012).

How it works

A reorganization can change one or more of four things.

• Units. Which groups exist, and how work is grouped: by function, product, customer or region.
• Reporting lines. Who reports to whom, and how many layers sit between the front line and the top.
• Roles and decision rights. What each job is responsible for, and who can decide what.
• Headcount. Whether staff are added, moved or cut. The de Jong review compares restructuring with staff reductions and without them (de Jong et al., 2016).

The structure on paper is the easy part. The harder part is often what happens to people's work and well-being once the change begins.

What the research says

The Evidence Library, which grades research on leading change, holds several reviews of restructuring. They point the same way, and none of them is a randomized test of restructuring itself.

Well-being mostly declines. A systematic review of 39 longitudinal studies from 2000 to 2012 found that restructuring, with and without staff reductions, mainly went with declines in employee well-being, in both the short and the long term (de Jong et al., 2016, rated Medium from its abstract). Some groups reacted less negatively, such as workers with high status before a merger. Several factors came between the restructuring and well-being, including job control, communication, the provision of information, training, procedural justice, job insecurity and acceptance of the change.

Unit attitudes drop and stay down. A meta-analysis of 137 longitudinal studies found that unit-level job attitudes declined during cost-oriented changes such as restructuring and stayed lower afterward (Solinger et al., 2021, rated Medium from its abstract). Attitudes rose during people-oriented changes, such as investment in HR practices, and stayed higher. When the two were combined, attitudes remained unchanged. In a process model, lower attitudes under cost cutting went with reduced perceived support, and the authors suggest that maintaining perceived support can mitigate some of the negative impact. The studies are observational, so these are patterns over time, not proof of cause.

Repeated restructuring is harder. A systematic review of 22 studies of hospital restructuring that included layoffs found significant decreases among nurses who stayed, in job satisfaction, professional efficacy, ability to provide quality care, and physical and emotional health, along with more turnover and disrupted team relationships (Cummings & Estabrooks, 2003, rated Medium from its abstract). Nurses with fewer years of experience, and those who went through several rounds of restructuring, were affected more.

Downsizing shows little long-term gain. A meta-analysis of 905 effect sizes from 114 articles found many negative and mixed financial outcomes after downsizing, with little long-term gain (Steel & House, 2024, rated Medium after a full-text read). Stock market reactions to downsizing were negative and short-lived on average. Downsizing the authors class as defensive drew a more negative reaction, and only the kind they class as offensive drew a small positive one. These are correlational studies of firms.

Realistic communication went with better outcomes in one field experiment. After a merger was announced, employees in one plant received a realistic merger preview, a program of realistic communication, and employees in another plant received limited information. Across four rounds of data, the plant that received the preview showed fewer harmful outcomes of the merger, and the difference lasted through the study (Schweiger & DeNisi, 1991, rated Medium from its abstract). It is one organization and two plants.

Middle managers carry a heavy load. In 64 interviews across five UK organizations going through large-scale restructuring, middle managers reported more autonomy but longer and more intense hours, closer monitoring and fewer promotion prospects (McCann et al., 2008, an Atlas study rated medium). At one large financial services firm, the authors of a case study trace a failed change initiative to closed executive and rank-and-file systems that left middle managers powerless (Raelin & Cataldo, 2011, an Atlas study rated medium). See middle managers.

Where the evidence is thin

1. No trials of restructuring. Organizations do not restructure at random, so the reviews above mostly report patterns before and after, not comparisons against a control group. Some of the decline may reflect whatever led to the restructuring in the first place.
2. What to do about it. The reviews name the factors that came between restructuring and outcomes, such as communication, support and fair procedures. Only the merger preview study tests one of them directly, and it is a single case.
3. Which structure. The studies here are about the act of restructuring. They do not say whether a particular new structure works better than the old one. That is a question for organization design.

How it maps to the Unfrozen Loop

1. Week 0
   Before you start

   Measure how people are doing before the new structure is announced. The reviews below report a decline during restructuring, and you can only see a decline in your own organization if you know where you started.

2. 1
   Surface both ways

   In the one field experiment below, realistic information after a merger announcement went with fewer harmful outcomes than limited information. Telling people what you know, and what you do not, is the first move.

3. 2
   Make sense together, top included
4. 3
   Start it close to the work
5. 4
   Review on a rhythm, then hold the pace
6. 5
   The middle’s own weather

   Restructuring adds work and worry for the managers who must carry it out while keeping the business running. The interview study below describes longer, more intense hours for middle managers in restructured firms.

7. Ring
   Safe to speak, and speaking changes something

Highlighted parts are the ones this idea speaks to. The mapping is my reading, not a tested finding. See the whole Loop and the evidence for each part.

Common misreadings

"The new chart is the change." The chart is the decision. The change is what people do differently afterward, and the reviews above find that well-being and unit attitudes mostly fall during and after restructuring.

"A clean break is kinder." The hospital review found larger effects among nurses who went through several rounds of restructuring (Cummings & Estabrooks, 2003). That is one reason to be cautious about a series of reorganizations, and it does not show that one large one is painless.

"Cutting costs pays for itself." The downsizing meta-analysis found little long-term financial gain on average (Steel & House, 2024), and the attitude meta-analysis found that unit attitudes stayed lower after cost-oriented change (Solinger et al., 2021).

Using it well

1. Take a baseline before the announcement. A short pulse on workload, clarity and trust in each team gives you something to compare against in month three.
2. Say what you know and what you do not. Give people the timeline, the decisions already made and the ones still open, and update it on a fixed schedule. The merger preview study is the closest test of this idea.
3. Protect support while you change structure. Solinger and colleagues (2021) report that lower attitudes under cost cutting went with reduced perceived support, and suggest that maintaining it can mitigate some of the negative impact. Name who each person goes to with problems during the transition, and make sure that person has time for it.
4. Plan for the managers in the middle. Ask the managers who will carry out the reorganization what they need to stop doing while they do it. See change saturation for a worksheet.