Reorganization vs. Restructuring: Are They Different?

Reorganization vs. restructuring – these two terms are often used interchangeably, but do they actually have different meanings?

Below, we’ll discuss the two terms, as well as the key steps involved when changing an organization’s structure.

Reorganization vs. Restructuring

Reorganization and restructuring generally mean the same thing.

Neither term has a definition that is universally agreed upon, and many people use them to mean the same thing. At the same time, however, many people don’t have a clear definition of either one.

One useful clarification of the terms comes from Harvard Business Review, which describes two types of reorganization:

• Restructuring involves fundamental changes in a business’s activities and resources
• Reconfiguration revolves around changing business units, without changing the underlying business structure itself

The difference we should be paying attention to, therefore, is perhaps not the difference between reorganization and restructuring. Instead, we should look at the difference between the two terms listed above.

Each type of change, after all, has its place and its use case – and each carries different implications for the business.

For instance, the greater the change, the greater the impact on:

• The organization’s culture
• Workflows and business processes
• Business strategy

The authors of the above-cited article point out that incremental changes such as reconfigurations and revolutionary changes such as restructurings are both necessary. Yet each type of change has its time and place.

When to Reconfigure and When to Restructure

One’s own circumstances and needs should determine the right time and place to restructure.

For instance:

• Incremental changes, or reconfigurations, can be useful to keep up when the economy, the marketplace, and customer needs are changing over time
• Radical changes, or restructurings, can be useful to keep up with disruptive changes or to make major leaps forward

Here are a few concrete examples of how this might look in the real world:

• In a fast-moving market, such as today’s digital economy, incremental changes can be used to keep up with the shifting business landscape
• Organizational restructuring may be needed during disruptive changes and crises, such as COVID-19, which forced many companies to rethink their businesses and their operating models
• Ongoing reconfigurations can also be used to optimize business processes and improve organizational performance
• Restructuring may also be necessary during mergers and acquisitions, which often require major overhauls to an organization’s brand, structure, and strategy, among other things

The decision to restructure or reconfigure will ultimately depend on one’s own circumstances and needs. 

In either case, however, both are major decisions that will affect many areas of the organization. Understanding what those impacts are will help change leaders design a change program that gets better results.

Tackling the Challenges of Restructuring and Reconfiguration

There are a number of factors that will impact the types of challenges faced during organizational change.

A few of those include:

• Employees’ attitudes towards the proposed change
• The level of buy-in from business leadership
• How well-structured the change process is
• The scale and scope of the change
• The change project’s timeline

As mentioned above, larger-scale change efforts such as restructurings will require more effort and they will present more challenges. This is only natural, since these involve deep-rooted changes that will affect every level of the organization.

Regardless of the number and types of challenges faced during an organizational change, however, it is important to address those issues early. 

Here are a few ways to do just that:

Assess the business impacts of the change

A business impact analysis can be used to assess how the change will impact the organization and its operations.

These analyses, when used in conjunction with other tools, such as gap analyses, SWOT analyses, and change readiness assessments, can identify potential problems before they arise.

Identifying those problems, in turn, can help change managers design more effective change management plans and risk mitigation strategies.

Create a plan and communicate that to all stakeholders

Having a solid change management plan is essential – and communicating that plan to all involved is just as essential.

There are several benefits to providing a clear roadmap for change.

On the one hand, for instance, a roadmap ensures that everyone knows their roles and responsibilities during the project.

At the same time, roadmaps can act as a communication tool, ensuring that expectations are clear. The result: no unexpected developments, less resistance, and more efficient project execution.

Invite participation from all stakeholders

Total participation is one way to reduce resistance from employees.

By inviting participation, employees feel heard and they feel like their opinion matters. This can reduce feelings of alienation and increase support for the change project. 

For this strategy to work, though, managers must actually listen to employees – if they only hold meetings but don’t use employee feedback, then this approach may backfire.

Obtain buy-in from leaders early on

Commitment from business leaders is essential for success.

As many research firms have noted, for instance, change management sponsorship can have a major influence on a project’s outcomes. 

In large-scale projects, such as organizational restructuring, this commitment and leadership is particularly essential. After all, a lack of proactive support during such delicate and important change projects can easily make or break that project.