Organizational structure changes can result from mergers, economic changes, and process improvements. The new structure aims to maximize strengths and reduce weaknesses, and may involve centralizing decisions, outsourcing, or eliminating positions.
Changes in organizational structure can result from a merger or acquisition, economic changes, and process changes. These changes are usually initiated due to an organization’s desire to reduce costs, improve processes or increase communications. After a merger or acquisition, the company may need to reorganize to avoid duplication of processes and maximize the strengths of both organizations. Economic changes can also force changes in organizational structure in order to improve processes or reduce costs. Process changes can also lead to reorganization when a company wants to become more efficient or change its strategic direction.
Mergers and acquisitions usually require one organization to absorb the other organization’s employees and processes. Especially in case both organizations have different hierarchical structures, changes in the organizational structure may be necessary. The new organizational structure will take the strengths of both organizations in order to maximize the potential of the combined business and reduce the weaknesses that both organizations have brought to the table. If the company being merged or acquired will keep its organizational structure, the other organization will still have to change in order to be able to monitor the resources and decisions made within both organizations.
Economic changes can force changes in an organizational structure. When the business cycle plunges into a recession or depression, companies often retool to cut costs or increase efficiency. If the company has a high hierarchical structure, it may find that centralizing decisions can help it increase productivity and customer satisfaction while reducing staff turnover. Some organizations at this stage of the cycle decide to outsource departments or eliminate the need for certain positions. When the business cycle is booming, a company may find that changes in organizational structure allow it to better support its desire to invest in R&D teams or increase the number of product lines.
Process changes can cause changes in the structure of the organization by removing unnecessary steps or adding new measures. An analysis of processes within the organization can discover that employees or departments perform essentially the same activities. To remove any duplication of processes, employees or departments can be reassigned or eliminated from the organizational structure altogether. The company may also discover that essential steps are missing, are not assigned to a person or department, or are no longer needed. In that case, the company would retool to address missing steps or to make sure employees are completing steps in line with current goals and objectives.
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