(As originally published in FEI Canada F.A.R. member e-newsletter, April 2017)
Tackling reorganization with an eye on the future
By: Lance Mortlock, EY Canada’s Strategy Services Leader
Canada’s job market is changing. Companies are responding to weak commodity prices, uncertain economic conditions and increasing technological workforces. Teams are becoming streamlined, processes are becoming automated and jobs are being moved around in every industry.
The oil and gas sector is a prime example – the sunken value of commodities means many companies in the industry have been through some sort of reorganization to stay afloat. According to EY’s Canadian oil and gas reorganizations study, completed in association with the University of Calgary’s Haskayne School of Business, Alberta alone has seen nearly 30,000 job cuts in the oil and gas industry since the fourth quarter of 2014.
Aside from job cuts, there are many reasons why companies may consider reorganization options. Having worked closely with oil and gas companies, I’ve seen firsthand some of the great successes and challenges of undertaking a reorganization – and there’s a lot the industry can teach others. As stated in our report, in order to survive in the short term and thrive in the long term, companies looking to reorganizations should consider the following:
- Design the new organization to help achieve immediate goals, but also position it so that changes will set the company up for long-term success.
- Understand the organization and what it’s strategically trying to achieve. Do a rigorous current state assessment, perform a benchmark analysis against competitors, and fully evaluate the options and opportunities that result from a reorganization.
- Engage the right professionals to help achieve the right outcomes. A mix of external professionals to drive the process, middle management to provide the right information to and from the front line, and the proper resources from internal support functions to help drive implementation efforts.
- Build leadership experience and intelligence to support sustainability. Organizations need to develop leadership and management capacity to redesign their work adaptively, and understand the core principles of organization design. This understanding will help to evolve process and operational disciplines in a way that drives cost management and value creation.
Reorganizations are tricky and can be hard on leaders and employees. If a company mismanages change, it can be confusing and miserable for all those involved and impacted. In the case of oil and gas companies, our report found many companies focused on cost-management solutions that allowed for immediate results, such as deep headcount reductions and process efficiencies. But as we see the industry start to recover, those reductions could lead to challenges with recruiting or retaining employees who may currently be overworked.
Rather, companies should tackle reorganizations by focusing on people as drivers of success, and on long-term sustainable and structural solutions. Leaders should take the time and investment required to develop a strategy that shifts focus towards people and culture-related goals to ensure companies attract and retain the best talent.
Working through a well-developed plan and making the right changes is critical for organizations to achieve their short-term goals, while setting themselves up for success in the future. My advice: take the time to get it right the first time and it will pay off in the long run.