Designing Organisations

Thousands of established businesses fail every year because of the way they are organized, or re-organized. Business survival can depend not only on whether its structures and reporting lines meet the needs of the market, but also whether they can adapt in the face of a rapidly changing business environment.

Yet managers seldom talk coherently about structuring or restructuring their operations, let alone take a systematic approach to this vital issue. Too often, companies are restructured for the wrong reasons - for example, because a new CEO wants to make an impact, or to work around a new IT system.

This revised and updated Economist Guide shows how leaders should think about and implement the design of a company, using five easy-to-use guiding principles:

- Design a company around its strategy and the operating context, not for ulterior or non-business reasons;

- Think holistically - don't restructure just one division without taking into account other operations;

- Consider future markets, customers and trends, not just what works best now;

- Invest time and resources: - a redesign can be complicated to implement and must be done without disrupting daily activities; and

- Go back to the basics of how the company operates and its market position; this is not a repair job to fix a short-term problem.