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Winning CFOs: Implementing and Applying Better Practices, with Website by David Parmenter

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CHAPTER 26

A Reorganization Too Many

A major reorganization is as complex as putting in a new runway at Heathrow Airport while keeping the airport operational. The steps, the consultation, the dynamics, and so forth are as difficult. Then how is it that we are unable to fully understand the ramifications and costs of a reorganization, and why do organizations appear to have an addiction to reorganizations?

This chapter, while it may not give a cure for the addiction, may help management be more aware of the symptoms so that advice can be sought.

Ramifications and Associated Costs

The CFO has historically been far too silent when a reorganization is muted. If anyone is to talk sense to the board and senior management team, it has to be the CFO. The CFO needs to ascertain the costs of such an exercise. To assist, I set out next what happens. The cost estimates, included here are based on a national organization with 5,000 full-time employees.

  • There is a period of chaos, where staff members are disillusioned and many key staff in the third- and fourth-tier management ranks look to leave (normally in the first six months).You will need to incorporate some costs here based on discussions with your mentors.
  • The bedding-in process starts to kick in somewhere between the seventh and twelfth months. The completion of all the redundancies takes longer than expected and, yes, more than a few will come back as contractors at a higher cost. These costs must not be ignored.
  • Costs go through the roof, ...

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