In your search for synergies, don’t forget flexibility

Whenever we experience a tough business environment, we inevitably see a wave of corporate restructuring. After the 2008/9 Financial crisis we initially saw a rapid fall in training budgets and people development and an increase in layoffs. Nine months later we saw a huge rise in demand for upskilling people to cope with a more integrated or matrixed way of working. It was the same pattern as in previous recessions.

After the financial crash nearly every matrix implementation was driven by a need to become more global, to identify synergies and drive out cost duplication. Some years into this process of centralisation, companies were surprised to learn that they become less flexible!

In many cases we think that the increase in desire for agility in recent years was a response to the centralization and lack of flexibility in the way the matrix had been implemented.

The matrix is meant to be multi-dimensional. If you just want to centralise or drive out synergies you don’t necessarily need a matrix. The matrix is about representing the needs of the global and the local, the  business unit and the geography and the function – not just any one of these dimensions in isolation.

As we start to think about emerging from COVID-19 into a tough economic environment, as business starts to return closer to normal and as government assistance is progressively withdrawn, we will see a wave of business failures, refinancing and restructuring.

Organisations have had a full year to plan for it (the financial crisis happened over a much shorter period of time) but many have found it difficult to execute on the changes whilst many of their top people are still working from home.

The need to become more integrated and more effective will be even more important in sectors that have been most impacted by the experience such as retail, leisure, airlines, and hospitality, and to a lesser extent automotive and oil and gas.

All industries will be affected, but for some this is a matter of their continued survival.

A couple of pieces of advice for those going through this process

1. be clear about why you are doing it – be careful that your drive for synergies and cost savings does not drive out the flexibility and innovation you also need to survive. Make maintaining the right balance between synergy and flexibility an explicit part of your strategy so you do not fall into that trap
2. focus on ways of working rather than structure. Nobody used a formal structural reorganisation as their first step to surviving the need for lockdown. We have learned that flexibility in ways of working is much more valuable. It is skills and culture that will make our integration efforts succeed or fail, not reporting lines

It is going to be a tough for many organisations, but hopefully we can learn the lessons from previous recessions and restructurings and don’t make all the same mistakes again

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