Build with Leila Hormozi – Episode 212: How & When To Reorganize Your Team Effectively

Release Date: November 29, 2024

In Episode 212 of Build with Leila Hormozi, host Leila Hormozi delves deep into the intricacies of team reorganizations—a critical yet often daunting process for business leaders. This comprehensive episode offers tactical insights, real-world case studies, and actionable strategies to successfully restructure your team to align with your organization's evolving needs.

1. Introduction to Team Reorganizations

Leila kicks off the episode by addressing a topic that induces anxiety among both leaders and employees: team reorganizations. She defines a reorganization as the restructuring of a team’s framework, including incentives, compensation, reporting structures, and titles, to better align with the organization's strategic objectives.

Leila Hormozi [00:00]: "What is a reorganization? It's when you reorganize the structure of your team, the incentives, the compensation, the reporting structure, the titles to better fit the organization's needs."

2. The High Stakes of Reorganizations

Leila highlights a startling statistic from McKinsey to underscore the challenges of reorganizations:

• 74% of organizations experienced significant delays or budget overruns during a reorg in the past three years.
• Only 11% achieved their intended benefits.

This raises the crucial question: Why did that 11% succeed?

Leila Hormozi [00:45]: "Why did those 11% get it right? This is something that I have had to do time and time again in my business."

**3. Four Primary Reasons for Reorganizing

Leila outlines the four main catalysts that drive organizations to reorganize:

1. Misalignment Between Structure and Strategy

   • Statistic: 80% of companies’ internal structures do not support their external strategies.
   • Impact: The 20% that do align see substantially higher profits—three times more, and sometimes up to six times more revenue.

   Leila Hormozi [02:15]: "The way that your department or your company is organized does not help you achieve your strategy."

2. Market Changes

   • Adapting to shifts in the market, such as altering products or business models.

3. Workforce Shifts

   • Responding to changes in the employee market and altering job roles accordingly.

4. Redundancy and Inefficiency

   • Addressing low output, inefficiency, and overlapping roles within teams.

5. Rapid Growth or Decline

   • Scaling teams appropriately in response to business growth or contraction.

Leila Hormozi [04:00]: "The most common one that I've had to deal with is like, we've grown really, really quickly. And so then we have to reorganize how we are structured."

4. Indicators That a Reorganization Is Needed

Leila provides signs that suggest it might be time to reorganize:

• Difficulty in getting work done as a team.
• Ineffective reporting structures.
• Inadequate compensation or job titles.
• Misalignment between internal operations and external goals.

Leila Hormozi [06:00]: "If it feels really hard to get work done as a team, you may not be organized the right way."

**5. Why Reorganizations Fail

Leila examines the common pitfalls that lead to failed reorganizations, emphasizing that reorgs are inherently challenging:

Leila Hormozi [07:00]: "Reorganizations are a bear. You want to understand how to avoid those pitfalls so you don't have to deal with that."

Case Study: Adobe's Successful Reorganization

Leila cites Adobe’s 2012 shift from selling box software to a subscription model as a prime example of a successful reorganization:

• Result: Recurring revenue jumped from 19% to 70% in three years.
• Key Actions: Realigned incentives, modified team structures, revamped job titles and descriptions, and overhauled the product development process.

Leila Hormozi [08:30]: "They didn't just change reporting lines; they realigned incentives, modified team structures, redid titles, job descriptions, and rebuilt their entire product development process."

Lesson Learned: Successful reorganizations require comprehensive changes across people, processes, and projects—not just superficial tweaks.

6. The Critical First 30 Days of a Reorganization

Leila emphasizes the importance of the initial phase following a reorganization to set the foundation for long-term success.

Case Study: Microsoft's 2013 Reorganization

• Approach: Before announcing changes, Microsoft mapped out team dependencies, discovering that 84% of employees worked with individuals outside their immediate teams.
• Strategy: Created horizontal teams that cut across traditional vertical structures.
• Outcome: Employee satisfaction increased by 27% post-reorg.

Leila Hormozi [11:00]: "They spent months mapping out dependencies between teams... They found out that 84% of their employees regularly worked with people that were not within their team."

The Communication Triangle

Leila introduces the Communication Triangle framework by Cornell, which outlines effective communication strategies during a reorg:

1. Up (25% of communication effort)

   • Communicate changes to bosses and stakeholders.

2. Down (45% of communication effort)

   • Direct communication with the team undergoing reorganization.

3. Out (30% of communication effort)

   • Inform adjacent teams and departments affected by the changes.

Leila Hormozi [12:30]: "Companies that followed that distribution were almost three times more likely to have a successful reorganization."

Key Steps for the First 30 Days:

1. Develop a Clear Narrative

   • Articulate the real reasons for the reorganization transparently.

   Leila Hormozi [14:00]: "Have a clear reason why you are reorganizing a department when you have a clear story and you have a clear narrative for people."

2. Identify and Retain Key People

   • Focus on retaining high performers and keeping them informed.

   Leila Hormozi [16:00]: "Identify the people that you need to keep in what I call your close circle... to make sure that they are in the loop and they understand what's happening."

3. Map Out Quick Wins

   • Set achievable objectives for the first 30 to 60 days to build momentum.

   Leila Hormozi [18:00]: "Know what you want to achieve in the first 30 to 60 days, because if you can achieve more in the beginning, you will be set up for success in the long term."

4. Overcommunicate

   • Implement daily standups, document new processes, and actively seek feedback.

   Leila Hormozi [20:00]: "If you want people to not be scared and to do their best work, you have to over communicate."

7. Maintaining Momentum Post-Reorganization

After the initial 30-day period, maintaining the momentum of the reorganization is crucial for sustained success.

Strategies to Maintain Momentum:

1. Celebrate Wins

   • Acknowledge and celebrate achievements that align with the reorg goals to boost team morale.

   Leila Hormozi [22:30]: "Celebrate all the wins. Because you're going to see a huge increase in engagement within your teams if you are celebrating what has gone right during this process."

2. Structured Check-ins

   • Transition from daily standups to more spaced-out, yet regular, check-ins to ensure ongoing alignment.

   Leila Hormozi [23:30]: "After the first 30 days, you still want to have structured check-ins to make sure that things are going."

3. Documentation and Feedback

   • Encourage team members to document their learnings and provide feedback to refine processes.

   Leila Hormozi [24:30]: "Have everyone document what they learned. Reflect on what have I learned? What valuable lessons have I learned from this process?"

8. Final Thoughts and Encouragement

Leila wraps up the episode by acknowledging the challenges of reorganizing a team but emphasizes its importance for business growth. She urges leaders to:

• Do Their Homework: Understand the current workflows, communication patterns, and team dynamics.
• Innovate Internally: Reorganizations are a form of internal innovation crucial for scaling.
• Embrace Change: Change is necessary for evolving from a smaller to a larger, more efficient organization.

Leila Hormozi [26:00]: "A reorganization is a revitalization of your team. The team that you started with when maybe you were doing a million dollars a month is not the team you're gonna have when you're doing $10 million a month."

Key Takeaways

• Comprehensive Approach: Successful reorganizations require changes across people, processes, and projects.
• Effective Communication: Utilize the Communication Triangle to ensure clear communication at all organizational levels.
• Early Wins: Achieve quick wins in the first 30 days to build momentum and morale.
• Sustained Effort: Continue structured check-ins and celebrate successes to maintain long-term momentum.
• Documentation and Feedback: Encourage continuous learning and adaptation through documentation and feedback loops.

By thoughtfully navigating the complexities of team reorganizations, Leila Hormozi provides business leaders with the tools and insights necessary to create unshakeable and scalable organizations. Whether you're dealing with rapid growth, market shifts, or internal inefficiencies, this episode serves as a vital guide to restructuring your team effectively.