Are company reorganizations (reorgs) bad?

It depends on who you ask and how the reorg was handled. 

Most people associate reorgs with negative experiences because they often signify significant changes to the business. For better or worse, people tend to resist change, making reorgs an uphill battle when it comes to winning hearts and minds.

Whether a company has determined a business unit is no longer profitable, their success metrics need to change, or that they are simply moving in a different direction, a reorg means that change is coming.

The challenge most companies run into when attempting to successfully enact a reorg is effectively communicating the strategy, getting buy-in, and achieving adoption of the new status quo. 

A typical reorg looks like this: 
The CEO, often under pressure from the board, decides to implement a change in how the business operates. Perhaps the company isn’t profitable enough, early indicators suggest the need for proactive adjustments, or a new strategy seems necessary. The CEO shares this plan with the executive team, expecting them to communicate and champion the change with the same enthusiasm.

In an ideal world, employees would immediately understand, embrace, and adapt to the changes.

In reality, direct reports—wanting to appear as team players—often say, “I’m on board and looking forward to this change!” whether they genuinely feel that way or not. This lack of transparency creates a false sense of confidence for the CEO, who believes their team is fully aligned.

But then... the wheels fall off.

And then…egg on his face (metaphorically). The proposed changes fail to gain traction. Confused and frustrated, the CEO demands answers: “Why isn’t everyone as excited about this change as I am?!”

The truth might eventually surface, often at great cost. A brave executive who explains the lack of adoption risks being labeled insubordinate—and perhaps even losing their job. Others in leadership take note and quickly learn that honesty about these matters is unwelcome.

So what actually happened when the CEO proposed these changes? 

First, his executive team who report to him, conceptually understand why the change is being proposed, but they aren’t fully sold on the solution. It wasn’t their idea and they haven’t had enough time to think through the ramifications and determine the best outcome. The change feels very sudden.

They then go to their next level of leadership and say “A change is being made. We are now transitioning from operating like xyz and are now going to be operating like abc.” The team asks “Why?” And those leaders say because the CEO has determined that we need to make this change.

That next level of leader now has to communicate down to their direct reports admonishing “I didn’t make this change! My hands are tied. I can’t control it but the executives at this company are now making us operate like this. Don’t kill the messenger!” You might have seen this exact scenario play out at your company on remote work policies as we get further from the pandemic. 

The individual contributors doing the work at this company do one of two things:

The result…complete and utter failure at worst, and a major distraction at best

But reorg’s don’t have to be this way. Shoot, if reorg’s were always failures, companies would stop pursuing them.

It is just critical that companies pursue reorgs in the right way.

Here are a few tips on how to successfully enact a reorg:

Ultimately, reorgs are hard but necessary things for companies to innovate and continue to grow. If a reorg can be enacted successfully, that company will be in an incredible position to thrive moving forward.

If you are interested in engaging further into this conversation, follow the Ambition In Motion YouTube channel and look for virtual Pre-Symposium Panels covering this topic (Pre-Symposium Panels are virtual panels covering relevant business topics). And if you happen to be in Austin, TX on 2/13/25, come to the Executive Symposium which will debate and discuss this exact topic - RSVP’s here: ambition-in-motion.com/events. 

As the economy reverts back from the 2021 hiring boom, companies are increasingly removing middle managers in favor of one leader for very large teams. For example, as opposed to marketing being led by one middle manager, outside sales by another manager, customer support by another manager, and customer success by another manager, many companies are opting to remove the layer of middle management and have one leader in charge of all of those functions without any leaders in between.

This has led to a major need for companies to increase their focus on helping their employees effectively communicate and collaborate across functions to achieve desired business outcomes. While somewhat redundant, there was still a lot of information handled by those middle managers that is now the responsibility of the employee.

Why have companies opted to remove middle managers in the first place?

The simple answer is lack of perceived value.

The logic behind creating a layer of middle management is that the guidance of a manager of a smaller team that owns and is fully accountable for their outcomes will be greater than if there was one manager for multiple functions within the organization.

This logic is sound if:

This logic doesn’t make sense when:

For example, let’s say we are a recruiting company in 2021 and the market is hot. All the outside sales team needs is a pulse to close deals. There was a process that the middle manager leading outside sales followed to maintain a base level of competence but because sales are coming in from everywhere, bad habits are overlooked.

Fast forward to 2023. The market has completely dried up, and the outside sales team is really struggling to meet their goals. The CEO is begging and pleading for his team to close more deals. The outside sales team blames the economy and all these other factors for why their numbers are down. But in reality, the middle manager in charge of the outside sales team hasn’t been holding her team accountable to the standard business development process they have found to be tried and true. And now she’s out of practice at holding her team accountable, and the team is out of practice taking hard advice from their manager. This is a recipe for failure. 

The CEO then asks the middle managers in other departments to help pickup the slack in sales. He implores his customer success team to focus on upselling current customers. The customer success middle manager says that she is up for the task. She and her team have devised a plan for trying to turn open support tickets and queries into opportunities for upselling. 

The plan looks great, but they run into a brick wall with customer support. The customer support middle manager is incentivized to close support tickets as quickly as possible, and this clashes with the overarching business goals of upselling to current clients. To resolve this, the customer success manager has a 1:1 with the customer support manager. The customer support manager knows that him closing support tickets hurts the customer success managers goal of upselling the existing customers and closing more deals, but mentions that “his hands are tied” because in order for him to achieve his end of year bonus, he needs his time to closed ticket ratio to be under a certain level. They are at an impasse.

The outside sales manager isn’t effectively holding her team accountable, the customer support manager is only focused on his end of year bonus for the metrics he is accountable for, and the customer success manager is stressed out because her team is putting in overtime to try to pick up the slack for the outside sales team but keeps running into hurdles from the support team.

Executive teams look at this situation and have determined…screw it! Let’s remove middle managers and have one overarching manager over a wide group of people so they can adjust incentives effectively and ensure everyone is rowing in the same direction. The executive team can’t guarantee that this new model will be any more effective, but they can guarantee that it will cost a whole lot less to not have all of these middle managers than to have them. 

Their logic is that if it isn’t working with middle managers right now, why keep paying for them?

In order to achieve effective cross-functional communication and collaboration, there needs to be:

If companies cannot effectively achieve all four of these points, they will continue to struggle to achieve effective cross-functional communication and collaboration.

In part 1 of this 2-part article, I wrote about the psychology of why decision-makers make decisions to hire or not hire certain professionals for work. In a nutshell, people will do more to avoid pain than to gain pleasure. One implication of this is that decision-makers aren’t necessarily going to choose the cheapest option if they already have a pre-approved budget, nor will they choose the option that promises the highest upside. 

The decision-maker will choose the option that represents the lowest risk of them getting fired.

Therefore, if we are in business development, whether that be we are looking to sell our products or services on a B2B level or get hired by a company for employment, we need to position ourselves in a way that demonstrates that we are the low risk option for the company to choose.

How can we do this?

First, identify the risks. There are 3 core risks that decision-makers weigh when making decisions:

Financial risk represents the risk that the money spent with a consultant or contract will be a bust. The more a person charges, the more risk the buyer must weigh when making a purchase decision. But as outlined in part 1 of this article, if a buyer has a pre-approved budget, there is little practical financial risk if the proposal comes in under budget. 

This leaves time and reputation as the two biggest factors business development professionals must overcome to build trust and close the deal.

Time risk represents the total amount of time it will take to implement a solution and the time it will take others at the company to deviate their normal behavior to this new behavior a consultant is prescribing. If a consultant is selling change management consulting, the time is the amount of time it will take to achieve the desired result. If a person is looking to get hired for employment, this is the amount of training time required to develop a self-sufficient and productive team member. For most decision-makers, this unknown intermediary period is the risk they are worried about. 

The pivot point centers around the credibility of the person proposing this change. They need to demonstrate to the decision maker that their plan is achievable within the proposed timeline. If someone promises too short of a timeline without much proof or track record of achieving that, then it represents high risk. If someone shares a timeline that is too long, much longer than the buyer has patience for, then it represents high risk as well because there is no chance of meeting expectations. The only success condition would be over performing expectations, and that’s a prayer, not a plan. The person doing business development needs to find the middle ground.

Reputational risk is the amount of people being impacted by this decision-maker’s decision. If a decision maker hires a consultant that only impacts the work of a few people then the reputational risk is relatively low. But if the decision-maker is making a decision that will impact everyone at the company, there is high reputational risk. If they hire the wrong person, or if the person hired does a bad job, it reflects poorly on them, increasing their chances of getting fired or losing credibility for making a poor choice. 

When people share the adage, “nobody ever got fired for buying IBM”, it truly holds a lot of weight. Even if it costs more, decision-maker’s are seeking the lowest risk option for whom to do business with.

Therefore, if we are a small to medium-sized consulting company looking to get business (or a candidate for hire that doesn’t have a ton of experience), we need to do things to de-risk the decision for the decision-maker.

Unfortunately, there isn’t a credit rating check for one’s credibility. Sure, people have references, but nobody is ever going to list a bad reference for themselves.

Therefore, if we are looking to develop business, we need to be creative about de-risking the financial, time, and reputational risk when it comes to deciding who to hire. 

The more someone spends time with another person, the more comfortable they feel with that person. If a business development professional can spend more time with a prospect, they build rapport and connection to that person.
2. Follow Through

Do what you say and say what you do. If a business development professional says they are going to do something or deliver value in some way, they better do it.

How can consultants achieve this with their prospects?

One thing my team at Ambition In Motion has done for consultants is help them set up their own executive mastermind groups. An executive mastermind group is a group of leaders coming together to work through a challenge. The consultant facilitating the group isn’t there to solve their challenges, but rather create a safe space for leaders to discuss their challenges and work through the challenges together. This builds trust through proximity, and it’s also a low-risk decision for the decision-makers. 

This has been incredibly helpful for consultants because it oftentimes creates an opportunity for them to engage with a prospect before they are ready to commit to a bigger contract for more services. And it keeps the consultants from seeming like door-to-door salesmen when an opportunity for partnership arises. 

For example, a consultant might propose their services at $20,000 per month over a 6-month period and incorporate 50% of the company to achieve a certain result. 

Without trust, it will be incredibly hard for a consultant to land this deal. 

The prospect might say “I am interested but follow up with me in 3 months.”

Will this lead to a deal? Maybe. But a lot of things can happen between now and 3 months. 

Instead, the consultant can offer the prospect the ability to be in their executive mastermind group and offer a helpful service now while building long-term trust. 

Financially, the group is much more cost-effective than their consulting services. 

Time-wise, the group represents a much smaller time investment compared to the consulting services.

Reputationally, the group only involves them, the decision-maker and nobody else at their company.

Participating in an executive mastermind group represents a low-risk option for the decision maker to be around the consultant more and assess the consultant’s ability to follow through. Furthermore, the group gives both parties a chance to learn more about each other. It won’t always be a perfect fit, and this also helps the consultant avoid over-committing as they learn more about prospective companies and their needs.

And, over time, if the prospect feels trust with the consultant, it will be a very low risk proposition for them to hire the consultant for expanded services. The key to this method’s success is the mutually assured benefits for both parties throughout the process. 

If you are a consultant, executive coach, or anyone in B2B sales and would like to learn about setting up an executive mastermind group for yourself, reach out to me on LinkedIn and I’d love to tell you about it. 

Over the past month, I have been obsessing and diving deeper into research from Daniel Kahneman and Amos Tversky – specifically Daniel Kahneman’s Prospect Theory (of which Kahneman won the Nobel Prize in Economic Sciences in 2002) and their research on loss aversion.

Despite this research being out for 20+ years, I believe that most sales and business development professionals are practicing outdated methodologies. Up until now, these professionals were able to achieve some semblance of results with brute force tactics. They still race to the bottom to see who can provide a product or service cheapest, or cycle through business development representatives instead of building relationships with prospects and then pass that prospect to someone else and potentially other people on the team to try and get a deal signed. Or they are spending money on Google Ads or other ads with the hope of booking conversations. 

With the tightening of spending by companies and increased private equity scrutiny around how budgets are spent, I believe that a gap is widening between business development professionals who understand this information and those who don’t.

And business development isn’t just isolated to professionals in sales. It includes anyone looking for a job, or trying to convince dotted line team members to get their work done in the manner they want it, or any behavior change that one may want to see in another person.

Loss aversion is the concept that people will do more to avoid pain than gain pleasure. 

From a business perspective, this means that professionals would rather do more to avoid getting fired than to do something that could make them a hero and swiftly work up their company’s organizational hierarchy.

Here are some examples:

A company has decided that they need consulting services to improve their performance and operational abilities. They have a $100,000 budget for this service and have appointed a leader in the organization to decide which consulting company to go with. 

Outdated perspectives would assume “If I can deliver more than what they are asking for in my proposal and come in way under their budget, they would have no choice but to choose me and my consulting firm.”

That perspective would be wrong.

Why?

Because the decision-maker in this scenario didn’t choose to pursue this consulting. In fact, if it were up to them, they likely wouldn’t change anything about the way the business operates. Why? Because change represents time and energy and as long as that decision-maker continues to get paid by their company, they aren’t exactly incentivized to change the way the company operates. 

However, because the company appointed them to make a decision, they are essentially forcing this decision-maker’s hand. They are essentially saying “if you don’t make a change in this area, we will make a change for you.”

This decision-maker also doesn’t see a dime of savings from the budget allocated for this service. Therefore, if you are a consultant and you come in $1,000 under budget or $50,000 under budget, this doesn’t really affect the decision-maker because as long as the project is under budget, that is all that matters to them.

The number one factor that the decision-maker is contemplating in terms of who to hire for this consulting work is “who represents the least likelihood of getting me fired.”

That is it! And if they can get away with stalling the decision and ultimately get to no decision without putting their job at risk, that is their number one option. 

When people share the adage “nobody ever got fired by hiring Deloitte (or KPMG or Ernst & Young or whoever the largest, most dominant competitor is in your market)”, they are referring to the simple fact that they represent the status quo. If Deloitte does a bad job and the executive team is dissatisfied, can you really fire the person who hired Deloitte knowing their reputation? Not as likely. Or, if you go with a smaller, lesser-known consultant and they do a bad job, when going with a Deloitte was an option for them (and within budget), is it easier to justify firing the person that decided to make that hire? Much more likely. 

This can also be applied to people seeking a job. If you are a candidate with a lot of experience AND you fall within budget*, you are much more likely to land the position compared to someone who doesn’t. Taking a risk on a candidate you like but who doesn’t have the qualifications creates risk for the business. If that candidate fails or leaves, in a post-mortem, we can observe “were there flaws in our hiring process?” 

*Caveat on falling within budget. From a hiring perspective, this is oftentimes subjective based on assumptions as to how much a person will cost to bring in. Some candidates have heard the feedback “you are just too experienced for this role” or “this role would be beneath your capabilities”. This is oftentimes HR speak for “we assume we know how much you are going ask for in terms of salary and we don’t have the budget to afford it so as opposed to going through fruitless negotiations in which we think we know we can’t meet your salary demands, we might as well end the interview process short.”

The same holds true for getting a dotted-line team member to change the way in which they behave so then you can get your work done more effectively. If you are waiting on another team member or entire department to get work done in a specific way and they consistently come up short, elongating the time and energy it takes for you and your team to complete the work, your respective mid-level managers might jump in and try imploring their respective teams to be more amenable to the change, but this oftentimes doesn’t work. 

Why?

Because a mid-level manager isn’t going to fire one of their teammates for not adjusting their work output to make it easier for a team in a different department to get their work done. As long as the incentives and metrics they are being measured against are consistently achieved, it is really hard to achieve a behavior change.

However, if the person who wants to see the behavior change from the other team can quantify the financial impact this extra time and energy has on the bottom line (perhaps they can say that they wouldn't need to fulfill an additional headcount because they are that much more efficient) and then take that information to the CFO and the CFO determines that this minor behavior change from the other team is a much less painful adjustment than the financial costs of hiring an extra team member to account for this, you can bet that the behavior change is about to be permanent.

Therefore, if we are business development professionals, we need to think differently about how we make ourselves more attractive to our prospects. This starts with understanding who feels the pain that you can relieve the most. It is then followed up with having high proximity to those decision-makers in an environment that shows off our knowledge and capabilities but not in a way that seems braggadocios but rather a humble way. I will be writing a second part to this article to elaborate on solutions, but if you are interested in this topic in the meantime, send me a message on LinkedIn.

Layoffs are an unfortunate aspect of a business’s lifecycle.

Whether a company over-hired during a period of steep growth in anticipation of potentially continuing that growth.

Or a company had a client that represented a large percentage of their total revenue leave and is trying to figure out where to come up with the revenue to pay for everyone’s salaries.

Or a company has gradually fallen on harder times and has decided that restructuring how the organization looks and operates is critical to being successful in the future.

Or a company could have had an informal layoff where they decide to not backfill positions after someone leaves and just ask those who are left to take on additional work.

They are part of a business’s natural ebbs and flows. One could argue that if a company isn’t putting themselves at risk of having a layoff (e.g. hiring to pursue new opportunities), they aren’t effectively preparing themselves for opportunities for high growth when they present themselves.

But what happens to those who are left?

Those who are left oftentimes feel a sense of survivors guilt – as if they are the lucky ones for not getting fired.

This is oftentimes quickly followed by burnout because they are now being asked to do the work of multiple people after growing accustomed to doing the work they had been doing.

Once burnout occurs, people start to formulate their own assumptions about what is next for them and the business. This narrative people create about their future fate is oftentimes way worse than the reality of the situation because the news of the layoff in the first place was likely a huge surprise and has tarnished their belief in the business long-term.

As a leader of a company, here are 3 things you can do to help build back morale after a layoff:

1.      Control the narrative

If leaders don’t control the narrative after a layoff, their people will come up with their own narrative. One leader I interviewed 3 months after a layoff her team decided to pursue shared that she heard from one of her team members that the company was about to go through a merger or get acquired. She had no idea where that news came from. As the second largest shareholder in the company, she reassured her team member that a merger or acquisition was not going to happen, but she couldn’t help but wonder where this rumor came from and how many other rumors might be flying around that she has no idea about.

To minimize surprises around a layoff, some leaders will practice open book management or sharing the financials of a business with all of the employees.

The challenge with the assumption that employees who know the financials will be less surprised if a layoff happens is that the employees don’t know how an executive team will react to multiple down revenue months in a row. Multiple down revenue months could mean no bonuses this year or it could mean layoffs. Knowing how an executive team will react to multiple down months in a row is not the job of the employees.

Companies also often face the challenge of leadership happy talk. This is the act of a charismatic leader (oftentimes the founder or CEO) who say things like “we have been around for 25 years and aren’t going anywhere!”

This talk, when times are good, boosts morale and makes people feel secure. But when a layoff happens, it completely tarnishes morale and the trust employees have in the company moving forward is severely tarnished.

Therefore, if leaders are to control the narrative for those employees that are left, they need to explicitly share why their performance justified keeping them and how that helps the business grow into the future. Leaders essentially need to reassure employees why their job is safe or else employees will assume their job isn’t safe and starting looking for jobs elsewhere.

2.      Make people feel heard

There was a prison study in which inmates were to submit feedback on the state of the cafeteria food. This suggestion box had always existed in the cafeteria but the results of the dining experience never seemed to change. Leadership in the prison wanted to get Likert scale feedback on the quality of the dining experience in the prison and to little surprise, their scores were very low.

Eventually, a leader within the prison decided to do something different. He decided to read all of the suggestions out loud in front of all of the inmates. Regardless of how feasible the suggestion was, he read them all out loud in front of everyone.

Then, something interesting happened. The scores for the quality of the dining experience at the prison improved on the Likert scale. The prison didn’t in fact do anything to improve the dining experience for the inmates, but they let them know that they were heard. 

The same holds true for employees.

I am not advocating for gaslighting the employee experience (e.g. listening to what they have to say and doing absolutely nothing about it), but what I am writing is that helping employees feel heard, even if the leader can’t do anything about their concerns, is much better than ignoring employee concerns altogether to avoid the hard conversation. 

3.      Elaborate on the why to the nth degree and repeat, repeat, repeat

Too many leaders assume that all employees are privy to all the information that the leader is and should therefore understand why certain decisions were made.

Too many leaders assume that explaining why a decision was made once is sufficient for employees to fully digest and understand moving forward.

These are toxic assumptions because employees are not aware of the information a leader has at their disposal, and although the leader may have explained the situation once to the employee, the leader needs to go further to explain the why behind the decision.

For example, a leader could share “We have decided to layoff 5% of our workforce. We made this decision because we over-hired the year prior. We were on a major upward trajectory and wanted to be prepared if the market continued to climb. Unfortunately, that didn’t happen and we let go of these employees for the sole fact that we don’t have enough business to justify having them on the team moving forward. Moving forward, we believe we have right-sized our business to be commensurate with where the market is now. As long as we are able to achieve xyz profitability, we should be able to grow a steady growth rate moving forward. When our company is able to achieve xyz profitability, it allows us the freedom and ability to grow our business in a stable way. When we are below that profitability, it puts the business at risk of going under. If the business goes under, nobody has jobs and we won’t be able to work together anymore.”

This may seem like overkill, but by being abundantly clear about how the business operates and the numbers the business needs to achieve to thrive, it empowers employees to know where they stand with the business. 

Then repeat, repeat, and repeat some more. And when you feel like you have shared this message a million times, share it one more time just to be safe. 

Oftentimes, employees will need to hear a message multiple times for them to become conscientiously aware as to what the message means and the ramifications it has on them.

Overall, building back team morale after a layoff is hard. It is the companies that can control the narrative, make people feel heard, and explain the why with enough repetition that are able to achieve success after a layoff.