Sometimes, a break up can be good. Examples include: When Ariana Grande requests it, or when your diversified multinational corporation needs to survive an uncertain future.
Lately, a rising number of conglomerates are promising to be more focused by splitting up their organizations or reorganizing. EA Sports is a recent example. The popular gaming company is splitting two of its business units: EA Sports will become its own entity, while EA Games will become EA Entertainment.
For HR leaders, restructuring can help solve a handful of potential organizational challenges, including those related to recruiting, retention, and culture. A new name or a smaller, more focused organization can send a message about a company’s strategy and even help it better adjust to change in the future.
Motivations. In an era when companies are cost-cutting and conducting layoffs, reorganizations or spin-offs can help direct innovation and R&D efforts toward a singular goal, and create better market outcomes. Some experts say it can help organizations adjust to today’s rapidly changing environment.
“A corporation that was previously viable reaches a point where the ecosystems of its different businesses have diverged and the CEO can no longer develop a viable strategy for all of them,” Robert Burgelman, a professor of organizational behavior at Stanford Graduate School of Business, told Stanford Business. “The original species needs to split into multiple new corporate species that are better able to pursue their specific opportunities.”
Quick-to-read HR news & insights
From recruiting and retention to company culture and the latest in HR tech, HR Brew delivers up-to-date industry news and tips to help HR pros stay nimble in today’s fast-changing business environment.
With that in mind, HR leaders who are struggling with culture, engagement, or executing or advancing their organizational strategy may benefit from a restructuring of some sort.
Restructurings can also help save costs—as in the recent examples of layoffs at Disney, McKinsey, and a host of Big Tech companies, such as Meta, Amazon, Google, and Microsoft—and allow companies to pursue new partnerships.
“We have new freedom to go to the market. We can continue to serve IBM customers but can also expand partnerships with other tech providers,” David Wyshner, Kyndryl’s chief financial officer, told CNN Business after his company’s 2021 split from IBM.
How to restructure. HR leaders thinking about whether splitting up might be right for their company have a lot of work ahead of them, especially if doing so requires restructuring their own department. Acclimating employees to a new company or business unit name, team members, or processes involves a significant “onboarding” effort, potentially in coordination with L&D.
Employees will also likely have myriad concerns. Consistent, thoughtful communication will be critical as they deal with the anxiety of change and uncertainty, recruiting company Randstad advised.