the practice of organizational restructuring:: from design to reality

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The Practice of Organizational Restructuring: From Design to Reality JULIA BALOGUN, Cass Business School, London Organizational restructurings are commonplace, put in place by many senior management teams as part of a wider strategic change to create align- ment between ways of working and a new strategic intent. Yet we know little about how these restruc- turings are implemented and delivered by the mid- dle managers often charged with making the senior manager blueprints a reality. This paper argues that for us to appreciate the way restructuring works in practice, we need to recognise that any shift in organisational form requires an accompanying cog- nitive orientation. The paper discusses the implica- tions this raises for practice. Ó 2007 Elsevier Ltd. All rights reserved. Keywords: Restructuring, Middle Managers, Stra- tegic Change, Schema Change, Strategy as Practice Introduction Restructuring is a common phenomenon, undertaken by many organizations on a regular basis (Whitting- ton, Pettigrew, Peck, Fenton, Martin, 1999; Mayer et al., 2003, 2004; Whittington et al., 2007; Whittington et al., 2004). This restructuring can be driven by a number of strategic considerations, such as a desire to adopt new, more flexible and modular organiza- tional forms to respond to an increasingly dynamic business environment (Schilling and Steensma, 2001), or the need for more globally integrated ways of working (Rugman and Hodgetts, 2001), or just the need to improve business performance through cost reductions or productivity gains (Balogun and Hope Hailey, 2003). For these new structures to work, the structural blueprints designed by senior manag- ers have to be put into practice by others, since new structures require not just a reorganization of individ- uals on a structure chart, but actual changes in ways of working for the design principles behind the new structure to become a reality (Porras and Robertson, 1992). Yet the focus on the role of senior managers in change research means we know little about the role of these ‘‘others’’ during re-structuring initiatives (Balogun, 2003; Balogun and Johnson, 2004, 2005). Middle managers in particular are likely to be key since they are often those tasked with making senior management plans happen (Floyd and Wooldridge, 1994, 1997) – although in imposed change these man- agers are as much recipients as they are implementers of senior manager wishes. They have to grasp some- thing they did not design and negotiate the details with others equally removed from strategic decision making. The research reported here therefore exam- ines the implementation of a shift in organizational structure from a traditional hierarchy to a more modular organizational form from the perspective of middle managers rather than senior managers to understand the issues involved in operationalizing a new structure in practice. Consistent with the grow- ing field of strategy as practice (Balogun et al., 2007; Jarzabkowski, 2005; Jarzabkowski et al., 2007; Johnson et al., 2003; Whittington, 2006) the research seeks to understand the actual activities associated with restructuring initiatives and builds implications from this for managerial practice. Management Focus European Management Journal Vol. 25, No. 2, pp. 81–91, April 2007 81 doi:10.1016/j.emj.2007.02.001 European Management Journal Vol. 25, No. 2, pp. 81–91, 2007 Ó 2007 Elsevier Ltd. All rights reserved. 0263-2373 $32.00

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Page 1: The Practice of Organizational Restructuring:: From Design to Reality

doi:10.1016/j.emj.2007.02.001

European Management Journal Vol. 25, No. 2, pp. 81–91, 2007

� 2007 Elsevier Ltd. All rights reserved.

0263-2373 $32.00

Management Focus

The Practice ofOrganizationalRestructuring:From Design to Reality

JULIA BALOGUN, Cass Business School, London

Organizational restructurings are commonplace,put in place by many senior management teamsas part of a wider strategic change to create align-ment between ways of working and a new strategicintent. Yet we know little about how these restruc-turings are implemented and delivered by the mid-dle managers often charged with making the seniormanager blueprints a reality. This paper argues thatfor us to appreciate the way restructuring works inpractice, we need to recognise that any shift inorganisational form requires an accompanying cog-nitive orientation. The paper discusses the implica-tions this raises for practice.� 2007 Elsevier Ltd. All rights reserved.

Keywords: Restructuring, Middle Managers, Stra-tegic Change, Schema Change, Strategy as Practice

Introduction

Restructuring is a common phenomenon, undertakenby many organizations on a regular basis (Whitting-ton, Pettigrew, Peck, Fenton, Martin, 1999; Mayeret al., 2003, 2004; Whittington et al., 2007; Whittingtonet al., 2004). This restructuring can be driven by anumber of strategic considerations, such as a desireto adopt new, more flexible and modular organiza-tional forms to respond to an increasingly dynamicbusiness environment (Schilling and Steensma,2001), or the need for more globally integrated waysof working (Rugman and Hodgetts, 2001), or just

European Management Journal Vol. 25, No. 2, pp. 81–91, April 2007

the need to improve business performance throughcost reductions or productivity gains (Balogun andHope Hailey, 2003). For these new structures to work,the structural blueprints designed by senior manag-ers have to be put into practice by others, since newstructures require not just a reorganization of individ-uals on a structure chart, but actual changes in waysof working for the design principles behind the newstructure to become a reality (Porras and Robertson,1992). Yet the focus on the role of senior managersin change research means we know little about therole of these ‘‘others’’ during re-structuring initiatives(Balogun, 2003; Balogun and Johnson, 2004, 2005).Middle managers in particular are likely to be keysince they are often those tasked with making seniormanagement plans happen (Floyd and Wooldridge,1994, 1997) – although in imposed change these man-agers are as much recipients as they are implementersof senior manager wishes. They have to grasp some-thing they did not design and negotiate the detailswith others equally removed from strategic decisionmaking. The research reported here therefore exam-ines the implementation of a shift in organizationalstructure from a traditional hierarchy to a moremodular organizational form from the perspectiveof middle managers rather than senior managers tounderstand the issues involved in operationalizing anew structure in practice. Consistent with the grow-ing field of strategy as practice (Balogun et al., 2007;Jarzabkowski, 2005; Jarzabkowski et al., 2007; Johnsonet al., 2003; Whittington, 2006) the research seeks tounderstand the actual activities associated withrestructuring initiatives and builds implications fromthis for managerial practice.

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The research site was a recently privatized BritishUtility, Utilco, implementing strategic change involv-ing a shift in structure to a more modular organiza-tional form in response to increasing regulation. Theresearch examines how middle managers interpretsenior manager design and actions and why, andhow these interpretations in turn shape the way thenew structure actually operates. In other words, theresearch studies the middle manger ‘‘sensemaking’’:how the middle managers build an understandingof what the new structure means for them, their work,roles and responsibilities. In order to achieve this itidentifies the schemata, the mental maps or memorymodels individuals have about their organizationand their world more generally, prior to the restruc-turing, and how these mental models develop andchange during the restructuring. Whilst this researchfocuses on a particular example of restructuring, thisexample includes issues that many organizationsencounter. The nature of the restructuring in whichnew divisions are created out of an older, establisheddivision with an intent for this structure to support aradically different way of working, and the way therestructuring is implemented, through the top-downimposition of a structural outline which requiresthose within the structure to complete the detail ofthe design as they work within in, are characteristicof many restructuring initiatives. The case studyshould therefore be seen as an illustration thatreminds us of the problems and issues that com-monly arise during restructuring and therefore thelessons we should extract. The key findings are that:

v Restructuring to new organizational formsrequires an accompanying cognitive reorientationfrom middle managers.

v When introducing differentiation into a previ-ously homogeneous structure, cognitive reorienta-tion occurs through a shift from shared sensemakingaccompanied by a ‘‘deidentification’’ from com-mon goals and identities, to differentiated sensemak-ing with ‘‘reidentification’’ with new moreinterdependent goals and identities.

v During this cognitive orientation individuals passthrough a phase of fractured sensemaking in whichthey edit senior manager designs through theirinterpretations.

v Particularly in decentralized organizations, suchas the one studied here, middle manager interpre-tations are shaped as much by the more informalsocial processes of interaction occurring betweenthemselves, as they are by senior manager com-munications and actions. This has implicationsfor the degree of control senior managers canactually exercise over how change develops.

v Attention is, therefore, required to both formal andinformal aspects of new structure design. This isparticularly true in terms of interfaces betweenthe different components of a new structure.

This paper first explains what we know about middlemanagers and change, and describes the research

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study. It then moves on to consider the key observa-tions from the research and the implications these raisefor practice. The paper concludes with a considerationof some of the design traps senior managers fall intowhen developing new organisation structures.

Middle Managers and Change:Their Undervalued Contribution

Whilst there is a stream of research dating back toBower (1970) looking at the strategic role of middlemanagers, most research on strategy and strategicchange continues to focus more on upper echelons(Balogun et al., 2007; Jarzabkowski et al., 2007). Thusdespite a growing volume of work (for example,Balogun and Johnson, 2004, 2005; Floyd and Woold-ridge, 1994, 1997; Huy, 2001, 2002; Rouleau, 2006)arguing for a recognition of the strategic contributionmiddle managers can make, middle managers con-tinue to be thought of in traditional terms; as ‘‘link-ing pins’’, or a conduit, connecting senior managerswith the rest of the organization and relaying seniormanager orders in an unquestioning fashion. Middlemanagers are also still subject to much criticism asresistant, foot dragging, self seeking, saboteurs ofchange (Balogun, 2003). Thus although we know thatthese characterizations of middle managers areunfair, and that middle managers do indeed makean important contribution, their role and potentialcontributions remain undervalued. Given that thesemanagers do indeed play a pivotal role, (somethingthe notion of ‘‘linking pin’’ does at least capture),we need to understand more about the nature oftheir ‘‘work’’ in different types of strategic situations,such as different forms of change, and what, there-fore, more senior managers can do to facilitate thisactivity given that it is likely to be critical to thechange outcomes achieved.

Change as a Cognitive Reorientation

Whilst new structures might create cognitive orderand alignment with strategic organizational goalsand environmental shifts for top executives, it alsocreates a schism between top managers and theirsubordinates (McKinley and Scherer, 2000). It createsuncertainty for the subordinates in terms of howthings are to be done in future, and presents manag-ers outside of the top team with the conundrum ofhow to make the new structures ‘‘work’’. In addition,the more radical a new structure, the more it willrequire a shift in the mental models, or schemata, oforganizational members about ‘‘the way things aredone around here’’. Thus we cannot appreciate thetrue implications of restructuring unless we see itas a process of ‘‘cognitive reorientation’’, requiringa shift in not just administrative mechanisms, butalso the informal side of organizations, such asassumptions and beliefs about the nature of work

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(Porras and Robertson, 1992), and therefore individ-ual’s mental models of their organisations.

Schemata are the mental models or frameworks inwhich learning from past events and experiences arestored in memory (Rumelhart and Ortony, 1977). Theyare data reduction devices which enable us as individ-uals to negotiate our complex world. Organizationalschemata or interpretive schemes (Bartunek, 1984)are simply the frame of reference shared among mem-bers of an organization. Whilst individuals within agroup may not have identical schemata, some levelof shared understanding is likely to exist to enablecoordinated activity. If an organisation is to change,the mental representations that individuals shareabout that organisation also need to change. The pro-cess of sensemaking is central to the creation and changeof individuals’ schemata. When individuals experi-ence change, to understand the implications of thesechanges for themselves and to make sense of it all, theyexchange gossip, stories, rumors and past experiences,and take note of symbolic behaviors and actions (Gioiaand Chittipeddi, 1991; Isabella, 1990; Labianca et al.,2000; Poole et al., 1989). Through these means, whatis more commonly known as sensemaking behaviour,individuals then develop new understandings. Thus,when organizations are restructured, individualsengage in active sensemaking processes to understandthe implications for themselves, their teams/depart-ments, and their ways of working with others.Through these means they can come to some form ofnew, and where possible, shared understanding toenable cooperative working within the new structureand the delivery, where possible, of the new goalsset for them. This in turn means that we need to under-stand the nature of the sensemaking processes and theschemata change process individuals go through if weare to understand how restructuring occurs.

Research Background

The research was conducted through a qualitative,longitudinal, real-time case study (Yin, 1994) of arestructuring initiative in the core business divisionof Utilco. The traditional, centralized hierarchy ofabout 3,500 staff was dismantled as the old corebusiness division was split into three new businessunits – a small core business division (with about300 staff) and two larger internal service businessunits, Engineering and Services, which were fromhenceforth to provide all needed support activitiesand services to the new core division on a contractualbasis. Services could ultimately be contracted out bythe core division if the internal service divisions didnot start to provide services of a better or equal qual-ity and price than could be obtained from externalsuppliers. The research tracked the implementationof the new structure from the perspective of the mid-dle managers for a period of about a year, primarilythrough the use of solicited middle manager diaries.26 middle managers from a group of about 90 man-

European Management Journal Vol. 25, No. 2, pp. 81–91, April 2007

agers at this level maintained diaries. The diary datawas supplemented with face-to-face interviews witheach diarist at the beginning and towards the end ofthe tracking, phone interviews with diarists to adddetail to diary entries and, towards the end of theresearch, focus groups. This data captured the sense-making activity and the changing schemata of themiddle managers involved in the research. Theresearcher also held review meetings with the dia-rists every 6–8 weeks on a divisional basis, and inter-viewed individually the three appointed divisionalchange managers on each site visit. In addition, eachof the divisional directors was interviewed and doc-umentation, such as copies of team briefings andworkshop documents, were collected.

The Restructuring Process

Following a strategic review of the core business ofUtilco, the senior managers concluded that the busi-ness had to be radically reengineered if it was toremain profitable given the increasing tough regula-tory environment and price reviews. Working withconsultants, the senior managers developed a blue-print for a new structure and new ways of working.The core division was to become the business ownerresponsible for the strategic development of the busi-ness. Engineering was to be responsible for thedevelopment, maintenance and repair of Utilco’s net-work and Services was to be responsible for thedelivery of customer services. Both business unitswere to provide these services on a contractual basis.This fundamental restructuring of the business there-fore also involved the development of new workingpractices, procedures and systems to support thenew contractual working environment. These newways of working included more flexible workingpractices and the introduction of new technology.The business was therefore downsized as part ofthe re-structuring. Simultaneously there was anintent to shift from the relatively old fashioned tech-nical, ‘‘blame/control’’ culture to a more customerservice orientation.

The actual implementation started once the threebusiness unit directors and their senior managementteams had been appointed. In the following four tofive months staff were moved into the new structureon a level-by-level basis. At the management levelsall staff had to apply for the jobs they wanted inthe new structure. The staff who were to be offeredpositions were selected and those to ‘‘take exit’’ alsoidentified. However, the main transitionary periodwas due to last a year, during which time the newworking practices, systems and procedures were tobe put into place. No contracts were to be issueduntil the end of the first year. The main co-ordinationmechanism during this time was ‘‘business asusual.’’ This meant that staff and departments wouldcontinue to do the work they used to do until which-ever department was to be responsible for that work

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in the new structure was ready to take it over. Mid-dle managers were to work out the detail of newroles and responsibilities for their part of the newbusiness units.

Much effort was put into communication early on toensure staff understood the purpose of the changes.All staff attended roadshows explaining the changes,and received a detailed team brief on the progress ofthe changes to date. Regular monthly team briefswere issued from then on. All staff were also ableto attend ‘‘vision workshops’’ providing more detailon the change rationale and plans.

Key Observations and Implicationsfor Practice

The key observations from the research are capturedin what follows under three headings: restructuringas a cognitive reorientation, balancing the contentand process of restructuring and middle managersas editors of senior manager plans. In each sectionthe key observations are recorded and the associatedpractical implications discussed.

Restructuring as a cognitive reorientation: fromshared sensemaking to differentiated sensemaking

What happened at UtilcoFigure 1 shows that before change everyone withinthe old core divisions of Utilco worked together as

Before Change:Shared Sensemaking

Utilco:

Common Purpose

One Company

During Change: Fractured Sensemaking

Core Division:

Business Owner

Multiple Business Units

Services:

Contractor

Multiple Business Units

Engineering:

Contractor

Multiple BusinUnits

Separating:

Imposed Change

Figure 1 Restructuring as a Cognitive Reorientation

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one company, with equal status. When cooperationbeyond the usual was needed it was done on thebasis of goodwill. There was an unspoken expecta-tion that the favour would be returned at sometime, but there was no need to request that ordemand something in return. However, trackingof the middle manager schemata showed that asthe new structure was imposed and staff wereassigned either to the Core Division or one of theservice businesses, the middle managers moveaway from this shared sensemaking and into fracturedsensemaking as the old common identity brokedown. The Core started to move towards (andbehave as) a business owner, and meanwhile theservice businesses were metaphorically starting toequate themselves with contractors. As the individ-uals within each of the new divisions focussedinternally on the establishment of their own bit ofthe new structure, there was little overlap betweenthe different divisions in terms of the content oftheir schemata, and therefore the way they sawthe new world. For example, the Core Divisionwas busy establishing procedures that wouldenable them to issue and monitor work against con-tracts. Engineering in fact had three sub-divisionswithin it and had to work to set up three separatespecialized streams of staff resourcing and workingpractices, but also coordination between these sub-divisions, as well as implementing new financialsystems and flexible working practices to achievecost savings. Services needed to facilitate downsiz-ing through the introduction of new technologyled working practices. Only as change progressedinto the second year of implementation and the

ess

Post Change: Differentiated Sensemaking

Core Division

Working Together

Contractually

Coalescing

Engineering

Services

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contracts were issued did the divisions start tomove to some common view of working togetherthrough contracts, establishing yet again somesense of shared, although now differentiated sense-making. Whilst they had a shared perception ofeach others’ roles and the way they work together,there were considerable differences between theCore Division and the services businesses as theystarted to identify more with their different posi-tions of business owner and contractual serviceproviders.

However, the movement from shared to differenti-ated sensemaking was not smooth. When thechanges were imposed, and everyone was separatedinto three different divisions, this fractured the onecompany mentality (captured in Figure 2 in theUtilco Schema) – particularly for those in Engineer-ing and Services. They were now ‘‘contractors’’working on a contractual basis for those who usedto be their equals and colleagues. They were forcedto reconsider their identity and their job security.As a result they went through a process of deidentif-ication (Fiol, 2002).

Utilco SchemaCommon Purpose

One company: EqualsKeeping the service going … through …

Work done on basis of goodwillTechnical culture

ControlSenior managers controlBlame for mistakes

Before Change:Shared Sensemaking

During Change: Fractured Sensema

Core Division SchemaMulti-business: Inter-Business Rela

Contracts may make things worseWe need to work with other businInter-Business Tensions:

Barriers / walls between divisDefence of turfWho does whatLack of co-operationPerception life easier / no thre

Control

Engineering SchemaMulti-business: Inter-Business RelatiInter-Business Tensions:

Attitudes of Them and UsDefence of turfWe are now contractors / no longCore behaving like prima donnaWe are doing Core’s work / busiWho does whatPressure greater in Engineering

ControlSenior managers controlBlame for mistakes

Services SchemaMulti-business: Inter-Business RelatiInter-Business tensions

Defence of TurfWho does whatOther divisions not taking on new exploiting Services

ControlSenior managers controlBlame for mistakes

Figure 2 From Common Purpose to Multi-Business. Adapte

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‘‘There was a lot of pride . . . they are now saying that the CoreDivision owns the system, and Engineering are purely contrac-tors . . . there is an awful lot of people in Engineering who felta real pride and ownership in their bit of the system . . . it wasn’tthe company’s, it was theirs.’’ (Engineering)

At this point in time, there was little overlap inunderstanding between the managers of the threedivisions about the working of the new structure,and the managers were therefore seeking to negotiatethe boundaries to their new roles and responsibili-ties, and patterns of both intra and inter-businesscoordination, based on their different under-standings. As Figure 2 shows, during the phase offractured sensemaking, the new inter-businessrelationship was characterized by inter-business ten-sions with few people prepared to give anythingwithout immediately receiving something of benefitin return:

‘‘The major effect to me was the lack of people being prepared tocompromise on what they thought was their, what the businesswas expecting of them . . . It was a case of I’ll give you somethingif I get . . . I’ll take something if you give me something inreturn.’’ (Core Division)

kingPost Change:Differentiated Sensemaking

tionships

esses

ions

at in Core

onships

er own assetssness as usual

onships

duties /

Core Division Schema: Business OwnerMulti-business: Inter-Business Relationships

We are co-operatingWe can work together through the contractsInter-Business Tensions:

(Still there – but declining)Control

Less senior manager controlMore open, two-way communication

Engineering Schema: ContractorsMulti-business: Inter-Business Relationships

Contracts resolving who does what We can co-operateWe can work together through the contracts Inter-Business Tensions:

(Declining but still …Attitudes of Them and UsWe are doing Core’s work / business as usualPressure greater in Engineering)

ControlSenior managers controlBlame for mistakes

Services Schema: ContractorsMulti-business: Inter-Business Relationships

We can work together through the contracts Inter-Business Tensions:(Declining but still …Defence of TurfWho does whatCore divisions not taking on new duties /

exploiting Services)Control

Senior managers controlBlame for mistakes

d from Balogun and Johnson (2004)

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Whilst there were plans for the internal developmentof each of the businesses, there was no plan for howthe interfaces were to work other than ‘‘business asusual’’ and the intention for middle managers towork out the details in practice. ‘‘Black holes’’, workand responsibility overlooked and not assigned any-where, exacerbated the task, as did the lack of con-tracts or knowledge about what was in thecontracts. Not surprisingly, as individuals tried towork through the change in their relationship withthe organization and their ex colleagues, the barrierscame up. People defended their territory. There werearguments over who was responsible for what:

‘‘The only problems I am directly encountering at the momentare peoples, and my own, lack of knowledge of responsibilities.The answer to these black holes of responsibility will be the defi-nition of the work processes for each section and the implementa-tion of the contracts. These black holes do not become a problemunless someone is reluctant to take ownership and solve the prob-lem.’’ (Engineering)

‘‘Some staff have been convinced of what they will and won’t do.For example . . . ‘we’re not getting paid for it, so we don’t need todo it any longer’. . . taking a protective line to their duties.’’ (CoreDivision)

However, the issue of the contracts helped to smooththe tensions. They became a means of resolving dis-putes over black holes and who does what – and theCore Division had procedures for dealing with issuesthat couldn’t be resolved by the contracts as cur-rently written. This led to a new working relation-ship between the Core and the service businesses.In addition, the members of the different businessesstarted to reidentify (Fiol, 2002) with their businessesand the nature of their work as new internal ways ofworking were completed. In some ways, this high-lighted the differences between the three divisionsas the Director of the Core Division was moving thisbusiness away from the blame/control culture to oneof greater empowerment and more open communi-cation through his management style. In the servicebusinesses the blame/control culture remained asthe senior mangers continued to blame people formistakes and countermand local decisions made bythe middle managers.

Practical implicationsAs argued in the introduction, restructuring initia-tives in different organisations will to some extentbe unique. However, the Utilco example has certainsimilarities with many other restructurings. First, ablueprint is imposed in a top-down fashion leavingmiddle managers to work out the detail. Second itinvolves the creation of new organisational unitsfrom existing units. Therefore in common with manyother restructuring initiatives, the new Utilco struc-ture automatically challenges existing identities andhistorically taken for granted ways of interacting, col-laborating and coordinating to achieve particularorganizational goals and outcomes. In common with

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other change efforts, for the restructuring goals to beachieved and individuals to change how they goabout their work appropriately, they have to changethe way they think of their organization and theiridentity. Here, a critical issue was the nature of theworking relationships that developed between thedivisions. These relationships need to be profes-sional, contractual relationships, not antagonistic. Inother restructurings the critical issue might be some-thing else, such as individuals adopting a more Euro-pean as opposed to country centric approach.However, the similarities mean we can extract les-sons from Utilco that can be applied to other restruc-turing initiatives.

1. Structural design needs to pay equal attention toboth the within business unit and across businessunit roles, responsibilities, boundaries and liaisonmechanisms. The across unit coordination mecha-nisms are particularly easy to overlook in terms ofdesign as typically no-one is assigned particularresponsibilities for these within a structure, yetthese are critical.

2. As this case of restructuring highlights, there is aneed for managers leading restructuring initia-tives to recognize the dual sensemaking processthat is likely to occur when new organizationalunits are created from existing ones. Members ofeach new organizational unit need to evolve inter-nally within the unit to adapt to their new, moreindependent goals while simultaneously co-evolv-ing externally with the members of other new unitsto bridge the sensemaking faultlines betweenthese new units. Change leaders need to facilitateboth to reduce the length and impact of the frac-tured sensemaking phase.

3. In addition, we can characterize work settings interms of four components – organizing arrange-ments, physical setting, technology and social fac-tors. As this case shows, physical change requiresan accompanying change in the ways individualsthink about their work identities, relationshipsand ways of coordinating. Explicit considerationneeds to be given to how these social factors needto change to support the changes in the first threeharder, more tangible components – and to put inplace interventions to aid the development ofthese factors. Otherwise new structures become‘‘rough hewn as we will’’ – shaped by bottom-up, evolved interpretations.

Balancing the content and process of restructuring

What happened at UtilcoThe above section illustrates the tensions betweenstaff in the new businesses as they tried to developnew ways of working appropriate to the new struc-ture imposed on them. In fact, even after the intro-duction of the contracts, tensions remained. Thiswas partly because the tensions over the content

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of the new structure (contractual relationships)were heightened by the process for the implementa-tion of the new structure. It has already been pointedout that there was little transition manage-ment (a process issue) put in place to facilitate thechanges:

‘‘People have been tied up that much with what they are doing intheir own divisions that they have been very blinkered in theirapproach and that is part of the wall building bit of course thatwe have heard so much about.’’

Each division had an appointed change manager tohelp with the change process inside that division,but there were no resources or means assigned toaid the business interface development, other thanthe design of the contracts and ‘‘business as usual’’.On completion of the consultant/senior managerdesign team, they had ‘‘just closed the room up’’,leaving no team in place to take the design forwardand oversee the implementation. This lack of inter-business transition management in the context ofthe tensions between the divisions, meant that anyunresolved issues, such as who does what, responsi-bility for black holes, and other disputes had to bepassed upwards, ultimately to the directors, for reso-lution, slowing decision making and heighteningtensions. Disagreements over who does what werealso extended by the lack of knowledge of whatwould be in the contracts (again a process issue –leaving the completion of contract details until theend of the first year of change):

‘‘Contracts not being in place is causing problems. Staff aresometimes reluctant to carry out a task (eg. replying to a cus-tomer complaint) because they don’t have a contract saying theyshould do so.’’ (Core Division)

The lack of detailed output from the design team onroles and responsibilities created similar issues(again a process issue as the decision was taken toleave the details to others):

‘‘You can’t expect in re-engineering a huge division like this toget it right first time . . . They then created a lot of black of holes,which really passed the buck on, which 12 months prior to thatwe would have just done. You know it is either x or y, andwe’d have got on and done it, and then would have been theend of it. That caused real problems and an awful lot of hassle. . . they are the things that we got out of bed over, which causeddifficulty.’’ (Engineering)

A Bigger Process Issue, however, was ‘‘Business asUsual.’’

‘‘There is a feeling in the service businesses that contracts shouldbe in place, nothing should be done unless there is an incomestream resulting and arrangements under the ‘‘business asusual’’ agreement should be ceasing – an example of this is thereluctance of others to take responsibility for the collection andreporting of customer service data.’’ (Core Division)

The Core Division needed ‘‘business as usual’’ whenit was first established. The service businesses

European Management Journal Vol. 25, No. 2, pp. 81–91, April 2007

needed to continue to do the work that the Corewould ultimately take off them whilst the Core Divi-sion set itself up. However, no end date was set forthis transitionary activity, and meanwhile the down-sizing of the service divisions was continuing asplanned and to schedule. Thus as long as the servicedivisions had to provide transitionary cover, theywere continuing to support a workload inconsistentwith their new staffing levels. They were having tocontinue to do work they were no longer staffed todo:

‘‘The feeling of there being a lot of pressure on others to reducecosts, staffing, etc. but that the similar pressure is not on CoreDivision.’’ (Core Division)

The workload of the Core Division, in one keydepartment in particular, meant that ‘‘business asusual’’ was still continuing at the end of the first yearof change. Thus there were disagreements over this.The service businesses wanted this activity to endbecause it resulted in work overload for them, andthey also thought it was being used as an excusefor the non take-up of new duties. The Core Division,on the other hand, wanted it to continue as they werenot yet able to take on all of their new duties withouttaking on an impossible workload themselves:

‘‘As I see it, the problem is that people in the other businesses areheavily committed to achieving the, well not only their objectives,but the Core Division’s objectives for this financial year andbeyond . . . Our people are working very hard to achieve these tar-gets, and I know it is difficult for Core Division people becausethey are having to set their outfit up, they are having to set theshow up . . . but it would be nice if they could do it without get-ting in the way of ours people. . .’’ (Engineering)

In addition, as the contracts came in, the Core Divi-sion were clear that the first year of contract opera-tion was to be a parallel run of contracts and‘‘business as usual’’ to provide cover for contractualoversights and issues. The service businesses dis-agreed about this, and thus inter-business tensionsremained even with the contracts in place:

‘‘There is a problem despite the general message expressed ofbusiness as usual . . . although we haven’t got a contract specif-ically to do it, I can assure you it is part of business as usual,but that doesn’t help when the bottom guy says to me, I don’tthink it is business as usual, I want more money for doing thejob. So my job is to go and try and convince him that it is busi-ness as usual, and then maybe he’ll reconsider what he has beentold by his managers.’’ (Core Division)

This also, of course, was symbolic of the widerrestructuring. The service businesses were nowworking to contract – to some extent they were atthe mercy of the parts of the Core Division that forreasons of self-interest wanted to maintain ‘‘businessas usual.’’

‘‘We need a clear vision for each division and not only . . .. therelationship in terms of talking to people is fine but the under-standing of where we are going a few months from now, I think

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I know and they think they know and I think it is a different opin-ion.’’ (Engineering)

Practical implicationsA characteristic of the change process at Utilco is notjust that it was imposed top down, but that it wasdone as a ‘‘big bang’’. In other words, the new struc-ture replaced the old structure: there was no coexis-tence of the old and the new other than thecontinuation, by some, of tasks that would ultimatelybe passed over to others. These two different ways ofdelivering structural change – a replacement of theold with the new, as opposed to coexistence andgradual transition of one to the other – lead to differ-ent patterns of schema change that the change pro-cess needs to be designed to facilitate. When radicalstructural change is imposed (as here) forcing a rela-tively sudden break from the past old schemata aredestroyed virtually overnight, and replaced withsome sort of experimental schemata/expectations.These new schemata then have to evolve incremen-tally from on the job learning, so there is likely tobe a lot of confusion and experimentation.

Imposing change in a big-bang fashion does, ofcourse, have advantages. There is no going back.However, senior managers need to consider the syn-chronization of change process and content sche-mata. Even when radical change is imposed in abig bang fashion there are still two design choices.Either it is necessary for those leading the changesto engage in extensive up-front design so a completedesign can be imposed, or operationalization of a lessdetailed structural outline falls to middle managers.Typically the latter approach is taken as otherwisethere are issues about the length of the design phaseand the extent to which it is possible to design all ofthe detail. This choice, however, raises issues abouthow the business is kept going in the meantime aswe see above. The change process needs to bedesigned to minimize the potential tensions. Again,there are generic lessons here that can be applied toother restructuring initiatives.

4. Once a new schema has been imposed, it is neces-sary to facilitate its subsequent negotiation andevolution. Furthermore, it is necessary to facilitatethe development of both the change content andthe process schemata, recognizing not only theinterdependency of the two and the potential neg-ative impact of one on the other, but also the waythey evolve through on the ground experiencesrather than senior manager exhortation.

5. Explicit transition management and transition man-agement resources are needed to help facilitate thischange process. As we see from the case of restruc-turing discussed here, to design a structure andthen just ‘‘pass it over’’ to members of that structureto manage the changes ignores the realities of imple-mentation, which involves considerable energy andeffort to complete the detail of the design, and man-age the negotiations over inevitable disagreements

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(heightened by interests of self-preservation leadingto protection of turf), black holes, and lack of clarityas to design intent in some areas. Specialist transi-tion management can provide resources to (i) pre-vent overloading of line managers, (ii) providecontinuity through design and implementation,and (iii) take responsibility for resolution of inter-unit issues through the facilitation of the intra-and inter-unit negotiation process.

6. Project management is also required as part oftransition management. There is a need to projectmanage the timings of different intra and inter-divisional change activities, including the provi-sion of milestones for the ending of temporarymeasures such as business as usual which willotherwise be exploited causing aggravation. Thisrequires recognition of the critical inter-dependen-cies between the different change tasks. Here, forexample, the three divisions could not move for-ward together, or co-evolve, until the contractsand the new contract management procedureswere in place. Such activities should be consideredto form a critical path and be planned, managedand resourced to shorten the fractured sensemak-ing phase as much as possible.

Middle Managers as Editors of Senior ManagerRestructuring Plans

What happened at UtilcoSo what informed how the middle manager schemataevolved at Utilco? How was the cognitive disordercreated by the imposition of the new structureresolved? Certainly there were active attempts at com-munication about the change process from the busi-ness directors who attended the vision workshopsand conferences when they were organized, and pro-vided informative progress information in monthlyteam briefs. Yet although this official communicationwas appreciated, with many positive comments fromthe staff about the effort put into the communication, itappeared to ultimately have limited impact.

What also shaped the schemata of the middle man-agers were the behaviours they encountered in oth-ers in the course of their daily work whennegotiating their job boundaries, the stories and gos-sip they exchanged with others as they tried to makesense of the changes, and their observations of theirsenior managers and others. Certainly the inter-busi-ness tensions were greatly fuelled by the experiencesdescribed above of a lack of co-operation and defenceof turf, and disputes over who does what and busi-ness as usual. Yet there were also many stories,rumours and gossip circulating about the attitudesof the other divisions, and, for example, stories suchas the senior managers not getting on:

‘‘Engineering Director is not giving the same messages as CoreDivision Director – very aggressive at Engineering Briefing.’’(Core Division)

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‘‘Rumour: Core Division are Taking Staff to Watch Engineeringdo the Work.’’ (Engineering)

Therefore these descriptions of change at Utilcoreveal the extent to which middle manager interpre-tations arise as much from the horizontal and largelyinformal social processes of interaction occurringbetween themselves as from the vertical interactionsbetween middle and senior managers – and howthese interpretations in turn impact the way thenew structure works in practice in comparison tothe way intended, ‘‘the problems between Core Divi-sion and the service businesses has been just puredysfunctional behaviour.’’ This also shows hownew structures can in fact be created bottom-upthrough the interpretations people hold despite thefact that they are initially imposed top-down. Itshows the need for a cognitive reorientation of thosepopulating the new structure in line with the originalintent of those who designed and imposed thestructure.

Practical implicationsOf course senior managers influence interpretationsdeveloping during restructuring initiatives, but asthe case discussed here illustrates they typically influ-ence more indirectly, through the presence of theiractions in the stories, gossip and rumors shared byothers. This indirect influence was heightened atUtilco. In common with other more modular anddecentralized organizational structures, in whichdelayering has often removed hierarchical layersbetween middle managers and their seniors reducingopportunities for interaction up the managementchain, and where middle managers are often geo-graphically distant from their seniors, the influenceof the senior managers over middle manager interpre-tations wanes. In addition, the temptation to use mod-ern technology such as e-mail as the main medium ofcommunication, reduces the effort vested in face-to-face, two-way communication, even though we knowthat such communication is the most powerful, partic-ularly at times of uncertainty and ambiguity. Thusonce again we can extract some generic lessons thatcan be applied to other restructuring initiatives.

7. Middle manager sensemaking has a significantimpact on the way imposed structural blueprintswork in practice. Senior managers need to recog-nize the significant role of middle managers duringrestructuring, and the corresponding significanceof lateral inter middle manager processes of nego-tiation. The term change recipient, with its implica-tions of passive acceptance, is inappropriate(Balogun and Johnson, 2004, 2005). Middle manag-ers are more than a conduit of change. As such,efforts must be made to engage them in the intentof the design and to help them deliver against it,otherwise unintended design consequences asencountered here become more likely.

8. The informal nature of many of the lateral pro-cesses of negotiation occurring between middle

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managers, and the extent to which they areembedded in the every day work of the managers,puts them largely out of the control and influenceof senior managers, raising in turn a questionmark over the degree to which change is ‘‘man-ageable’’ or ‘‘controllable’’. This suggests that thesenior managers either need to take themselvesto the sensemaking. They need to be presentwhere the sensemaking is occurring by beingmore visible and available out in the organizationwhilst change is occurring, or bring the sensemak-ing to themselves by creating more shared sense-making opportunities (Balogun, 2006).

Conclusions

The advice here may read like a list of common sense –yet it is surprising how frequently this commonsense, such as equal attention to the design of inter-faces and to the units, and equal attention to contentand process, isn’t applied. Focus typically remainson within unit content. Similarly it is often arguedthat it is the job of line managers to implementchange. This is indeed true – they have a leadershiprole in terms of helping their people through change.But as argued elsewhere (Balogun, 2003) the impactof having to simultaneously undertake personalchange, help others through change and implementchanges in working practices creates a heavy work-load that often becomes unmanageable. This issue iscompounded by the downsizing that often accompa-nies restructuring initiatives. We know that changecreates additional work in the transitionary phase,even if ultimately workloads for some individualsshould be reduced by whatever new ways of workingare being implemented. Thus when restructuring isinitiated not just for reasons of cost saving, to takeresources out at the beginning makes little sense interms of transition management. But yet again, orga-nizations continue to do this and then wonder whythose who are left in place stumble under the pressureof the change process, and often ultimately fail todeliver the new ways of working that were supposedto be the foundation of the new structure, or alterna-tively deliver what was expected, but at a muchslower pace than expected. Whilst some organisa-tions have no choice but to take costs out of a businessquickly (Balogun and Hope Hailey, 2003), those thatdo have a choice should not confuse a cost cuttingagenda with the implementation of new ways ofworking. If one (new ways of working) is being usedto achieve the other (cost savings) then the new waysof working should be put in place first and then usedto deliver the cost savings. Trying to do both simulta-neously is more likely to deliver short-term cost sav-ings in terms of head count at the expense of a longertime to deliver the new working practices. Evenworse, organisations regularly find themselves hav-ing to take on temporary staff to manage the extra

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workload associated with the changes having let theirown staff go, reducing anticipated cost savings.

However, the failure of new structures to deliver isalso due to the way top managers often conceive ofrestructuring – they neglect the need for the accompa-nying cognitive reorientation behaving as though giv-ing individuals new job roles and responsibilities onits own will be enough. They treat restructuring a lit-tle like a chess game, or an intellectual exercise –assuming that a reorganisation of the pieces will besufficient. We can see from the example providedhere that this is not the case. In addition, restructuringis regularly imposed by top managers (McKinley andScherer, 2000) with scant regard for the effortrequired by others to then make these neat, rationaland attractive paper structures work in practice.Politics due to self-interest and defence of turf arerealities of change. To design a process for imple-menting a structure that ignores this makes littlesense. Clear direction from the top with clear mes-sages that resistance will not be tolerated (for exam-ple, those that do resist are asked to leave or aredemoted in some way) are one way round this,although this can also drive legitimate questioningabout design flaws underground.

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JULIA BALOGUN,City University, CassBusiness School, 106Bunhill Row, LondonEC1Y 8TZ, United King-dom. E-mail: [email protected]

Julia Balogun is Profes-sor of Strategic Manage-ment at Cass BusinessSchool, City Universityand a Ghoshal Fellow,

Advanced Institute of Management. Research to datehas focussed on how strategic activity is initiated andchampioned at multiple levels within organizations.Her current research explores strategizing as a dis-tributed organisational activity, through a focus onactivities such as strategic planning and change. Shehas published in a wide range of journals including theAcademy of Management Journal, OrganizationStudies, Journal of Management Studies, and theBritish Journal of Management.

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