New IT Organizational Structure: Your Guide to the Five Big Reasons to Reorganize
It always ends up being both personally and politically messy.
But sometimes you don’t have a choice: You have to change your IT organizational structure.
Here are some clues it may be necessary to reorganize your IT group.
Reason to Reorganize IT #1
You must reorganize for regulatory or compliance reasons.
Functions within the business often require an IT presence to meet their compliance issues. If your industry has local manufacturing or regulatory requirements, you’ll likely need to offer some local IT presence to support them.
Depending on the specific requirements, this presence may be simple or complex.
A. A simple example: Every country issues payroll locally, so each country’s sites will have their own local bank account and local funds. They need IT to help them withdraw the appropriate taxes and produce local tax forms for their employees.
B. A complex example: In the pharmaceutical industry, every country has a regulatory agency that requires different formats for site inspections and submissions. Increasingly, these submissions are digital. The organization will need a global submissions database to handle the 90% of these materials that remain the same between regions, as well as a modicum of local support to meet the 10% difference each local market’s agency requires.
In both cases—though especially in the second case—you don’t have a choice but to organize IT around these needs, and to reorganize when new needs arise. (These necessary support areas also offer a great avenue to demonstrate and communicate the value IT provides. If IT didn’t do its job, the organization would shut down. How’s that for offering value?)
The Takeaway: Providing regulatory and compliance support is the number one reason to reorganize. Make sure you are always organized to provide this support. Pay close attention to local regulatory and compliance laws, environments, and changes within them, and (proactively) respond accordingly.
Reason to Reorganize IT #2
The business’s vision and/or strategy has changed, and IT hasn’t caught up.
Each time your larger organization changes direction or structure in a substantial way, IT needs to shift to mirror it.
The key word is “substantial.” Obviously you aren’t going to conduct a massive reorg every time the larger organization makes any type of change. To help define what I mean by “substantial,” here are two examples—both from the same company, but issued a couple of years apart—of changes in its vision and strategy substantial enough to necessitate an IT reorg.
A. CEO #1 Decides to Consolidate from Local to Global: A few years ago, a large multinational client of ours announced, on the business side, that it was going to consolidate local operations (70+ individual local sites) and begin performing as a global entity in order to dramatically reduce costs and leverage its large manufacturing footprint. At the time, IT was primarily organized at the local level. We helped IT reorganize to operate as a primarily global organization.
B. CEO #2 Decides to Shift the Company’s Focus: Then, two years later, the company’s new CEO announced his focus on expanding the company’s product portfolio and focusing on direct-to-consumer relationships. These are two very different approaches, with significant impacts on how the organization structures itself to deliver on these goals. As an active participant in this shift, we helped IT reorganize itself accordingly.
These examples demonstrate just how “substantial” a change the larger organization has to make to necessitate a new IT organizational structure.
The Takeaway: Ask yourself, has your CEO issued a new:
• Long-range plan?
• Company vision?
• Shift in emphasis?
• Mission statement?
If any of these, or any other sizable change initiative, has been issued, ask yourself, “Have I adequately reorganized IT to mirror the change?”
Reason to Reorganize IT #3
The larger organization has already organically—but informally—shifted its structure so much you need to formalize what’s already happened.
But all organizations change organically over time, as many small, bottom-up shifts naturally occur at the organization’s various functional levels.
None of these shifts on their own are substantial enough to reorganize IT for. But given enough time, these changes will add up and give the organization a new, informal structure. When this happens, if IT hasn’t shifted to match this new organizational structure, IT will operate in misalignment with its stakeholders.
One example: In Company X, HR has been gradually outsourcing all recruiting and hiring, and no longer solely focuses on PMP. While each little shift in direction was minor, after a year or two, HR has completely changed how it operates. Because their staff now operates differently in their day-to-day work, HR’s IT needs have shifted substantially, even though no official declaration has been issued.
Change is change, regardless of whether it happens all at once or slowly over time.
The Takeaway: Periodically, check in with your stakeholders to make sure IT is still organized to align with their structure and deliver on their goals.
Ideally, the CIO should do this for the IT organization as a whole, but ultimately you risk misalignment if you don’t perform your own regular check-ins to make sure your structure mirrors the structure of the function you support.
Reason to Reorganize IT #4
Your IT organizational structure doesn’t maintain continuous alignment and intimacy with the business.
A. IT can mirror their stakeholder function’s physical structure
IT organizations are often physically located “in the basement” of the organization. (Too often, this is a literal basement where the business’s IT professionals work.)
Other times, IT professionals are placed in the corners of the office plan, away from the people they serve.
This physical distance creates professional distance between IT and the stakeholders they serve. Not only will IT become strangers to their stakeholders, but they also lose the ability to truly see, hear, and feel how their stakeholders use their technology services. Without this intimacy, it becomes very hard for IT to learn how to best work with their stakeholders.
B. IT can mirror their stakeholder function’s organizational structure
IT commonly organizes their people according to the system those people work on, or the role they perform. At first, this makes sense: IT thinks about their work in terms of systems and roles… but IT’s stakeholders rarely do.
IT’s stakeholders often think about their technology needs in terms of function. Employees in the finance department don’t want to contact “systems support” when something goes wrong—they want their own IT professional or team on hand who specifically understands and supports their unique needs, not the general needs of the larger technology system that finance happens to share.
Perfect mirroring isn’t always possible due to resource constraints. You probably can’t give every function within your organization its own dedicated IT team with no overlap with other functions. And you may not be able to move all of your people into the cubicle next to their primary stakeholder. But you can reorganize IT to better mirror the people you serve.
The Takeaway: If IT, or your people, aren’t organized to mirror the business functions and stakeholders they serve, it’s almost always the right idea to reorganize to do so.
This often means breaking up the monolithic “IT organization” in tangible and intangible ways.
Instead of physically locating all IT personnel in one central office, have them sit and work near the people they directly serve.
Instead of organizing around services, have IT organize around function.
It’s a hassle, yes, and won’t proceed without a few bumps in the road. But over the long run, it’s more important to foster closeness between IT personnel and groups, and the stakeholders and functions they serve in the larger organization, than to maintain the existing structural integrity of the larger IT organization.
Reason to Reorganize IT #5
IT needs to change its organizational structure for its own internal reasons.
This is the way it should be.
For the foreseeable future, IT departments will likely remain service organizations that work with others to help them reach a shared set of goals. Most of the time, IT will reorganize to better meet and mirror the changing needs of the larger organization of which they’re a part.
However, IT does have its own distinct set of needs, and operates as its own unique group within the larger organization. There are times when IT will reorganize for its own internal reasons that have no direct, immediate connection to the larger organization’s needs.
• IT’s unique vision and/or strategy have changed: Nine times out of ten, IT will change its vision and strategy to mirror a change in the overall organization’s vision and strategy. But there are times when IT will decide to change its course on its own. When this happens, the full IT organization will need to restructure itself towards its new direction.
• IT itself has organically shifted in countless ways, and these changes need to be formalized in a new structure. IT itself will also organically make many little shifts over time to meet the subtle, changing demands of its day-to-day operations. Given enough time, these little changes will add up to a new informal IT organizational structure, which will benefit from formalization.
Even though these reorganizations are internally focused around IT’s needs, they don’t provide an excuse for IT to reorganize itself out of alignment with the stakeholders, functions, and larger organization it serves.
• If IT changes its own unique vision and strategy, it should do so because the previous vision and strategy were found to inadequately serve the business.
• The small, organic changes that need to be formalized within a new org chart should all be shifts made to stay in step with the business.
In short, even when IT changes for internal reasons, these internal reasons need to keep the business’s demands front-and-center.
The Takeaway: Internally driven reorganization can’t create an internally focused IT organization. All reorganizations need to hold, as their base aim, a desire to further mirror and meet the structure and demands of the business.
Is It Time for a New IT Organizational Structure?
By now, you have a solid framework of reasons why you might need to restructure your IT organization.
To help make your IT organizational structure a success, we put together a follow up article: Organizational Design for IT: Our 5 Best From-the-Trenches Reorganization Tips
In addition to reading that article, as you think of ways you can reorganize your IT group, sharpen your understanding of IT alignment and intimacy with your free copy of our book The 11 Secrets of Highly Influential IT Leaders. Click here to download your free copy now.
And if you want to jump-start your employee engagement efforts, grab our new report “What IT Pros Most Want”. It goes deep into this question of what your people really want from their careers. Give them that, and they’ll never leave.