The ROI of restructurings: are we focusing on the wrong thing?

Launching a reorganization in a large company often follows a familiar playbook. The business case is built quickly, cost savings are quantified, validated by the executive committee, and presented to the board. Yet, a few months into execution, the actual return on investment rarely lives up to initial expectations. 

The initial calculation: necessary, but not sufficient 

On paper, the mechanics are well understood. The ROI of a reorganization is assessed by comparing expected gains, including headcount reduction, structural rationalization, operational efficiency improvements and elimination of redundancies, with the costs incurred, such as implementation expenses, change management efforts, recruitment and training. 

Among these costs, one category is particularly critical: the direct costs associated with employee exits, including severance packages, notice periods, potential litigation and, where applicable, collective redundancy schemes. Factoring these costs rigorously into the business case from the outset is a prerequisite for an honest and credible model. 

The ROI can then be further refined: short-term gains versus medium-term structural benefits, impact on execution capacity, acceleration of decision-making, or the value generated by cross-entity synergies. 

ROI calculations are useful. They are necessary to secure shareholder approval. But they are not sufficient. 

This approach implicitly assumes that an organization behaves like a mechanical system, in which parts can be removed and reassembled without any loss of efficiency. In reality, an organization is first and foremost a collective of individuals working together. And this is precisely where the limits of the calculation become apparent. 

The human factor: the variable no one wants in the spreadsheet 

Every reorganization triggers a period of human turbulence. Teams wonder where they will land. Front-line managers absorb their teams’ anxiety while dealing with their own. The most mobile talents, those with options, begin to look elsewhere. And throughout this period, the business continues to operate below optimal performance. 

The cost of this transition phase is rarely included in the initial business case, even though it is very real: declining engagement scores in internal surveys, slower decision-making cycles during the transition, loss of critical skills through unanticipated departures, onboarding of replacements and, in customer-facing functions, even deterioration in customer satisfaction. 

Incorporating the HR dimension into ROI calculations therefore means attempting to put a value on the intangible: the cost of unwanted turnover, the cost of temporary disengagement and the opportunity cost of an organization operating below capacity for six to eighteen months. This is not easy. But it is honest. 

Execution over time: the overlooked discipline 

At Akoya, our field experience shows that the main driver of the gap between expected and realized ROI is not the quality of organizational design, (4 best practices on this topic), nor the precision of the initial calculations. It is the lack of sustained execution over time. 

This is partly explained by the intensity of the upfront phase of a reorganization. It generates fatigue among program leaders and often leads to a sense of release once the business case is approved and the initiative launched. In some cases, responsibility is even handed over at this critical point, or the core project team is dismantled altogether. 

Beyond overall program governance, a frequent pitfall is forgetting how tightly interdependent the projects underpinning the target organization actually are. What truly secures ROI is the combination of initiatives that generate gains and those that mitigate risks of value erosion. 

The former are typically visible: merging departments, redesigning governance structures, rationalizing IT tool portfolios and consolidating sites. They are executed first. 

The latter are far less visible: safeguarding critical processes, maintaining customer service quality during the transition, robust change management plans and retention mechanisms for key talent. These are often the first initiatives to be cut under budgetary pressure. This is also where ROI gaps emerge, as a fragile equilibrium, both mathematical and organizational, has been broken. 

Conclusion 

The ROI of a reorganization is not the outcome of a magical formula. It is built patiently through disciplined execution over months or even years. It requires an honest business case that fully integrates the human dimension. And it requires execution governance that protects the delicate balance on which long-term value creation depends.