Restructuring boosts performance when it helps people in the organization make better, faster decisions on critical matters, and then execute those decisions more effectively. British Gas, a division of the multinational energy and utility company Centrica, is a compelling example.
A few years ago, British Gas was facing serious performance issues. A new leadership team realized that the business was too large to be managed as one amorphous whole, and so planned a restructuring.
Looking at the business's sources of value, the team identified the organization's most important decisions. One customer segment used large amounts of gas or electricity and paid regularly through guaranteed direct debits. Key decisions for that segment related to customer retention-handling home moves, for instance. A second segment used less energy and paid through a system of prepayment cards. Here the key decisions related to controlling costs, such as those associated with meter reading. A third segment wasn't always consistent in keeping up payments. For this group, the critical decisions related to managing receivables.
Recognizing the different sources of value in each group, leaders decided that the company should be structured by customer segment. They could then locate accountability for decisions that directly affected customers, such as service levels, positioning, and product bundling, in the business units, while headquarters focused on non-customer-facing matters such as IT. The alignment of structure and decisions helped British Gas improve its performance significantly. The company reduced customer attrition, its bad debt fell, and the business began growing for the first time in years.