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Taking IT reorgs to the extreme

Kim S. Nash | March 31, 2015
IT departments are constantly reorganizing, but a few companies have gone so far as to break the traditional IT department into pieces.

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Credit: Jeffrey Green via

Get ready for the disappearing IT department. Companies including Zappos, GameStop, Aetna and AccuWeather have restructured IT, sometimes radically, to respond to some harsh economic and technologic forces bearing down on CIOs.

Zappos, which has been called "one of the most blissed-out businesses in America," is exploding its entire hierarchy to replace it with what might be the equivalent of a corporate commune. The company spent 2014 reinventing itself as a holacracy, embracing an organizing principle akin to democracy--including a 31-page constitution.

Spontaneity and distributed power are hallmarks of holacracy, where people work in groups, or circles, according to their enthusiasms. The circles are rearranged as new projects emerge or colleagues choose to pursue something else. Employees take suggestions, not orders. Decision-making is pushed down, often to the lowest rungs (if there were rungs). Former managers become "lead links" who offer coaching but don't approve or reject ideas.

"It's a radical approach, and we're passionate about trying it," says Brent Cromley, CTO at Zappos. "We want everyone thinking about how we can improve things, not just a select few at a time or a group set aside to do innovation."

Traditional org charts show lines and boxes, but a holacracy has clots of circles meant to merge and divide like amoeba under a microscope.

Not every revamp goes to the Zappos extreme but some CIOs are feeling pressure to change the IT group amid new business realities. Marketing chiefs and other non-IT executives now encroach, or want to encroach, on technology decisions. Tech is changing faster than ever, while financial slumps and internal bureaucracy can inhibit quick response. And customers won't wait. Walt Disney Parks and Resorts reorganized its global IT operation in October, aiming to double the share of technologists working on innovation from 30 percent to more than 60 percent. General Electric has formed agile and sometimes self-governing teams. Other CIOs have abolished IT groups focused on technologies, such as email or the data center, and have reorganized to target business goals, such as customer acquisition or globalization, says Andrew Horne, a managing director at the Corporate Executive Board.

Companies are struggling to transform into digital versions of themselves, often with no clear idea of what they will look like at the end. The IT group, Horne says, must be ready for anything.

"We see companies trying to create a structure that is flexible enough to be able to succeed regardless of the type of demand for technology, the type of economy or the direction the company goes," he says.

Done well, a dramatic overhaul can make IT responsive to the unknown. Done poorly, you fertilize staff resentment about too much change or dead-end jobs on legacy systems. There are no best practices for the bleeding edge. Just a few intrepid CIOs.


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