Struggling CEOs often seize on top-level corporate restructuring as a way to appease anxious boards and shareholders or to galvanize employees around the importance of change. But our research suggests that executives are unwise to assume that restructuring is a quick fix.

We studied 45 underperforming global companies, representing a wide range of industries and all major geographical regions, that had undergone a top-level restructuring from 1998 to 2002.¹ On average, these companies improved their total returns to shareholders (TRS) by 17 percent relative to their industries in the two years after a restructuring announcement. Yet a control group of 13 underperformers that resisted changing their organizational structure actually achieved a similar jump in TRS a full year earlier than those that did restructure (Exhibit 1).

Our findings reinforce the view that companies undergoing structural change can improve their performance, but not necessarily as a result of these changes. Indeed, the struggling companies that restructured may actually have been distracted by the shake-up of high-level functions, product groups, or geographies at a time when more pressing business imperatives needed attention.

A broader look at the proprietary database² underlying our sample reveals another significant pattern. In all but 1 of the 12 sectors studied, we identified default structures, or common approaches to organizational design, that were adopted by a majority of companies in the sector. These default structures include not only "pure" archetypes (organized exclusively around products, functions, or geographies) but also hybrids derived from that archetype—for example, a dominant, archetypal model, such as product-related business units, combined in parallel with a few key geographic business units (Exhibit 2).

Outliers are companies with structural models that resemble neither an industry's dominant archetype nor hybrid models derived from it. Our analysis shows that these outliers are more likely to underperform: over the five years ending in June 2005, 58 percent of them posted lower TRS than did the average company in their industries.

Companies that exclusively followed their industry's dominant archetype outperformed competitors on TRS by an average of some 7 percent. But the hybrid configuration appears to produce an even greater margin of success; companies with a hybrid model enjoyed an average advantage of 11 percent over their industry peers. When pursued as part of a broader, more coherent strategy, such hybrid models can help CEOs to manage complexity better and to focus on the highest-value opportunities.

Interestingly, an industry's default structure seems to prevail across different corporate strategies. In the United States, for example, American Airlines and Southwest Airlines have very different strategies and modes of operation but share organizational structures aligned by functions such as marketing, operations, and revenue management. Wal-Mart Stores and Tesco, meanwhile, are both functional organizations, but their strategies in global retailing are dissimilar: Wal-Mart drives standardization and centralization across its store network and has historically grown via expansion and scale, whereas Tesco takes a tailored approach to customer segments and looks for growth within its existing customer base as well as identifies new segments to serve. Again, these examples support the view that structure is just one of several organizational levers that can be pulled to support strategy.

For many companies, structure alone is rarely responsible for problems such as sluggish decision making, a lack of accountability on the part of employees and management, or stagnant innovation processes. More often, the root causes of such difficulties are poorly defined responsibilities, misaligned incentives, or substandard management processes.

Executives should think twice about departing from a sector's default organizational architecture. Unusual or innovative structures—often the goal of highly publicized corporate makeovers—do not appear, by themselves, to be the answer for troubled businesses.

Companies should launch an organizational redesign focused primarily on restructuring only if they have compelling evidence that the current structure is suboptimal and only if they can't address this shortcoming less invasively—for instance, with increased accountability and better planning and performance-management processes. Meanwhile, businesses that deviate from the norm should take a hard look at whether an outlier organizational structure is truly beneficial. Only proven industry front-runners should seek structural ways to maintain—or even increase—their advantage.