Google’s Reorganization: Does It Spell a Brighter Future, or Trouble Ahead?

Last week, Google acknowledged it was reorganizing in the wake of Larry Page’s assent to the Chief Executive Officer position. The Los Angeles Times reports:

Larry Page, who returned as chief executive of Google on Monday, put his stamp on how he will run the Internet giant with a major reorganization of his management team on Thursday.

The move comes three days after top Google executive Jonathan Rosenberg resigned from the Internet giant as Page began to try to restore the sense of urgency and innovation that was once the company’s calling card.

On Thursday, Page put key executives in charge of their individual product groups. They will report directly to him.

Sometimes moving people around can help, but what happens to companies that go through unsuccessful reorganizations?

Positives to reorganizing

Reorganizing is impossible to avoid at times, so it shouldn’t be seen as negative in and of itself.

For example, companies with significant growth often have to reorganize several times during that period. Foresight into both overall strategy of high growth companies, and how well the talent you have today will grow into their positions, is incredibly tough to do perfectly so reorganization is just a fact of life in those situations.

Similarly, companies drawing down staff have to reorganize as well. Obviously, closing or shutting down a particular division is the default, but companies in their sunset will need to reorganize and consolidate responsibility, especially among senior executives.

A caution to using reorganization repeatedly

Even companies that are relatively stable can reorganize successfully. Sometimes an organizational structure is stale or is leading to issues that are impacting results.

What is more problematic is when companies go back to the restructuring woodshed every few years. You see many of these large companies go for a reorganization hoping that it will breathe new life into their company and get better results. Of course, the dirty little secret is that this is an easier thing to promise to Wall Street after disappointing results than rethinking your core business and product.

So you see large companies like GE or Microsoft go through these upheavals, lose millions of dollars of productivity for a couple of years of positive results, only to see things change again once it becomes stale.

What’s the verdict with Google?

Of course, Google is a different beast than Microsoft and GE.

Page, co-founder of Google, is taking the reigns from former CEO Eric Schmidt (who held the position for the 10 years since Page was last CEO). Putting his stamp on the organizational structure makes sense, especially when his predecessor was cut from such a different cloth. But as Fast Company noted, he’s got other issues though:

Page is becoming CEO at a crucial inflection point in Google’s history. The company is beset by rivals everywhere — Apple and Facebook, both of which are closing off chunks of Internet activity beyond Google’s reach; Amazon, Microsoft, Netflix, and others that compete fiercely against it in multiple markets; and even the U.S., the EU (European Union), and other governments that want to curtail Google’s ambition. Lately, Google has had more and more public whiffs (see Google Wave, Google Buzz, Google TV).

It’s true that Page is not stepping into a dire situation as Steve Jobs did at Apple in 1997. Page doesn’t need to be a turnaround artist. Yet he has to do something potentially harder: make changes to a winning formula in the face of intense scrutiny, when momentum appears to be against him. To borrow a sports aphorism, winning your first championship is easy compared with trying to repeat.

Here’s one good bet though: if another major reorganization comes down the line in the next couple of years, you can be sure that Google is struggling with their identity.