Reorganising in Profit – Why Successful Companies Rewire Themselves at the Top of Their Game

For many observers, this feels contradictory. Profit signals health. Health implies stability. Stability should mean continuity. And yet, companies like ASML, Meta, Microsoft, SAP, and Salesforce choose to reorganise precisely at moments of strength, not weakness.

This is not a coincidence. It is a pattern.

And it reveals something deeply counter-intuitive about modern corporate governance: financial success often creates organisational risk, not organisational comfort.

ASML as a contemporary anchor case

ASML provides a textbook example. After reporting record revenues and profits—driven by structural global demand for advanced semiconductor equipment—the company announced a reorganisation aimed at “more focus”, “efficiency”, and a reduction in management layers. No major business units were divested. No strategic retreat was announced. The market outlook remained strong.

Yet the internal organisation was being redesigned.

This matters. Because ASML is not a distressed firm grasping for survival. It is a global technology champion, operating at the heart of geopolitically sensitive value chains, with order books stretching years ahead. If such a company decides to reorganise while profitable, the explanation cannot be reduced to cost pressure alone.

The real driver lies deeper: growth itself had become a governance challenge.

Profit as a source of organisational drag

In classical economic thinking, profit is an outcome. In organisational reality, profit is also a condition—one that shapes behaviour, incentives, and internal structures.

Sustained profitability tends to produce four structural side effects:

Layer accumulation
Growth brings coordination needs. Coordination brings managers. Over time, managers begin managing managers, not work.
Decision dilution
As organisations scale, decisions move upward “for alignment”, slowing execution and obscuring accountability.
Slack absorption
Surplus resources are absorbed into buffers, roles, committees, and reporting structures whose marginal value becomes unclear.
Cultural drift
The organisation slowly optimises for internal coherence rather than external performance.

None of these effects signal failure. They are symptoms of success.

But left unchecked, they gradually tax the organisation’s ability to execute, especially when technology cycles shorten and competitive advantage depends on speed, not just scale.

This phenomenon is often described as the coordination tax: the hidden cost of managing complexity created by growth.

A different type of governance change took place a few times ate General Electric, read our blog: When Corporate Governance, Not Technology, Saved a System Giant.

Why reorganisation happens before performance declines

A crucial governance insight follows:

The optimal moment to reorganise is not when performance deteriorates, but when the organisation still has the financial and reputational capital to absorb disruption.

Reorganising from strength allows management to:

redesign decision rights without panic,
invest in simplification rather than emergency cuts,
retain strategic optionality,
and signal long-term discipline to boards and investors.

This explains why profitable firms often reorganise ahead of downturns, not after them. They are not reacting to bad numbers; they are anticipating future constraints.

In ASML’s case, this anticipation is logical. Semiconductor equipment markets are cyclical, geopolitically exposed, and technologically unforgiving. The organisation that wins the next cycle is not necessarily the one that maximised headcount or managerial oversight in the previous cycle—but the one that preserved clarity, focus, and execution speed.

Read more in the Eindhovens Dagblad: Unions furious after harsh intervention at ASML: ‘This is a huge blow’

Reorganisation without divestment: a specific category

It is important to distinguish this phenomenon from more familiar forms of restructuring.

What we see here is not:

a turnaround,
a balance-sheet repair,
a portfolio clean-up,
or a retreat from strategy.

Instead, it is a pure operating-model reorganisation:

fewer layers,
broader spans of control,
sharper role definitions,
reallocation of resources from coordination to execution.

The business remains intact. The strategy remains intact. What changes is how work flows through the organisation.

This is why traditional restructuring language (“cuts”, “downsizing”) often misleads. The real object of change is not cost—it is friction.

And now something completely different in our blog on: Axelera AI and the Governance of European AI Ambition.

The governance lens: reorganisation as control redesign

From a governance perspective, this type of reorganisation is far more consequential than it appears.

Every organisational design embeds answers to fundamental governance questions:

Who decides?
Who escalates?
Who is accountable?
Who controls quality, risk, and compliance?
Where does judgement reside?

When layers are removed and roles reshaped, these answers change—explicitly or implicitly.

This is why boards should never treat reorganisations in profitable companies as “operational matters” only. They are, in essence, control system redesigns.

The danger is not that control disappears—but that it becomes informal, opaque, or overloaded.

The emotional backlash: why stakeholders struggle with this logic

Despite its rational foundation, reorganising in profit almost always triggers resistance:

Employees interpret it as betrayal: “If even success isn’t safe, what is?”
External observers frame it morally: “Greed over people.”
Politicians and media question legitimacy: “Why cut jobs when profits soar?”

These reactions are understandable. But they often miss the structural point.

The choice is rarely between profit with jobs and profit without jobs. More often, it is between:

a temporarily painful reorganisation now, or
a structurally weakened organisation later, when margins compress and choices become harsher.

Reorganising while profitable Profitable companies restructuring Organisational redesign during growth Delayering in successful firms Operating model redesign

Reorganising while profitable Reorganising while profitable Reorganising while profitable Reorganising while profitable Reorganising while profitable Reorganising while profitable Reorganising while profitable Reorganising while profitable Reorganising while profitable Reorganising while profitable Reorganising while profitable Reorganising while profitableReorganising while profitable Reorganising while profitable Reorganising while profitable Reorganising while profitable

This does not absolve leadership of responsibility—but it reframes the ethical question. The real governance test is not whether reorganisation occurs, but how intelligently it is designed and communicated.

Setting the stage for theory

To understand this pattern properly, we need more than anecdotes. We need theory.

In the next part, we will examine the business and organisational theories that explain why profitable firms reorganise:

organisational slack,
delayering and span of control,
agency dynamics,
and dynamic capabilities.

These frameworks help distinguish disciplined renewal from cosmetic cost cutting—and they provide boards and executives with a language to govern reorganisation responsibly.

Reorganisation is not intuition — it is theory in action

When profitable companies announce reorganisations, the external narrative often reduces the decision to sentiment or style: new leadership, investor pressure, changing times. Internally, however, such decisions are rarely intuitive or ad hoc. They are usually grounded—implicitly or explicitly—in long-standing organisational theory.

What makes this uncomfortable is that most of this theory contradicts popular assumptions. Success does not simplify organisations; it complicates them. Profit does not sharpen focus; it allows it to blur. Growth does not automatically increase effectiveness; it often erodes it.

Four theoretical lenses are particularly useful to understand why firms reorganise while performing well: organisational slack, delayering and span of control, agency dynamics, and dynamic capabilities. Together, they explain why reorganisation is often a rational response to success, not a failure of it.

Again here in an other governance blog on our site: Nvidia: Inside the Engine Room of the AI Economy.

Organisational slack: resilience buffer or hidden inefficiency?

The concept of organisational slack originates in behavioural theories of the firm. Slack refers to resources that exceed the minimum necessary to maintain current operations: extra staff, time buffers, redundant processes, discretionary budgets.

Slack is not inherently bad. In fact, a certain level of slack is essential for:

absorbing shocks,
enabling experimentation,
and sustaining long-term innovation.

But slack has a tendency to change form as organisations grow.

In young or stressed firms, slack is typically unabsorbed: cash reserves, unused borrowing capacity, or temporary staffing. In mature, profitable firms, slack becomes absorbed: embedded in roles, layers, reporting structures, and coordination routines. It no longer looks like excess—it looks like “the way we work”.

This is the dangerous form.

Absorbed slack is difficult to detect because it presents itself as professionalism: steering committees, alignment meetings, dual sign-offs, coordination roles whose original purpose has faded. Over time, these structures stop protecting the organisation and start slowing it down.

Reorganisation, in this context, is not a cost-cutting reflex but a slack conversion exercise: turning absorbed slack back into strategic capacity. The aim is not to eliminate resilience, but to free it from bureaucratic form.

Delayering: flattening the firm — and its risks

One of the most visible features of reorganisation in profitable companies is delayering: the removal of management layers and the widening of spans of control.

At first glance, this seems straightforward. Fewer layers mean:

faster decisions,
clearer accountability,
reduced overhead.

Empirical research indeed shows that many large firms have systematically flattened over the past decades. Middle management layers, in particular, have been reduced or redefined.

However, delayering is not a neutral act. It fundamentally reshapes how authority and information flow.

When layers disappear, their functions do not automatically disappear. Someone must still:

translate strategy into operational priorities,
mediate conflicts between units,
coach less experienced staff,
detect early warning signals.

If these functions are not deliberately reassigned, they re-emerge informally—through ad hoc influence, personal networks, or shadow hierarchies. The organisation looks flatter on paper, but becomes less transparent in practice.

This is why delayering is a governance issue, not merely an HR exercise. Boards must ask not only how many layers are removed, but which coordination and control functions survive—and where they land.

Span of control versus span of attention

Closely related is the concept of span of control: the number of direct reports per manager. Reorganisations often increase spans of control to reduce hierarchy.

But there is a critical distinction between span of control and span of attention.

A manager may formally oversee more people, but human attention is finite. As spans widen:

performance conversations become rarer,
risk signals are filtered or missed,
coaching degrades into supervision by exception.

In high-complexity environments—such as advanced manufacturing, technology development, or regulated industries—this trade-off is acute. The same delayering that accelerates decisions can also weaken quality control and risk oversight if not carefully designed.

This explains why some reorganisations fail despite good intentions. They assume that removing hierarchy automatically improves performance, while ignoring the cognitive and governance limits of management attention.

Successful reorganisations recognise this constraint and compensate deliberately: through clearer role definitions, stronger process ownership, and better information systems.

Agency theory: when success breeds empire-building

Agency theory provides another uncomfortable insight. When firms are highly profitable, managerial incentives often shift subtly but decisively.

Abundant resources reduce pressure. Reduced pressure allows discretionary behaviour. Over time, this can manifest as:

empire building,
overstaffing,
excessive internal complexity justified as “control” or “alignment”.

This is not a moral accusation. It is a structural tendency.

Managers rarely intend to bloat organisations. They respond rationally to incentives: more scope, more resources, more influence. In profitable firms, the discipline of scarcity weakens.

Reorganisation functions here as a governance reset. By redefining roles, reporting lines, and decision rights, boards and executive teams reassert the primacy of organisational purpose over managerial comfort.

Seen through this lens, reorganising in profit is not anti-employee; it is anti-drift.

And here is some AI Governance in our blog: The Brain of AI Governance – Vision and Ethics as the Seat of Corporate Judgment.

Dynamic capabilities: preparing for the next curve

Perhaps the most strategic explanation lies in the theory of dynamic capabilities. Firms do not compete only on current assets, but on their ability to:

sense changes in the environment,
seize emerging opportunities,
and transform themselves accordingly.

This ability erodes quietly when organisations become inward-looking. Coordination consumes attention. Past success defines future thinking. Processes ossify around yesterday’s problems.

Reorganisation, then, is a deliberate act of renewal. It is an attempt to realign the organisation with future challenges—often technological, geopolitical, or regulatory—before these challenges manifest in financial decline.

For ASML and similar firms, this logic is compelling. The technological frontier moves fast. The cost of organisational inertia is not gradual decline, but sudden loss of relevance.

The common thread: reorganisation as preventive governance

What unites these theories is a shared conclusion:
Reorganisation in profitable firms is preventive, not reactive.

It addresses:

absorbed slack before it hardens,
coordination overload before it paralyses,
agency drift before it becomes entitlement,
and strategic rigidity before it turns fatal.

This reframing matters. It shifts the conversation from “Why are they cutting when they’re doing well?” to “What risks are they trying to remove while they still can?”

Implications for boards and supervisors

For boards, these theories impose a higher standard of oversight.

The key question is not whether a reorganisation is justified, but whether it is theoretically coherent and governance-aware:

Does it target real coordination problems?
Does it preserve critical control functions?
Does it clarify, rather than blur, accountability?
Does it strengthen the firm’s future adaptability?

Without such discipline, reorganisation risks becoming symbolic—an annual ritual of change without improvement.

From abstraction to execution

Theory explains why profitable firms reorganise. Practice shows how hard it is to do it well.

What follows are not turnaround stories, but cases of companies that:

were financially successful,
maintained their strategic direction,
and still chose to redesign their internal organisation.

These cases reveal a consistent pattern: reorganisation is less about headcount and more about decision architecture. Where that architecture is addressed explicitly, performance improves. Where it is ignored, problems resurface under a different name.

Meta: efficiency as an operating model, not a crisis response

Meta’s so-called “Year of Efficiency” is often framed as a reaction to investor pressure. That interpretation is incomplete.

At the time of its reorganisation, Meta was still highly profitable. The real issue was not earnings, but execution discipline. Years of rapid growth had produced:

overlapping product initiatives,
heavy middle-management layers,
diffuse accountability for outcomes.

The reorganisation focused on:

delayering,
clearer ownership of products,
and a sharper link between resource allocation and strategic priorities.

What is instructive from a governance perspective is that Meta explicitly linked organisational redesign to performance accountability, not just cost. Management framed the change as a shift from exploration-heavy growth to execution-driven focus.

The risk Meta accepted was cultural: morale, psychological safety, and trust. The benefit it sought was structural: faster decision-making and fewer internal veto points.

This illustrates a core principle: reorganising in profit often involves trading organisational comfort for strategic clarity.

Microsoft: removing layers to accelerate learning loops

Microsoft’s reorganisations in recent years follow a similar pattern but with a different emphasis.

Rather than emphasising efficiency rhetoric, Microsoft focused on:

agility,
learning speed,
and alignment around platform strategy.

Despite strong cash flows and profitability, leadership repeatedly pointed to internal friction as a limiting factor. The reorganisation aimed to:

reduce management layers,
empower product teams,
shorten feedback loops between development and market signals.

From a governance standpoint, this case highlights a subtle but critical distinction: flattening was paired with strong cultural norms and systems. Microsoft invested heavily in:

shared platforms,
common engineering standards,
and leadership development.

This mitigated the classic delayering risk: loss of coordination and control. It shows that flattening only works when process maturity and cultural discipline are already high.

SAP: transformation without retreat

SAP’s reorganisation is particularly relevant for European governance discussions.

Despite robust performance, SAP launched a transformation program aimed at:

simplifying internal structures,
reallocating resources toward strategic growth areas,
and reducing complexity accumulated over decades.

Importantly, SAP did not frame this as a crisis response. It framed it as future-proofing.

From a supervisory perspective, the key feature was transparency: the reorganisation was communicated explicitly as a strategic reset, with quantified expectations and clear linkage to long-term value creation.

This matters because it allowed stakeholders—boards, works councils, investors—to evaluate the change on its merits, not on fear or speculation.

SAP’s case illustrates that reorganising in profit can be institutionally legitimate if it is anchored in a coherent strategic narrative and measurable objectives.

Salesforce: margin discipline as governance discipline

Salesforce presents a sharper governance contrast.

Highly profitable but under investor pressure, Salesforce reorganised to improve margins and capital efficiency. The rhetoric focused on cost control, but the deeper shift was about governance discipline:

clearer financial accountability,
tighter portfolio prioritisation,
and stronger linkage between performance and reward.

Here, reorganisation functioned as a signal: management was willing to sacrifice internal expansion to restore trust with capital providers.

The governance risk in such cases is short-termism. When reorganisation is driven too heavily by margin optics, long-term capabilities may suffer. Salesforce’s challenge was therefore not whether to reorganise, but how to prevent efficiency from crowding out innovation.

ASML revisited: complexity at the frontier

Returning to ASML, the logic becomes clearer in light of these cases.

ASML operates at the intersection of:

extreme technological complexity,
long investment cycles,
and geopolitical sensitivity.

In such an environment, organisational friction is not merely inefficient—it is dangerous.

The decision to reduce management layers and increase focus can be interpreted as:

a response to scale-induced coordination overload,
an attempt to preserve engineering velocity,
and a pre-emptive governance measure ahead of future volatility.

The critical question is not whether ASML reorganises, but how it protects its control systems—quality, safety, compliance, and knowledge continuity—while doing so.

This is where governance either succeeds or fails.

Patterns across cases: what actually changes

Across all cases, several common elements appear:

Decision rights move closer to execution, not upward.
Management roles are redefined, not simply removed.
Narratives shift from growth to discipline, even in profitable contexts.
Governance becomes more explicit, not less—at least in successful cases.

What rarely works is superficial change: removing boxes on an org chart without redesigning processes, incentives, and information flows.

Where reorganisations fail

Equally instructive are the failure modes:

Flattening without process clarity leads to chaos.
Cost-driven cuts without strategic logic destroy trust.
Removing managers without redistributing coordination creates informal power structures.
Ignoring internal control implications invites future incidents.

These failures often occur when reorganisation is treated as an HR project rather than a governance intervention.

Governance lesson: reorganisation is a decision-making redesign

The central lesson from these cases is simple but demanding:

Reorganising in profit is not about saving money; it is about redesigning how decisions are made under conditions of success.

Boards that understand this ask different questions:

Which decisions must become faster?
Which controls must remain non-negotiable?
Where does accountability become sharper—or blur?
How will we know if “focus” has actually increased?

Without these questions, even theoretically sound reorganisations risk becoming cyclical rituals rather than genuine renewal.

Reorganisation as an operating-system upgrade

Reorganising while profitable is best understood through a metaphor familiar to technology companies: upgrading a live operating system.

The business keeps running. Customers are served. Products are delivered. But beneath the surface, core processes are rewritten: how decisions are made, how information flows, how errors are detected, how accountability is enforced.

This is why reorganisation is never neutral. It changes not only structure, but behaviour. And behaviour, in governance terms, is where risk and value ultimately reside.

Boards that grasp this metaphor govern reorganisations differently. They do not ask whether the reorganisation “saves costs”. They ask whether it improves the organisation’s capacity to act, learn, and control itself under pressure.

The governance risks nobody puts on the slide deck

Most reorganisation presentations emphasise benefits: focus, speed, clarity. Far fewer address the risks explicitly. Yet governance failures almost always arise in these blind spots.

There are five recurring risk categories boards should surface deliberately:

1. Control dilution
Delayering may weaken segregation of duties, escalation paths, or review mechanisms—especially in finance, quality, safety, and compliance.

2. Knowledge leakage
Long-tenured middle managers often hold tacit knowledge. Removing roles without transferring this knowledge erodes institutional memory.

3. Shadow hierarchies
When formal hierarchy is reduced without redesigning coordination, informal power structures emerge—harder to monitor, harder to govern.

4. Attention overload
Wider spans of control stretch managerial attention, reducing early detection of operational and ethical issues.

5. Cultural cynicism
Reorganising after a record year, if poorly explained, breeds distrust: “If success leads to cuts, why commit?”

None of these risks argue against reorganisation. They argue for governed reorganisation.

What boards should actually govern — a practical framework

Boards often underestimate their role during reorganisations, treating them as executive terrain. That is a mistake.

Reorganisations in profit warrant active, structured oversight, focused on four dimensions:

1. Decision architecture

Boards should require management to articulate:

which decisions must move faster,
which decisions must remain centralised,
and where escalation thresholds change.

If this cannot be explained clearly, the reorganisation is not ready.

2. Control continuity

Before approving delayering, boards should ask:

which controls are embedded in roles being removed,
how those controls will be reassigned,
and how effectiveness will be tested post-implementation.

This is particularly critical for audit committees.

3. Capability preservation

Boards must challenge management on:

which capabilities are strategically non-negotiable,
how talent loss will be mitigated,
and how learning and development will adapt to wider spans of control.

4. Measurement of “focus”

“Focus” is not a feeling. It is observable.
Boards should demand metrics such as:

decision cycle times,
project throughput,
defect or rework rates,
customer escalation trends,
internal audit findings.

Without these, reorganisation becomes narrative rather than discipline.

Reorganisation and financial reporting: the quiet accountability test

Reorganisations also test the integrity of financial reporting.

Even in profitable firms, restructuring creates temptation:

to smooth earnings,
to accelerate or defer costs,
to reframe performance through adjusted metrics.

Governance requires vigilance:

Are restructuring provisions specific, justified, and reversible?
Are non-GAAP measures transparent and consistent?
Does segment reporting still reflect economic reality after internal changes?

Reorganising in profit should strengthen, not weaken, reporting credibility. When it does the opposite, boards should intervene.

The ethical dimension: legitimacy without populism

There is an ethical tension at the heart of reorganising in profit. It cannot be ignored, but it must be handled with maturity.

The ethical question is not whether employees should be protected from change at all costs. It is whether leadership:

acts with proportionality,
communicates honestly,
and takes responsibility for second-order effects.

Governance legitimacy comes from coherence: between narrative and action, between profit and responsibility, between efficiency and care.

Companies that explain reorganisation as an operating necessity—not as a financial inevitability—retain trust, even under difficult decisions.

When not to reorganise

A final governance insight is often overlooked: not every profitable company should reorganise.

Warning signs that reorganisation may be premature or misguided include:

unclear strategic rationale,
reliance on cost targets rather than process analysis,
absence of operational bottlenecks,
leadership seeking symbolic action rather than structural change.

In such cases, restraint is a governance virtue.

Synthesis: success is a governance stress test

Bringing all parts together, a clear synthesis emerges.

Profitability is not the end of governance risk—it is often the beginning of a new category of risk: complacency, complexity, and drift.

Reorganisation, when done well, is a disciplined response to that risk. It is:

preventive rather than reactive,
structural rather than cosmetic,
and governed rather than delegated.

When done poorly, it becomes:

destabilising,
trust-eroding,
and ultimately self-defeating.

The difference lies not in financial performance, but in governance maturity.

Closing metaphor: tuning the engine while flying

Reorganising in profit is like tuning an aircraft engine mid-flight. It requires:

confidence without arrogance,
precision without paralysis,
and governance without micromanagement.

The organisations that master this discipline do not reorganise because they are weak. They reorganise because they understand that success, left unchecked, carries its own risks.

That understanding is what separates temporary winners from enduring institutions.

FAQ’s – Reorganisation in profitable companies

FAQ 1 – Why do profitable companies reorganise instead of waiting for problems?

Profitable companies often reorganise before problems emerge because success itself creates structural risks. Growth leads to added layers, slower decision-making and absorbed organisational slack. Reorganising from a position of strength allows firms to address coordination overload, clarify accountability and redesign decision rights while financial and reputational buffers still exist. From a governance perspective, this is a preventive intervention rather than a reactive one. Boards increasingly recognise that waiting for declining performance limits strategic options and forces harsher measures later.

FAQ 2 – Is reorganising while profitable mainly about cutting costs?

No. While cost effects may occur, reorganising in profitable companies is primarily about reducing friction, not expenses. The real objective is improving execution speed, decision clarity and strategic focus. Successful reorganisations redesign how work flows through the organisation: who decides, who escalates and who owns outcomes. Treating such reorganisations as cost-cutting exercises is a governance failure that often leads to loss of control, talent drain and cultural damage.

FAQ 3 – What governance risks arise when companies delayer management?

Delayering changes control architecture. Key risks include diluted oversight, weakened segregation of duties, loss of institutional knowledge and the emergence of informal “shadow hierarchies”. Wider spans of control also stretch managerial attention, increasing the likelihood that operational, compliance or ethical issues go unnoticed. Boards must therefore ensure that control functions are explicitly reassigned and that governance effectiveness is monitored after delayering.

FAQ 4 – How should boards oversee a reorganisation in a profitable company?

Boards should govern reorganisations as decision-system redesigns, not HR initiatives. Key questions include: Which decisions must become faster? Which controls are non-negotiable? How will accountability be preserved or strengthened? Boards should require clear metrics—such as decision cycle times, escalation patterns and quality indicators—to verify that “focus” and “efficiency” are real outcomes rather than narrative claims.

FAQ 5 – What business theories explain why successful firms reorganise?

Several theories converge. Organisational slack theory explains how surplus resources become embedded inefficiencies. Delayering and span-of-control theory highlight the trade-offs between speed and oversight. Agency theory shows how success weakens discipline and encourages managerial drift. Dynamic capabilities theory frames reorganisation as a way to preserve adaptability in fast-changing environments. Together, these theories explain why reorganisation is often rational during periods of success.

FAQ 6 – When should a profitable company not reorganise?

A profitable company should avoid reorganisation if there is no clear strategic or operational bottleneck, if the initiative is driven by symbolism rather than diagnosis, or if leadership lacks the capacity to redesign processes and controls alongside structure. Reorganisation without a coherent governance rationale risks destabilising the organisation and eroding trust without delivering meaningful benefits.