What Is Rationalization in Business?<\/strong><\/p>\n\n\n\n Rationalization means restructuring an organization to improve efficiency.<\/p>\n\n\n\n One purpose of rationalization is to reduce complexity, which tends to increase over time. <\/p>\n\n\n\n As an organization grows, for instance, complexity will naturally increase in areas such as:<\/p>\n\n\n\n When complexity grows to the point where it hinders operational efficiency, rationalization is often called for. <\/p>\n\n\n\n Typically, the term rationalization has an economic focus, but it can involve changes that affect many areas of the organization, including:<\/p>\n\n\n\n Ultimately, the process of rationalization can improve organizational efficiency, organizational effectiveness, and its bottom line.<\/p>\n\n\n\n Here are a few examples of rationalization to illustrate what rationalization looks like in the real world:<\/p>\n\n\n\n The key takeaway here is that rationalization is about improving efficiency and profits through reorganization \u2013 also, as we\u2019ll see below, the term \u201crationalization\u201d tends to be used only within certain business domains.<\/p>\n\n\n\n Rationalization is a concept that tends to be used more frequently in economics and finance than in other areas of business. When discussing organizational changes<\/a> aimed at improving business efficiency, other terms are more commonly used.<\/p>\n\n\n\n A few of these include:<\/p>\n\n\n\n Each of these terms falls under the business discipline of change management, a field that focuses on executing, managing, and streamlining business changes. <\/p>\n\n\n\n Typically, organizational changes have been viewed as discrete change projects that occur only occasionally \u2013 they are implemented and then they finished. <\/p>\n\n\n\n In recent years, however, disruptive changes such as digital innovation<\/a> have compelled many companies to undergo continual change. As a result, a number of companies have chosen to permanently embed change management functions into their operating model.\u00a0<\/p>\n\n\n\n Agile is one example of a business approach that focuses on continual improvement and adaptation. When combined with the discipline of change management, agile practices can enable an organization to stay relevant, effective, and profitable.<\/p>\n\n\n\n There are a number of situations that can bring about the need to reorganize or rationalize. <\/p>\n\n\n\n Examples include:<\/p>\n\n\n\n Each of the problems listed here will have a different impact on the organization. The solution to each one, therefore, should depend on the circumstances. <\/p>\n\n\n\n When deciding on the organizational change that best suits the situation, it is important to keep a few points in mind:<\/p>\n\n\n\n Importantly, regardless of which type of change is implemented, structured change management can be a useful discipline to study and implement, as we\u2019ll see next.<\/p>\n\n\n\n Change management<\/a> is the business discipline dedicated to designing, managing, and leading organizational change projects.\u00a0<\/p>\n\n\n\n While rationalization is less discussed than other types of change<\/a>, the discipline of change management can still be valuable \u2013 in fact, it may be essential.<\/p>\n\n\n\n Properly executed change management, after all, can:<\/p>\n\n\n\n\n
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Rationalization vs. Reorganization: Key Differences<\/strong><\/h2>\n\n\n\n
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When Are Rationalization and Reorganization Necessary?<\/strong><\/h2>\n\n\n\n
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The Importance of Managing Organizational Change<\/strong><\/h2>\n\n\n\n
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