The growth of digital subscription businesses has revolutionized the way we consume products and services. From entertainment to health and wellness, people want tailored experiences that can be delivered to their phones or inboxes. But the growing global recession, volatile markets, rising inflation and the cost of living have forced many people to cut memberships, prompting companies to focus on retention over acquisition.

Our conversations with more than 20 leaders in consumer membership organizations over the past few months underscored the need for this strategy shift, but also shed light on the internal impact these shifts are having on priorities, organizational structure, and leadership. In this article, we explore the key actions leaders need to take now to ensure their teams are able to capitalize on this strategy shift rather than hinder it.

A Matter of Model: Should You Centralize, Decentralize, or Both?

While centralized structures are often the most cost-effective and have a clear leadership structure, most digital subscription companies today need an element of decentralization to be competitive. Innovation and entrepreneurship thrive in a decentralized environment, where leaders feel and act like empowered owners and are free to make quick decisions and take necessary risks.

However, there are some caveats to decentralization. When there is a wholesale change in strategy (eg, a shift from acquisition to retention), functional teams may suffer if they do not have a voice in large-scale organizational decisions. Additionally, decentralization often means that there are duplicate jobs and positions. A company’s willingness to accept this duplication of effort depends on whether the primary focus is growth or profitability. For companies focused on growth, this duplication is part of the trade-off for rapid scaling. For those focused on profit, the cost of double work is probably less palatable.

Our Eclipse: Make the most of the model you have.

Before changing to a different organizational model because of a strategy change, take stock of what’s working and where you can improve. It may turn out that you don’t need to make structural changes, but instead you can work to develop employee muscles around communication and create clarity in decentralized teams. Leaders can also focus on building cross-functional rituals to make communication intentional and deepen relationships among teams.

How much restructuring is too much?

If you’re asking this question, you may have already reached the limits of what your current leaders and workforce can handle. Reorganizations in digital companies are rather frequent, triggered by personnel changes, mergers and acquisitions, new business priorities and market expansion. However, even for the most agile employees, frequent reorganizations can take a toll. Employees who are part of companies that restructure every six months or every year can experience burnout and stress among their teams, as they are expected to deliver results on their current projects while implementing new operating models and ways of working at the same time. These high levels of stress and expectations can reduce employee morale over time, leading to burnout and disengagement from the organization’s goals and outputs.

Our Eclipse: Prioritize the well-being of your employees during the transition.

One of our recent studies on generations and roles in the workplace found that employees value their physical and mental health above all else, including compensation. While you may not be able to limit your restructuring, consider offering your employees relevant additional benefits. This could include paid time off for additional professional development or mental health days to recharge or simple ideas like eliminating internal meetings on Friday afternoons. It’s also important that people feel heard when they voice their frustrations. Leaders need to actively listen and take stock of company morale. An environment that constantly feels unstable and employees who feel undervalued undermine productivity and engagement, potentially increasing talent turnover.

Business changes require leadership changes

As membership businesses shift from a focus on acquisition to retention, they need strong functional leaders in critical areas of product, data, marketing, engineering and others, who are aligned to company goals, strategies, and decision-making processes. For example, your chief marketing officer, chief product officer and chief data officer should work in lockstep with data at the core driving both product development and product positioning. Bringing the strengths of each of these teams together creates a powerful cross-functional trio capable of understanding business strategy from multiple angles and adding context from each of their actions. For this deep alignment to be successful, these leaders need to have high emotional intelligence, comfort with ambiguity and face every challenge with a customer mindset.

In addition to being tightly connected to functions, these functional leaders should have a voice at the top of the organization, with access to the CEO and board when applicable. This is extremely important when considering new strategies and products. They will have business insights that are critical to making informed decisions.

Our Eclipse: The functional head must be more connected than ever.

This does not mean endless WhatsApp and Slack messages at all hours. What this means is time to connect on shared leadership priorities and agree on rules of engagement and decision-making frameworks. Then these leaders must translate this shared passion for connecting with their teams, which will result in higher employee morale and benefit the business with greater alignment across tasks. It may take some time to build cooperation, especially if your company is used to frequent reorganizations. The teams you work with may change and you need to allow time to build trust in these new relationships. It may also be time to consider team coaching to help build stronger alignment across tasks.

Subscribing to excellence

Digital subscription businesses that change customer strategy without considering their organizational structure and people can find themselves at risk of being canceled—first by their employees and then by customers if they lack the ability to meet customer needs. Leaders must remember that customer centricity should not come at the cost of their employees. Thriving businesses know that to build customer loyalty they first need to build employee loyalty.

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