A few years ago, the world’s leading designer and manufacturer of office products decided that it needed an organizational overhaul. Coordination across product lines was poor. Design teams collaborated ineffectively. Key personnel were remote from customers. The company responded in part by reorganizing its work space, creating an office-free “village” where designers and architects could mingle and collaborate and customers could visit easily. Proximity does matter for promoting collaboration, and the space was conceptually compelling and visually appealing. Yet it failed to spark meaningful innovation or closer relationships with customers. Four and a half years after the building opened, management decided to revamp the work space again.

This experience should be familiar to many businesses that respond to organizational dysfunction without fully thinking through its causes. An organization plagued by sluggish decision making might decide that decentralization is the remedy. A company suffering from poor communication, inflexibility, or an inability to pull together product offerings and expertise might try breaking down barriers that make functions or business units operate as silos. Yet as sensible as such interventions look on paper, they often yield disappointing results, so reorganizations, like rites of spring, come and go with surprising regularity, often without significantly...