A Guide to Successful Business Restructuring KEY TAKEAWAYS
Reorganization or a restructuring of the business is indispensable for growth opportunities and progress. Determine where the company is failing to meet goals and where it’s working. Choose the best path forward and communicate the reorganization. “The world hates change, yet it is the only thing that has brought progress” , says Charles F. Kettering , an American inventor, and engineer.
When a big or relatively small company experiences a change, the organization must adjust accordingly.
As the business grows it is quite obvious that there will be challenges and different than usual market conditions. To survive in a hyper-saturated or competitive market, your enterprise must aim to pivot to capitalize on opportunities or optimize inefficiencies. Or, consider taking help from platforms like Mackay Goodwin .
For that matter, business restructuring is creating better results.
Ironically, smaller companies generally have fewer major organizational changes, but concerning big ones, they tend to experience more frequent reorganizations.
What’s the reason behind it? Small companies are leaner to define job roles more flexibly and big companies narrowly define job roles.
In this article, see how to successfully restructure a business and discover the difference.
Reasons For a Company Restructure Growth opportunities and progress provide endless possibilities and endless business. Likewise, enterprises must consider these to drive success. For that, companies must engage in a ceaseless hunt to cut administrative, general, or sales-related costs.
Hence, to achieve the same, reorganization or a restructuring of the business is indispensable.
Do You Know?: Recently, approximately 60% of companies in the S&P 500 have launched large-scale cost-reduction and reorganization initiatives within the past five years, according to McKinsey.
Despite this, there are other reasons as well. Those are as follows:
As previously mentioned, a key person like a CFO or CMO has left the company. It may have an enormous impact on operational decisions and structure. If your organization isn’t meeting its KPIs or something is broken. The company is merged with or acquired by another organization. Due to organizational problems like departmental conflicts, internal inefficiencies, talent mismatches, bureaucratic waste, job overlap, and so on. Willing to make a way for new opportunities. The company is growing or shrinking. Due to changing markets, consumer bases, products, or services. Usually what happens is businesses choose to just undergo a department restructuring instead of the whole organization. While it’s certainly less difficult to reorganize a department, at the same time, it’s not atypical to overhaul its entire organizational structure at once.
How to Restructure a Company Successfully? Here are the steps to be followed for a successful restructuring of a company:
Commence With Your Business Strategy The foremost component would be to find out why the upper management wants to reorganize. Look for problems the company is hoping to solve and comprehend the new direction the company is heading.
Setting SMART goals will arm you with criteria your business wants to meet with this reorganization plan.
Look For Strengths and Weaknesses in the Current Structure The next move is to determine where the company is failing to meet goals and where it’s working. The best way is to make an org chart. With this, a company can gain an elevated perspective on where your company structure stands now.
Statistics: Back then in 2023, real estate was a dominating sector for restructuring activity.
It is ideal to weigh the edges or profit of a restructure against the risk.
Employees are leaving due to organizational change? If you think the problem is not solved even after restructuring, then don’t attempt it, it’s a wasted effort.
Choose a Design of a New Structure Once you are done analyzing every aspect of the older structure be it feedback from employees and key stakeholders or considering existing job functions. Now, it’s time to choose a new business direction or a new structure.
Many wonder if they will be able to amend the new structure or not. Well, a newly restructured model is only a first draft. Organizations can easily change prior to implementing it.
The chosen restructure model must include:
The vertical and horizontal lines of authority. Assigning a person in authority to make formal decisions within departments. Attributes of employees. Proper definition or distribution of functions throughout the organization. Pros and cons of different types of organizational structures based on hierarchical, horizontal, matrix, etc. Take note: Do not attempt this without a visual to clarify your course of action.
Communicate the Reorganization Have you determined your best path forward? Communicate the reorganization to the employees. It’s significant to maintain transparency. Again, an org chart can help create clarity in this situation.
Do not forget to mention details about each role’s responsibilities and give employees space or time to soak it in.
Either, communicate the plan with managers or anyone with a direct report because they can assist with execution.
Launch the Company Restructure After sharing your vision, the moment has arrived, a restructure has taken effect! Change can be difficult to adapt to, so, closely monitor the situation. Consistently draw attention to wins to indicate that the major changes are working.
Fast Fact: The report from BCG 2012 stated that among the organizations that claimed they had capable leaders, 74% said restructuring their plan was successful.
If the new organizational structure still doesn’t meet your goals, then take a step back and make adjustments. q
Real-Life Example of Restructuring Who doesn’t know about Google? We all consider Google as a giant in the digital landscape. In the past when Google started growing at an exponential rate, it seemed an impossible task to manage as one entity.
To manage things effectively, the leaders of the company decided to deconstruct the behemoth. How? By breaking up into the Alphabet Umbrella. This alphabet umbrella consists of more than 40 subsidiaries and sub-holding companies.
The structure looks like this:
AlphabetGoogleGmail Google Cloud Google Maps Android YouTube Hardware Infrastructure capitalG Calico Wing Loon Verily Waymo Conclusion Business leaders possess the capability of transforming restructuring into a positive experience. It sets the tone for how it will be. There are an infinite number of ways you can arrange people within a large-scale organization.
A company restructuring is proven to be a significant lift for a business. Especially for those in efficiency, cost reductions, and competitive advantages.
So, discover the difference, see business from a different perspective, and edge out the competition!
