“Every success story is a tale of constant adaption, revision and change,” said Richard Branson, a man who knows a thing or two about business.
You don’t progress in business by standing still. Change is the one constant, and businesses need to evolve and develop over time to stay competitive. Sometimes those changes are relatively minor, but there are times when a major overhaul is needed.
If you’re thinking of restructuring your business, it needs careful consideration and robust planning. A business restructure will have major implications on your people, processes and productivity. It’s important to put in the groundwork; to look before you leap.
In this blog, I’ll take you through the reasons for organisational change and the best business restructuring process. Importantly, I’ll share the key things to think about before any business restructure.
Your First Step in the Business Restructuring Process
Want to know my ultimate piece of advice for anyone thinking of restructuring a business? Do it for the right reasons.
It’s vital to consider your customer base when making big decisions like this. Keep customer service as your top priority. Make sure any decisions are customer-led and that any restructure benefits them. If that restructure doesn’t work for your customers, it won’t work for you either as you’ll lose business.
What is Business Restructuring?
Basically, a business restructure is a change of business model, structure or processes. That could be an organisational restructure which involves moving or reallocating people, or making redundancies. It could also be financial restructuring which can include refinancing, selling assets or even insolvency.
Organisational restructuring may occur when the business owner or senior management decide a part of the business needs to change. The scale of this change can vary from a relatively small reorganisation to an entirely new structure with large-scale layoffs to cut costs.
A company restructure can take multiple forms:
Financial restructuring: reorganising a company’s debt or equity, making cost reductions and streamlining cash flows to address financial difficulties.
Organisational restructuring: changing the internal framework including its organisational structure, processes and job roles. That may include outsourcing or layoffs.
Debt restructuring: if you’re facing financial difficulties and cannot pay off debt, consolidating and amending the terms of the debt (debt restructuring) is a viable option.
The main reason behind company restructuring is to reset your ship, steer away from a developing storm and move towards calmer waters.
Wrong Reasons for Business Restructuring
All too often, I’ve seen leaders change their company structure for the wrong reasons. For example, a Managing Director realises that they have too many people reporting in to them. Their solution is to create a new middle manager role, say in the sales or marketing teams. They then recruit their best internal talent to that role.
But if you promote your best salesperson to the new manager role, you’ve lost your best salesperson. You need to know that they’re good at strategy, people management and planning, as well as sales. If not, hire someone else for the leadership role. Don’t promote people above their level of competency.
Good Reasons for Business Restructuring
Changing Customer Needs
Your business exists to solve customer problems and meet their needs. Over time, that can change. Without customers, your business can’t survive. So it’s important to evolve and make the necessary organisational changes to respond to customer demand.
To Compete Better
The business landscape is dynamic and ever-changing. If you want to remain competitive in that environment, your business needs to respond and adapt to the shifting market conditions.
Restructuring can better position your business to take advantage of opportunities in the marketplace. It can be a way to increase your market share and give your company a more competitive edge.
Operational Change
Years ago, everyone was in the office full time. Now, more of us work from home either fully or hybrid. Operational changes like this need new processes and structures, and sometimes a bigger restructure.
New Opportunities Due to New Technology
New technology can revitalise your business. You can automate processes that were tedious daily tasks previously. That opens up new opportunities to reallocate staff from one area to another. In years gone by, you needed a team of people in the post room. Now, we email rather than sending post predominantly. People are needed in different areas of the business now.
New Market Openings
A great reason to restructure is if you want to expand into new markets, diversify your product or service offering, or make strategic partnerships. Taking advantage of new business opportunities may require a reallocation of resources or reorganisation of people and processes.
Company Merger
Combining your business with another to create a new company can be an effective way of gaining a larger market share. But a company merger or acquisition often leads to an organisational restructure. The new business owners or management often want to rework certain parts of the business.
Addressing Organisational Issues
The way you organised your teams originally may no longer make sense. Perhaps your business strategy or vision has evolved. Getting rid of those teams that are no longer relevant may be the way to go.
This is often the case for large corporations rather than smaller businesses. Nike is a great example of corporate restructuring. Originally set up to sell footwear for runners, it then evolved to produce shoes for other sports like football, tennis, basketball and so on. Over time, its divisions were categorised by the product they sold (footwear, clothing, equipment). Later, the company restructured to create divisions and subsidiaries focussed on the particular sport rather than product.
What are the Key Steps in the Business Restructuring Process?
My top tip is to draw an organisational chart of where you are now, and another of where you want to be next year. Think about your current team members and how they fit into that future organisational structure. Employees may need some additional training and development to suit that future role, and you can work on that between now and then. Any roles that haven’t been allocated to existing team members will need to be recruited by then. You may also have people who don’t fit in the future company structure, and they may need to be exited from the business.
Done well, change management will excite rather than scare your team members and get their buy-in. Clear communication is of paramount importance. Keep in touch with your employees regularly to provide them with updates on what’s happening.
Every change made during restructuring needs to be measurable. Set key performance indicators (KPIs) to track the impact of these changes.
Ask for professional help when making significant changes to your business structure. You may need specific financial insights from accountants or legal advice from solicitors to ensure you make the best decisions for your business.
Reorganise Your Business the Right Way
Make sure your reasons for reorganisation are valid. You don’t want to overhaul and disrupt your business unless it’s going to make a positive impact on your customers, your employees and your bottom line ideally.
Company restructuring can be reinvigorating, providing a refreshing new chapter for everyone involved. But it can also be unsettling, unnerving and demoralising if change management isn’t handled well.
Make a solid plan and work towards it over time. Seek advice where you need it. And importantly, communicate your vision clearly with your teams to get their buy in and support.
If you need help to get your head around marketing strategy and business planning, please give me a call.
