Factors to consider when restructuring an organization

Reorganization becomes essential at some stage in the lifecycle of any organization. In order to emerge triumphant through this tumultuous challenge, it is necessary that the focus remains on the challenges impeding the organization, thorough Strategic Planning to tackle the challenges, and prioritizing strategic initiatives to deliver effective Business Transformation. Strategic Restructuring has the capability to deliver these results.

When the word “Restructuring” pops up, the foremost idea that comes to mind is achieving Cost Reduction by minimizing payroll costs — predominantly by cutting back on the headcount.

Scores of organizations have suffered because, in the melee of headcount reduction, the most competent employees quickly found opportunities elsewhere, leaving inappropriately competent employees behind, resulting in a crippled organization.

The purpose of Restructuring is to make the organization profitable, efficient, and effective. Headcount reduction should be a consequence of the Restructuring initiative and not the prime objective.

To avoid an outcome that debilitates the organization as a result of Restructuring, it is absolutely essential to keep an eye on the Critical Success Factors (CSFs) while the organization moves through the 4 phases of Strategic Restructuring. Strategic Restructuring’s 5 CSFs include:

Strategic Focus
Continuous Communication
Participative Focus
Positions before People
Focus on Competency

Experts suggest envisioning a “Future State” for the organization, to be achieved through a robust Strategy that includes Change Management, implemented by the most competent employees who are redeployed. The rest of the employees either severe ties voluntarily or are laid off — ideally with a good severance package or a job placement, with the organization’s help, somewhere else.

Leadership has to ensure firm resolution in employing these Critical Success Factors in order to establish its role and build a constituency among employees who believe in the need for change. Let’s dig deeper into the 5 CSFs of Strategic Restructuring.

1. Continuous Communication

Communication is a decisive factor in Strategic Restructuring. Pitfall in this factor is the “need to know” approach. Top-level leadership should be communicating with the whole organization quite frequently.
Immediate and full disclosure of information builds trust in the management’s actions.
Repetition is key in getting the message across. Believing that enunciating once is enough, will be erroneous on the leadership’s part.

Redesign of structure is a bottoms-up job because the information and expertise are dispersed throughout the organization.
Employees in the thick of the action are in the best position to undertake this effort.
The management develops the organizational framework and keeps apprising the employees regarding the overall strategy in order to keep the direction true.
A participative approach to Restructuring assists in building employee morale and engagement levels.

Interested in learning more about the other Critical Success Factors of Restructuring and Transformation Phases?” You can download an editable PowerPoint on Strategic Restructuring: Critical Success Factors on the Flevy documents marketplace.

Do You Find Value in This Framework?

You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:

“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”

– Bill Branson, Founder at Strategic Business Architects

“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”

– David Coloma, Consulting Area Manager at Cynertia Consulting

“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight — it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”

– Roderick Cameron, Founding Partner at SGFE Ltd

As business conditions change, businesses -- if they are to continue to thrive -- sometimes also must change. Organizational restructuring is often necessary. Restructuring is difficult because it involves realigning jobs and work groups to fit the new strategy, and loyal employees may have no place in the resulting organization. Others may need to be retrained and to learn to adjust to a different environment. Human resources departments help design and implement such reconfigurations.

The first question human resources should consider in any restructure is "Why?". Many restructurings are designed to cut costs. In these situations, jobs may be combined and new duties added to job descriptions. Some restructurings are undertaken for other reasons, such as rapid growth, a desire to move into new markets, opportunities for employee development or preparation for management succession. In these cases, human resources will help determine the new roles, capabilities and reporting relationships that will be needed, and develop a structure and all new job descriptions to accompany it.

Another factor to consider is how to reorganize the company to meet the new mission and goals. Human resources managers, along with the manager of each core function (accounting, manufacturing, sales, etc.), analyze processes to identify opportunities to increase customer service, eliminate waste or expand business opportunities. When processes cross departments, such as manufacturing and delivery, human resources facilitates communications between both department managers about ways to cluster services, according to the University of California at San Francisco.

If layoffs are to occur, human resources ensures they will meet all the legal parameters -- for example, that the layoffs are being done without regard to race, age or disability. Human resources also must consider whether laid-off employees will be awarded severance pay and job search assistance. Another key factor to consider is aftercare -- how you will re-motivate retained employees. If new positions are to be created, recruitment and training must be planned.

During times of change, employees are often very anxious. If they don't receive correct information from human resources, they may receive incorrect information through the grapevine, and misinformation can heighten anxiety. Major changes, especially layoffs, are considered important news to the community, which includes your customers, suppliers and potential investors. Consider carefully what you will say to the local news outlets and when. In addition, consider how you will communicate on your social media channels. State your case without being defensive.

Page 2

A symbiotic relationship exists between human resources, or HR, management and human resources development, or HRD. In large organizations, HR management generally employs more than one person to shepherd daily HR activities. Several professionals in HRD might be responsible for employee growth duties. HR personnel recruit and hire people, among other things, and HRD employees develop those workers into productive colleagues. HR and HRD duties often overlap, because both human resources departments work together to help an organization reach its full potential.

Human resources management oversees many day-to-day concerns. These duties are multiplied significantly in large organizations because of the increased number of employees, so the HR department may have many employees. HR managers will make themselves and their personnel available for any employee-related needs, including managing unemployment claims or dealing with work-related accidents, employment lawsuits or unresolved employee disputes between co-workers or between workers and management.

In addition to supervising employee-related matters, human resources managers conduct recruitment, hiring and firing activities, oversee payroll and manage health benefits. HR staff members work toward a safe and productive work environment that maintains high levels of employee morale. HR professionals will devise employee appreciation programs, direct compensation studies and ensure that government safety standards are being met. HR managers ensure that the organization complies with all employment laws and coaches and counsels workers when necessary.

Activities pursued by HRD personnel are focused on the consequential development of the organization through its employees. As large organizations seek to flourish and employee turnover occurs, the need for qualified employees increases. HRD professionals strategically develop employees who possess the qualities and potential that can contribute greatly to the company's goals. The ideal HRD professional is perceptive enough to recognize qualities in others that can be strengthened to meet the continuing needs of the organization.

HRD team members will use the tools at their disposal to foster the growth of employees to fill strategic company needs. For example, HRD staff members may encourage an employee's ability to increase global sales by using definitive training approaches, such as sending the qualified employee to educational seminars. HRD professionals might also be involved in recruiting outside the organization when an individual is discovered who can help the company reach a critical goal.