Business restructuring usually accompanies negative connotations of inefficiencies or a need to cut the workforce to improve the bottom line. However it is important to balance this with the premise that a business restructure is a process to renew the business and position it in a manner to exploit a market opportunity.
History indicates that most restructures are poorly developed and implemented for three main reasons – (1) Cost cutting is the main focus, (2) There is a focus on people rather that positions and the strategic direction of the business and (3) There is no clear strategic purpose and a lack of communication
As businesses consolidate their positions and sound commercial opportunities emerge there will be a need to restructure. Following are some guiding principles that will help focus this process.
Strategy before structure:
As business must have a clear and realistic strategic direction to focus the efforts of the workforce, management and external stakeholders. Internally, the workforce will embrace the change if they can clearly see where the decision makers are taking the business. Furthermore, the critical external stakeholders such as accountant, legal professional and financiers will be able to deliver more value to the business if they have a clear understanding of where the owners want to take it.
Reduction of clutter and complexity:
Businesses can have complex organisational structures because of its size and / or industry, complex product offering i.e. technical or hazardous and / or complex transactional processes due to scale and scope of clients and suppliers. While some of these are unavoidable there are a few ways a business can mitigate the negative impact of these complexities.
- Design the structure and positions strategically before you concentrate on the personnel
- Simplify leadership roles through clear and efficient processes including clear audit trails
- Keep organisational structures flat – Matrix structures are confusing and make performance measurement difficult
Core competencies and activities:
Prior to developing roles and responsibilities gain a clear perspective on the core activities that define the business. Then identify the core competencies that drive the activities and generate the required margins. Through this process it is essential to identify those activities that add value to the businesses operations and keep these. Alternatively activities that do not add value can be removed.
Feasibility of positions and roles:
In the majority of restructures the cost cutting paradigm results in positions and roles being unrealistically loaded with duties that are not aligned to the strategic direction of the business and normally are not conducive to the provision of good product / service delivery. While it is essential to have all resources working close to capacity they have to be working towards the defined goals and objectives of the business otherwise inefficiencies occur and performance measurement is impossible.
Balance within management workloads:
The management and supervisory functions are a blend of management and leadership. If the people within these positions are overloaded they tend to focus on the urgent management tasks that are directly related to the visual output requirements. To assist in maintain the correct balance the following elements are critical
- Numbers of employees under direct management and supervision
- Ability of employees to perform tasks without supervision
- The level of “functional” work that the manager / supervisor has to perform other that workplace supervision
The critical time for the successful implementation of a restructure is within the first six weeks. If the workforce is confused about the restructure then the clients, suppliers and other stakeholders will be affected and the bottom line will be adversely impacted. A successful implementation process starts with clarity of positions, roles and responsibilities and clear identification of all functions within the business including activities, tasks and level of authority for decision making. All employees must understand where they fit within the efficient operating of the business. Finally, everyone must understand what they are accountable for and how this will be measured.
Flexibility for the future:
Every restructure has some early phase implementation pain therefore the leadership group have to have the capability and capacity to guide the business through these while ensuring the workforce has the ability to perform at the required level. To achieve this it is essential that all resources have sufficient “slack” to take up the overflow when required. In addition, when a restructure is aligned to sound strategy the business will be able to manoeuvre to capitalise on specific opportunities when they present.