Changing market conditions, shifting consumer trends, and increased competition can all impact an organisation’s ability to operate effectively and saddle it with debt, potentially making restructuring necessary.
Business restructuring can consist of organisational restructuring, which focuses on employees and processes, and financial restructuring, which addresses a business’s balance sheet and level of debt. When completed successfully, restructuring can make the business more dynamic and innovative by reorienting it to the market, improving profitability.
Businesses can implement 11 strategies to restructure their business successfully:
1. Avoid waiting too long
Delaying restructuring not only reduces the organisation’s available options but it can also raise the risk of business failure. By acting quickly when signs of trouble become evident, businesses may be able to avoid the need to take drastic actions.
2. Conduct an honest assessment
Business leaders need to identify what’s happening in their organisation. Accurate financial statements are the best tool for determining what’s happening in the business, including what’s causing debt and financial distress.
3. Review your strategy and business model
Strategic planning should inform an organisation’s restructuring plan. Business leaders should review and, if needed, update the organisation’s strategy and business model to align the restructuring plan with a new strategy that gives the business the best chance of success.
4. Look for ways to achieve quick results
Organisations in serious financial trouble need to look for opportunities to increase sales and revenue immediately. Business leaders can continue developing medium- or long-term plans, such as changing product or service offerings. However, they also need to identify ways to generate revenue quickly. This may include ceasing unprofitable product lines, liquidating unused equipment, and negotiating with suppliers.
5. Aim to reduce complexity
Business leaders should streamline operations and corporate structure. Complexity such as convoluted order processing, managers’ roles and responsibilities, or rules and levels of authorisation can hinder performance and should be eliminated where possible.
6. Determine core activities and processes
When restructuring employees’ roles, business leaders need to identify core activities and remove duplication. By familiarising themselves with the top value-adding activities and core processes, business leaders can avoid eliminating critical roles.
7. Realistically assess workloads
Role restructures can result in overloading positions. As a result, business leaders need to be realistic to maximise productivity and performance through any personnel restructure.
8. Match leaders with specific tasks
An organisation’s senior and line managers are critical partners during restructuring, as they interact directly with employees. Business leaders can support managers by giving them time to focus on leadership tasks, including coaching, mentoring, guiding, and engaging with other staff members to support a successful restructure.
9. Manage uncertainty and resistance
Through regular communication, business leaders can proactively manage uncertainty and resistance from employees. By clarifying roles, activities, and tasks at the beginning, and anticipating resistance from specific areas, business leaders can proactively reduce resistance.
10. Stay flexible
Business leaders should approach restructuring as if they only need to build a business that will be successful for the next six or 12 months. This way, business leaders can stay flexible and responsible to change.
11. Seek expert advice
Business leaders should talk to trusted experts, including the variety of professionals who can provide support throughout the entire process. Whether it’s advice on turnaround finance, restructuring, or external administration, business leaders need to obtain advice as early as possible, so they can explore their options and work to the best possible plan.
Business restructuring can help a business evolve in response to a changing environment. It’s often a challenging, uncertain time but, with a plan aligned to strategy, commitment to flexibility, and communication, business leaders can give their organisation a chance at survival and return to profitability.
Domenic Calabretta, Managing Director, Mackay Goodwin