The business world is always changing, making adaptability an integral attribute to any business. If companies are unable to keep up with the ever-evolving landscape, they risk being left behind. A company that is behind the times will not survive.
In order to endure, organizational restructuring is helpful and might even be necessary. Changing a significant chunk of the business gives it a chance at survival. The end goal is to make the business more streamlined and efficient. Because the organization is the foundation upon which a company runs, it is essential that it be as well structured as possible.
What is Organizational Restructuring?
The process of changing operational structures, ownership, and other internal operations to make a business more profitable is called organizational restructuring. A restructuring that results in growth and development is referred to as positive restructuring. Changes that lead to zero growth or a loss of profits are called negative restructuring.
Whether you are changing operations, ownership, or for legal reasons, the reorganization should always transform it for the better. Because of this, the employee’s ability to adapt must be taken into consideration. If they are able to adjust to the changes, the new environment should be beneficial to both them and the company’s profit. Visit this website to learn more about managing employee morale during organizational changes.
Reasons to Restructure
There are many different reasons that push a company to restructure. These factors can usually be sorted into two categories: internal or external.
Internal factors include:
- High operation costs
- Profit loss
- Poor communication
- Gross margins too high
External factors include:
- New clients and consumers
- New market trends
- Keeping up with competitors
- Redefined market.
Business environments are changing all the time. For example, Covid 19 forced a large percentage of the corporate world to reconsider their business models. With shut downs and isolation, retail and travel especially, had to completely restructure operations. Technology also continues to change, affecting how employees operate and how consumers interact with businesses. Working from home is more popular than ever and the inception of the metaverse has begun to transform the virtual landscape, making restructuring more essential than ever.
Buyouts and changes in business models often require reorganization as well. Each company has its own operating structure, so when they incorporate a buyout into their business, the new acquisition will need to be restructured. Same goes for changing the business model. Going a different direction with the company requires serious reconsideration when it comes to structure.
The Benefits of Organizational Restructuring
Going through a major change in a business is not an easy process, so to be worth doing it must have decent benefits. If you are weighing your options when it comes to restructuring, here are several benefits to consider:
- Cost Reduction- One of the most appealing benefits is cutting costs out of the budget. When you restructure, it includes the reorganization of all personnel. This usually results in eliminating redundant positions and saving on payroll expenses. The same work with fewer people streamlines who is involved in each task, making it easier to create teams with smaller numbers. Another way to reduce costs without cutting down the number of team members, is moving to a location where labor or supplies cost less. Visit https://hr.uw.edu/ops/workforce-reduction-strategies/organizational-restructuring/ to learn more about handling personnel while implementing changes.
- Increase in Efficiency- Decreasing and consolidating teams also has the goal benefit of increasing efficiency. It creates a clearer chain of command and internal organization as well as allowing each team to focus on their specific goals. The desired final product is redesigning jobs within an organization to focus on a limited set of tasks instead of a wide array. With only a few specific tasks, the team can handle their responsibilities with better efficiency.
- Utilizing Employee Talent- One thing that bogs down a company’s efficiency is not properly using their employee’s talent. Your workforce is most likely filled with talented people that would love their job even more if they felt properly utilized. Some team members are going to excel at administrative work, others will be bogged down by it. Remove administrative assignments from those that shouldn’t be doing it. Leave those employees free to focus on what they do best.
- Clearer Communication- One of the most common issues within a company is communication. Proper organizational implementation of changes allows management to set up good channels of communication. Establishing clear chains of command with fewer layers and complications clarifies rules and allows ideas and information to flow more fluidly.
- Create New Opportunities- When all the other benefits slide into place, the final goal is to open new doors for your business. Increased efficiency and communication mean that the machine of your company is firing on all cylinders. Your teams will work together like a well-oiled machine to help overcome each obstacle and envision new destinations for the business.