It goes without saying that reorganizing a well-established company is likely to be difficult, emotional and complex. After all, restructuring is a classic example of change management. It involves lengthy, often emotionally charged, discussions on what’s working, what is not working, and what needs to work better. Additionally, restructuring a business demands thorough cross-examination from a variety of perspectives and stakeholders. Plus, there are constraints and existing commitments that limit what you can do. Employees will be impacted, some of whom may no longer have a job following the restructure. And ideally, any changes that are made should have minimal impact on customers.
However, reorganization is about more than just the end result and implementing new, fresh and shiny business processes. How the business actually goes about making the changes is just as important as the changes themselves. If one is planning to restructure his company or make organizational changes in the near future, here are five things to consider before you begin.
Profit growth has come to a screeching halt. If your business historically has had growing (or at least consistent) profit margins that then start shrinking for an extended period of time, there is a problem. This is a sign that you need to audit you Cost of Goods Sold, salary to revenue ratio, and overall expenses. Some or all of these things are causing your net operating income to shrink. Regularly examining the books will help mitigate any surprises.
Turnover is high. This includes both employee and client turnover. Both need to be watched closely. If your customers start leaving it probably means they are no longer satisfied with your products or services and are willing to try other providers. There are many internal and external factors that come in to play. Building great relationships with your customers and constantly seeking new ways to make their lives better will ensure long lasting partnerships.
Morale is low. There are countless issues that can negatively affect morale. But some of the major themes include poor management, broken promises, constructive feedback being ignored, cancerous team members being allowed to remain at the company, or favoritism. When management realizes that drastic change is needed, it is quite common that the team has been begging for this change for some time. So management needs to make sure they are listening to their team members and applying that feedback towards making improvements in the way the company does business. Don't get into a "too little too late" situation.
Old systems no longer work. The processes that work when your company has ten employees are not the same ones that will be needed when you have fifty. It's not to say that systems must be increasingly complex as the company grows. In fact it's quite the opposite. As your company grows it is typical to change or at least improve upon existing processes every few years.
Inefficiencies are rampant: When a company becomes inefficient it has probably outgrown processes that used to work. The answer to more business or customers for inefficient companies is more people. And more people means higher payroll which decreases profit. Efficient companies however can keep growing and adding more business without having to continually hire more staff. Many times it is as simple as improving systems or adding software to streamline internal operations.
Team members are overworked: This also involved inefficiencies. If people feel overworked it doesn't necessarily mean you need to hire more people and spread out the work. There may be better ways to do things or people might be spending too much time on the wrong things. Whatever it is, it needs to be fixed or those people will leave, increasing turnover, and negatively affecting morale.
Others are underutilized: Again, there are many factors to be considered. If some people are overworked and others are underutilized you should probably audit the existing teams and structure. You may be overstaffed in some areas and understaffed in others. But don't assume either. Collect plenty of information and let the data direct your decisions.
The industry is evolving. If you are doing business the exact same way you were ten years ago, you are probably falling behind. Technology improves. Industries change. Economies shift. Economic changes for example might increase your costs of doing business which means you probably need to increase your pricing or find new vendors with lower costs. Either way, good companies pay constant attention to what's happening in their industry and the world around them.
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