Many businesses look for short cuts when it comes to restructuring. Nevertheless, restructuring should be strategic where businesses can set strategic goals and avoid any long term losses. No matter how big the issues arise during the crisis, such as the coronavirus pandemic, businesses should take time to plan strategic long-term restructuring that will bring benefits. Restructuring experts are finding themselves in demand, anticipating that companies will not be able to make good on their promises on time.
As organisations have become more sophisticated, agile, and responsive to market needs, business restructures should now aim far beyond simple capacity and headcount reduction. The main goal should be to improve long-term health and capacity. Having the right business strategy is one of the keys to success.
Moreover, restructuring is more likely to be successful when managers first understand the fundamental business/strategic problem or opportunity that their company faces. An example of Chase Manhattan Bank and Chemical Bank is when they used their merger as an opportunity to both reduce operating costs and achieve an important strategic objective.
Combining the two banks created opportunities to eliminate overlaps in such areas as back-office staff, branch offices, and computing infrastructure. Management of both banks also believed that larger and more diversified financial institutions would increasingly have a comparative advantage in attracting new business from corporate and retail customers. The merger was therefore also viewed as a vehicle for increasing top-line revenue growth. Internal cost-cutting alone would not have enabled either bank to achieve this second goal.
Moving forward, COVID-19 related uncertainty is triggering a vast array of business restructuring activities. Companies that are facing fast changes and crises, tend to react poorly or irrationally due to the pressure. For example, removing a company’s product development team may improve short-term profit, but badly damage future sales. Businesses should think long term, and act on critical areas of their business, without removing supporting sectors.
Restructuring Impact on People
Management must know what it is trying to achieve and what it wants the company to look like following the business restructure. People need to know it’s not their fault and there’s a bigger picture they couldn’t change. Employers should provide help and support for those leaving the company. Such support can range from offering services, such as career coaching and mentoring, to helping them network and find new jobs.
Meanwhile, for those employers that find themselves in the position of having to change the composition of their workforce as they reorient the business to exploit new opportunities, there is a talent management secret: upskilling or reskilling the workforce. One US bank, upon shutting down 80 per cent of its branches as a result of the pandemic, used an AI system to analyse the skills and experience of the 35,000 staff affected. The aim, according to Bersin, was to understand who would be the fastest and easiest to retrain for call centre positions and who should be placed on leave.
Successful business restructures tend to feature much wider strategic goals that position them for future growth. Heading the restructuring path, employees should have more compassion and provide help to people leaving the company.
To sum up, one thing has come to light, a need for change. Businesses are becoming aware of technological and digital transformation needed to accelerate their business through online apps or retail shops. Therefore, the goal of many restructures is to ready businesses to bounce back in an economic recovery. Achieving strategic goals requires continuous improvement. Once you think you have finished, start again.