Career Development

How to Plan an Effective Organization Restructure

June 10, 2021

An organization restructure may be necessary for a business to stay competitive, especially when they need to maintain their competitive edge in the face of developments in their industry. Understanding the basics of restructuring can help you implement a restructuring effectively to achieve your objectives. In this article, we explain what an organization restructure is, outline reasons for it and provide tips on how to restructure your organization.

What is an organization restructure?

An organization restructure is a change in a company's business model, structure or processes. A restructuring can involve changes to the workforce, reorganization of company hierarchy or introducing new processes. The scale of a restructuring campaign can depend on factors such as launching a new product or meeting customer needs. For example, if reducing operating costs makes restructuring imperative, large-scale layoffs may be necessary. Organizational restructuring may occur when management decides a part of the business needs to change. If implemented correctly, such changes may improve the business in a specific area or multiple areas.

Who handles an organization restructure?

In many organizations, restructuring often involves the following groups:

  • Management: Management often strives to keep the organization viable and operational. Management, often represented by the executive board, may also evaluate activities in the restructuring process and provide support to ensure it succeed.
  • Employees: While a company may not directly involve employees in a restructure, if it includes employees early in the process with information can help reduce opposition and increase success.
  • HR personnel: HR personnel often create blueprints to guide the reorganization and communicate changes to employees.
  • Stakeholders: Stakeholder or investor involvement may depend on factors like company size and the scale of the restructuring. Big companies with powerful investors often include them when making decisions that could significantly affect operations.

Related: Organizational Structure: Definition and Types

Reasons for an organization restructure

Restructuring often results from an analysis of a company's present condition and the identification of necessary changes. Here are some reasons some companies may decide to restructure:

Dynamism in the business environment

The world of business is ever-changing, forcing companies to change certain aspects of their businesses to remain competitive. While some changes rarely require intensive restructuring, some can lead to massive reorganization in companies. A dynamic business environment is one of the common external factors that encourage efforts aimed at restructuring. Internal factors can be more controllable and less volatile.

Changes in work structure and operations

Patterns of work and production are dynamic as companies discover new processes that may offer better results with time. Implementing new processes and structures in organizations may require a complete restructuring. A good example is the rise of remote work programs across industries with companies reorganizing and restructuring to accommodate more work-from-home arrangements.

Related: How to Improve a Business With Organizational Design

Leveraging market opportunities

A company might restructure to leverage opportunities for better business growth. Examples of opportunities include launching products in new markets, increasing market share or creating higher brand awareness. Restructuring the right way can put a company in a better position to take advantage of opportunities in the marketplace. For example, establishing new international offices as part of an organizational restructuring can make it easier to capture new markets.

Satisfaction of customer needs

Businesses may reorganize to meet the changing need of their customer base. When your company has to make new products or offer new services, restructuring may be necessary to manage changes to operations such as creating new departments, hiring new staff and adding new management positions to adjust to different customer demands.

A merger that leads to a rebrand

A restructuring may become necessary if a company merges with another company, or another company acquires it. The new owners or management may want to rebrand or change certain parts of the business, causing a full organizational restructure.

Internal organizational problems

There are different problems in an organization that could warrant changes to its internal structure or processes, such as:

  • Inefficiency
  • Poor performance
  • Increasing overhead costs
  • Declining revenue
  • Improper allocation and use of budgets
  • Communication problems

Inadequate company leadership

The leadership of a company is often key to its survival and success. If there is a breakdown in the leadership structure, it may become necessary to restructure. How much the restructuring affects leadership may depend on the scale of the problem. If the problem occurs across different levels of management, a complete overhaul of the company's leadership may be best.

Related: How to Perform a Smooth Company Reorganization

Tips for a successful organization restructure

When done right, an organizational restructuring can help streamline processes and make it easier to achieve business goals. Here are some tips for implementing a successful restructuring process:

Evaluate your current structure

Before embarking on a restructuring, you can evaluate your current organizational structure. This may help identify problems and make it easier to solve them. It also can make it easier to find parts of your organizational structure that are performing well and those that can benefit from restructuring.

Develop a restructuring plan

The chances of a restructuring succeeding can grow when there is a plan guiding its implementation. Your restructuring plan may consider various factors like legal and economic constraints and staff strength. When creating a plan, here are some activities that can feature prominently:

  • Creation of objectives
  • Identification of project management tools
  • Estimating costs and creating a budget
  • Establishing a project team
  • Appointment of a project manager

Make communication a priority

A successful restructuring may depend on the support it gets from key stakeholders within the organization. Communication can be important for building support for a high-stakes activity like restructuring. The communication about an organizational restructure should be regular and transparent so you can ensure employees know about the plans to avoid uncertainty and reduce opposition. You can also appoint spokespeople to discuss the benefits of the restructuring with employees.

Related: How to Foster Effective Communication in the Workplace

Perform a test on a smaller scale

A good strategy can be to implement restructuring in the smaller parts of a business before applying it to the entire organization. It may allow you to measure and evaluate a plan and avoid costly mistakes. You can use results from these mock implementations to refine the actual plan and prevent problems. You can try to gather feedback from employees during those test runs, and their responses may prove invaluable in gauging the potential reactions of the general workforce.

Implement new organizational structure

The last phase of restructuring involves implementing the new company structure. It's key to ensure your team understands the coming changes and that you can prepare them for the reorganization. It may be advisable to create a flexible implementation plan that allows adjustments to maximize effectiveness.

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