Most often associated with reductions in force or layoffs, business restructuring is the process through which a company changes the quantity, location, and responsibilities of part or all of its workforce to better meet its needs. While the press tends to focus on the negative aspects of restructuring, there are benefits to taking a fresh look at how and where work is being performed in an organization.
What is the Purpose of Organizational Restructuring?
Sometimes the restructuring involves moving jobs one for one from one location to another. Other times the change is focused on grouping certain activities together to get better operational efficiencies or superior service levels. And sometimes, it’s just good old-fashioned survival. Whatever the case for change, restructuring is always focused on benefits realization.
Top Benefits to Organizational Restructuring
If restructuring is all about benefits, what does “good” look like? It’s all about getting the right people in the right seats. If you are planning a restructuring, consider these potential benefits as you build your financial business case.
1. Reduced Costs
The most obvious benefit of restructuring is a reduction in payroll expenses and it is achieved in a couple of ways. The first is to do the same work with fewer people. We see this most often as an outcome of implementing new technology in the workplace. For example, the implementation of self-service checkout has greatly reduced staffing requirements in some retail chains.
The second is labor arbitrage, which is when work is moved to a location that costs less. While it’s not generally a permanent savings since wage rates tend to float up to meet demand over time, the initial gain is often big enough to support the case for change. Labor arbitrage started over 20 years ago when large companies started to move tech work to low cost countries with a highly skilled workforce. Now even small businesses and solopreneurs are using offshore virtual assistants to save money on their administrative support costs.
2. Increased Efficiency
This is another common goal for a restructuring project and aims to group similar work together in order to achieve better efficiency. Most of the time, it’s combined with a reduction in headcount as well, but in its purest form, this is simply redesigning organizations and jobs to focus on a limited set of tasks in order to do them more efficiently. We tend to think of factory line operations when we think of efficiency, but it also applies to services. Call centers are a great example of increased efficiency by consolidating customer service to a single group of people who only handle that task.
3. Better Use of Talent
Closely related to increased efficiency is the notion that restructuring allows for better use of the talent that you currently have. Essentially, it comes down to moving administrative work away from the resources that shouldn’t be doing it in the first place.
Take the example of a large HR function that is restructured to consolidate all payroll and administration tasks into one team. The result is increased work opportunities for more junior staff and the more experienced professionals have more time available to focus on strategic work.
4. Better Communication
While some organizations complain that communication declines post restructuring, a good implementation plan that includes change management and proper communication planning will generally result in better communication overall. The reason for this is twofold. One, restructuring projects that include labor efficiency goals generally include focused cost centers with service level agreements that document the ways of working and performance expectations. If the roles and the rules are clear, better communication follows. Two, focused teams that are working together on similar work without layers upon layers of management tend to share information more fluidly. They work next to each other, maybe not always on the same thing, but generally on the same stuff, day in and day out. Common work in proximity fosters knowledge sharing.
5. New Opportunities
Lastly, and sometimes an unexpected byproduct of better communication is the discovery of new opportunities. It doesn’t always happen, but when it does, its’ magic! By grouping people together in new ways, allowing them to work more effectively, more efficiently, collaborate and communicate on better ways of solving problems can result in completely new ways of working or new business opportunities. The pandemic, while challenging for many businesses, has completely transformed others. We’ve even seen changes in the public sector here that benefit everyone. Take jury duty for example. Zoom court is just so much more convenient than in person. And telemedicine has become far more mainstream than it was two years ago
Need Help with Organizational Restructuring in Your Business?
Bottom line, if you are considering a restructuring for your business, careful planning of the financial business case with a clear focus on benefits, can result in opportunities to take your company and your organization in a new direction. Having the right strategic partner working with you is a great way to start. Contact us.