Editor's Note: Take a look at our featured best practice, Smart Organizational Design (27-slide PowerPoint presentation). Business environment has transformed drastically and has become immensely challenging due to competition, disruptive technologies, laws, and globalization. These challenges warrant better performance to address customer needs and to survive--and outpace--intense competition. Consequently, [read more]
Strategic Restructuring – 5 Critical Success Factors
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Reorganization becomes essential at some stage in the lifecycle of any organization. In order to emerge triumphant through this tumultuous challenge, it is necessary that the focus remains on the challenges impeding the organization, thorough Strategic Planning to tackle the challenges, and prioritizing strategic initiatives to deliver effective Business Transformation. Strategic Restructuring has the capability to deliver these results.
When the word “Restructuring” pops up, the foremost idea that comes to mind is achieving Cost Reduction by minimizing payroll costs—predominantly by cutting back on the headcount.
Scores of organizations have suffered because, in the melee of headcount reduction, the most competent employees quickly found opportunities elsewhere, leaving inappropriately competent employees behind, resulting in a crippled organization.
The purpose of Restructuring is to make the organization profitable, efficient, and effective. Headcount reduction should be a consequence of the Restructuring initiative and not the prime objective.
To avoid an outcome that debilitates the organization as a result of Restructuring, it is absolutely essential to keep an eye on the Critical Success Factors (CSFs) while the organization moves through the 4 phases of Strategic Restructuring. Strategic Restructuring’s 5 CSFs include:
- Strategic Focus
- Continuous Communication
- Participative Focus
- Positions before People
- Focus on Competency
Experts suggest envisioning a “Future State” for the organization, to be achieved through a robust Strategy that includes Change Management, implemented by the most competent employees who are redeployed. The rest of the employees either severe ties voluntarily or are laid off—ideally with a good severance package or a job placement, with the organization’s help, somewhere else.
Leadership has to ensure firm resolution in employing these Critical Success Factors in order to establish its role and build a constituency among employees who believe in the need for change. Let’s dig deeper into the 5 CSFs of Strategic Restructuring.
1. Continuous Communication
- Communication is a decisive factor in Strategic Restructuring. Pitfall in this factor is the “need to know” approach. Top-level leadership should be communicating with the whole organization quite frequently.
- Immediate and full disclosure of information builds trust in the management’s actions.
- Repetition is key in getting the message across. Believing that enunciating once is enough, will be erroneous on the leadership’s part.
2. Participative Focus
- Redesign of structure is a bottoms-up job because the information and expertise are dispersed throughout the organization.
- Employees in the thick of the action are in the best position to undertake this effort.
- The management develops the organizational framework and keeps apprising the employees regarding the overall strategy in order to keep the direction true.
- A participative approach to Restructuring assists in building employee morale and engagement levels.
Interested in learning more about the Restructuring’s Critical Success Factors, Transformation Phases, and a Case Study on Restructuring?” You can download an editable PowerPoint on Strategic Restructuring: Critical Success Factors on the Flevy documents marketplace.
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29-slide PowerPoint presentation
Organizations that have survived over time have had to reinvent themselves over and over with the changes in the environment. These reinventions almost always include Cost Reduction that tend to lean towards Headcount Reduction. Headcount Reduction is typically achieved using 2 approaches:
1. [read more]
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"If you don't transform your company, you're stuck." - Ursula Burns, Chairperson and CEO of VEON; former Chairperson and CEO of Xerox
Business Transformation is the process of fundamentally changing the systems, processes, people, and technology across an entire organization, business unit, or corporate function with the intention of achieving significant improvements in Revenue Growth, Cost Reduction, and/or Customer Satisfaction.
Transformation is pervasive across industries, particularly during times of disruption, as we are witnessing now as a result of COVID-19. However, despite how common these large scale efforts are, research shows that about 75% of these initiatives fail.
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About Mark Bridges
Mark Bridges is a Senior Director of Strategy at Flevy. Flevy is your go-to resource for best practices in business management, covering management topics from Strategic Planning to Operational Excellence to Digital Transformation (view full list here). Learn how the Fortune 100 and global consulting firms do it. Improve the growth and efficiency of your organization by leveraging Flevy's library of best practice methodologies and templates. Prior to Flevy, Mark worked as an Associate at McKinsey & Co. and holds an MBA from the Booth School of Business at the University of Chicago. You can connect with Mark on LinkedIn here.
