Restructuring is a strategic change that can affect the performance, culture, and future of your organization. Whether you are facing financial challenges, market shifts, or organizational redesign, you need a clear and effective plan to minimize disruption and maximize efficiency. In this article, you will learn how to:
Before you start any restructuring process, you need to understand the current state of your organization and the reasons for the change. What are the goals and objectives of the restructuring? What are the drivers and challenges? How will the restructuring affect your stakeholders, customers, employees, and partners? Conduct a thorough analysis of your strengths, weaknesses, opportunities, and threats (SWOT) and identify the gaps and risks that need to be addressed.
focus! Recalculation at a nanosecond's notice if necessary, go with the flow. Concentration on all facets of operational management
The importance of communication throughout the restructuring process is crucial. For example, keeping employees in the loop can reduce uncertainty and boost morale. This point is backed by research from McKinsey that shows that the success rate of organizational transformations is three times higher when employees are informed and involved.
Once you have a clear picture of the situation, you need to define the scope and timeline of the restructuring. What are the key activities and deliverables that need to be completed? How long will each phase take and what are the dependencies and milestones? How will you measure and monitor the progress and outcomes of the restructuring? Create a detailed project plan that outlines the roles, responsibilities, resources, and budget required for the restructuring.
When General Motors underwent restructuring in 2009, they had to consider multiple elements like labor cost reductions, debt levels, and brand restructuring. A detailed plan was formulated with milestones such as debt reduction by a particular quarter and a 20% labor cost reduction by a specific year. The project was closely monitored using KPIs like revenue, profitability, and operational efficiency. Real-world restructuring plans often require adjustments due to unforeseen circumstances. For example, during the COVID-19 pandemic, many companies had to pivot their restructuring plans to accommodate remote work. Tools like Gantt charts and agile project management methodologies can add value in such situations.
One of the most critical aspects of any restructuring is communication and engagement. You need to communicate the vision, purpose, and benefits of the restructuring to your stakeholders, customers, employees, and partners. You need to address their concerns, expectations, and feedback and involve them in the decision-making and implementation process. You need to create a culture of trust, transparency, and collaboration that fosters alignment and commitment to the restructuring.
When Satya Nadella became the CEO of Microsoft in 2014, he initiated a restructuring aimed at shifting the company towards cloud computing. He communicated this vision clearly to stakeholders and employees. The company’s annual report showed a cloud revenue increase from $16.5 billion in 2015 to $50.8 billion in 2020. According to a report from McKinsey, companies that adopted digital tools for communication saw a 20% increase in employee satisfaction during restructuring.
The next step is to implement and execute the restructuring plan according to the scope and timeline. You need to ensure that you have the right people, processes, and systems in place to support the change. You need to manage the change effectively and deal with any issues or obstacles that arise. You need to provide training, coaching, and support to your employees and partners to help them adapt to the new structure and roles.
In 2015, IBM made a significant pivot towards cloud computing and AI, away from its traditional hardware business. By Q2 2021, IBM's cloud revenue had reached $6.1 billion for the quarter, representing a year-over-year growth of 13%. This transition was possible because IBM invested in training over 200,000 of its employees in cloud-related disciplines and adapted its processes and systems to fit the new direction.
The final step is to evaluate and adjust the restructuring plan based on the results and feedback. You need to review the performance, impact, and outcomes of the restructuring and compare them with the goals and objectives. You need to identify the successes, challenges, and lessons learned and celebrate the achievements and recognize the contributions. You need to make any necessary adjustments or improvements to the plan and ensure that the changes are sustainable and scalable.
Restructuring is a complex and dynamic process that requires careful planning, execution, and evaluation. By following these steps, you can minimize disruption and maximize efficiency in your restructuring plan and achieve your desired results.
In 2011, Netflix decided to separate its DVD rental and streaming services. Initially, it faced a lot of backlash, losing 800,000 subscribers in Q3 2011. However, they adjusted their strategy based on feedback and results, investing more in streaming content. By Q2 2021, Netflix had over 209 million paid memberships worldwide, from the 23.6 million they had in 2011. Their adjustment and evaluation phase was crucial to this turnaround. There is the need for a "post-implementation review" (PIR), which is a formal assessment usually conducted 3 to 6 months after the restructuring. According to a report by Bain & Company, firms that conducted a PIR were 32% more likely to sustain improvements over the long term.
In my experience, once top leaders begin redesigning the organization, they become emotionally and physically unavailable to create the leadership development and cultural-change strategies that should be included in the restructuring plan. Once the restructuring is launched, strong negative energy dominates the working environment; unplanned employees leave, and turmoil ensues. Faced with this new situation, creating a plan to shift the negative energy to positive and address the resulting issues becomes a priority. However, setting up the necessary interventions takes time, causing a disruption to the rollout. It is critical to have a plan to heal the organization and evolve the culture before initiating the restructuring.