Mainstreaming Inclusive Restructuring

Almost every week, regardless of the economic context, news breaks of another company going through a restructuring, whether it be the result of a merger, acquisition, delocalization, outsourcing, relocation, expansion, or downsizing. Restructuring is nothing new, but continuous change has become an unavoidable reality in today's business world. Digital and green transitions have made terms such as “reskilling”, “upskilling”, “reallocation” and “reorganisation” more and more common. These transitions have accelerated with COVID-19, putting pressure on business leaders to keep up with the ever-increasing demands of the market.

How do companies respond responsibly to these challenging circumstances? How do they prepare for a potential transformation ahead of time and avoid painful restructuring? It demands active engagement with employees and their representatives, investors, local authorities to align and develop acceptable procedures to limit layoffs and open new opportunities for the company, and for the people and communities involved in the process.

The task is complex. There is no single solution, but there are lessons to be learned from companies’ experiences. This is what we decided to do at Business for Inclusive Growth (B4IG). Under the leadership of Michelin and Unilever, we held several working sessions to share our experiences of transformation and analyse how inclusive procedures can provide added value to an organisation, employees, and communities in any restructuring. In order to help companies navigate this process and share these learnings more broadly, we put together the key findings from these sessions in the Responsible Transformation Guidelines we recently published.

Presented under three main pillars, and based on several examples, the Guidelines provide recommendations on how companies can prepare for transformation by creating and investing in a culture of continuous learning and adaptation. They explain how companies can plan the transformation and implement a step-by-step procedure, from designing the plan, to engaging with different parties, to preparing reskilling/upskilling programs that open new opportunities. Finally, they provide insights on how companies can provide support to vulnerable workers and related communities while preventing discrimination in the restructuring process.

In essence, the Guidelines outline how companies can progress their transformations towards a net-zero job loss goal and build the business case for inclusive practices. Reskilling and upskilling activities help employees adapt to change in their day-to-day work and in line with the business culture. Inclusive procedures reduce staff turnover and increase employees’ loyalty to the company, in the long-term reducing hiring costs for skilled labour positions. Revitalization, through the re-modelling and repurposing of facilities, of a site that otherwise would have been abandoned, create new services and economic activities that help sustain the economic and social development of local communities.

How a business deals with restructuring is a significant marker of its character and ultimately its fitness for the future. It is no longer about controlling the effects of short-term decisions, but rather translating difficult situations into new opportunities and solutions for the company and its stakeholders. The economic transition ahead of us will bring a complete reshuffle in how businesses create value. As we look to the future, only sustainable and inclusive growth business models will be viable for people, corporations, and the economy.

Aware of the difficulties of the exercise for companies, we want to encourage more open conversations and knowledge transfer across the global business community by sharing these Guidelines. We urge all corporations that have undergone or are going through a restructuring to join our work to complement it with their own experiences. This resource will also help governments to design policies that further encourage responsible transformations.