Organisational Restructuring And the Role of HR

Intriguing to reflect on the repeat restructuring activities that institutions undertake within relatively short time spans. Is it because we tend to see corporate restructurings as a special event rather than an ongoing evolutionary(change) process of business? This may be partly true. The other more definitive explanation is that businesses simply do not achieve the objectives of the preceding exercise for which there may be several explanations. Typically, organizations lack the staying power to withstand the disruptions sans early gains which are attendant to restructurings. Pressure of modern-day capital markets can test the resolve of the strongest willed business leader. This in turn has the effect of fostering employee skepticism which restricts behavioral change that the plan entails all along.

Recent data shows??that the evolution/change which the original plan spells out is hardly ever achieved.??The success rate in terms of ‘meeting or exceeding expectations’ is thought to be little better than 10%. In this writer’s personal experience, it is the conceptualization of a restructuring exercise which can serve as its undoing.??The plan when seen as a cost cutting exercise involving people, training programs and physical infrastructure often ends up as simplistic and incomplete.??Short term financial gains from such an exercise lead to premature claims of victory. The euphoria is eventually short lived as costs start to rise again, while there’s no accompanying gain in productivity.?

The disruptions which emerge from a cost cutting exercise, if not handled well by senior management, can lead to unintended loss of valuable human resources which then inevitably results in higher organizational costs. One can assign multiple factors why a restructuring exercise eventually under achieves or fails altogether. For purposes of this essay, I would like to look at the role of HR which may come up as sub optimal. In part at least, this is because HR is vulnerable to be viewed as a vassal of senior management’s agenda. Therefore, the question arises whether senior management sees HR and or the CHRO as an equal contributor to a strategic restructuring plan? In effect, HR’s role needs to be seen as less transactional and more value additive.

To navigate past such challenges and to serve stakeholders effectively, it is important for the HR function to play its due role in ensuring employees are provided with tools and incentives to perform and be adaptable. Talent management through the life cycle of an organization then becomes a valuable means of ensuring ROI on human capital. In difficult transitory periods, this has the effect of preserving morale, focus and commitment.

Amidst an ongoing change exercise, it becomes imperative to calm employees by clarifying their onward career path and development needs. Too often we become overly zealous about culling headcount, without considering the unintended turnover it yields. This turnover brings with it a cost which is higher and difficult to estimate. Therefore, it should be the role of HR, to communicate in tangible terms to management, the negative outcomes of a people culling exercise. To do so HR, needs to develop data (to be updated periodically) which shows how key members of an organization influence operational and financial outcomes.?

A period of change is unsettling and can create a level of ambiguity for employees. The cultural change inherent in such a situation is where productivity gains can be achieved leading to success of the initiative. To do so, no effort should be spared to train employees for the skill sets(both soft and technical) is indispensable. The worst action to undertake will be to hold back budgets in the need to demonstrate prudent expense management.?

Finally, failed restructuring can be a short coming of an institution’s management. Exercise of leadership and effective communications is key to achieving success. Very often leadership lacks the requisite skill sets to build and retain effective lines of communication to carry their teams through transitions.??It remains the function of HR to identify and monitor these gaps for timely corrective measures.