If measured in terms of shareholder value, more often than not, Corporate Restructures are more likely to fail than succeed. While there can be a variety of different reasons for restructures to fail in their strategic and fiscal objectives, common to most unsuccessful restructures is a failure to effectively manage the people element successfully.
Why do organisation’s choose to restructure?
In times of economic uncertainty, ‘restructuring’ has certainly been a word thrown around a lot lately. Whether it is due to necessity (such as Receivership or downturn in work), mergers, decline in sales or competitive advantage….. below are hopefully a few helpful tips to be aware of from a People perspective.
Making the decision to cut
Based on individual company circumstances, there are a variety of different processes to choose from in relation to corporate restructuring (which is also the subject of an entirely different paper). Some initiatives include offering voluntary redundancies, reviewing unprofitable areas/locations and making cuts accordingly, setting dollar or head count number reduction or reengineering processes/systems. Ultimately, there will be one end result in common which is…..looking at how do you successfully manage a restructure?
Whether looking at a department or an overall company, below are some key tips to be aware of:-
There must be a leader in place who is not only experienced in the role and industry but has had experience in successfully managing and taking an organisation (or department) through a significant change process. This is particularly important in terms of knowing the key levers that need to be focused on, keeping people motivated during change and understanding the pace of change required. Partnerships with key external parties may assist in this area if required.
There must be clear, specific definition and alignment in vision with all key stakeholders with what the objectives of the restructure are .
While companies often put together financial, marketing and overall strategic plans, more often then not, people planning is an after thought. Make sure this is also clearly documented and defined and covers core objectives and processes.
An immediate assessment of the supportive executive/management team must be conducted. Before you look at making any head count reductions, you must look at whether the leader/s of the area have the skills and abilities to deliver the company/departments core objectives. This assessment should also be conducted keeping in mind future strategies for the company and should also include a review of capabilities in areas like strategic innovation, marketing and sales. Where possible, a review of core competitors and best practice strengths should also be reviewed in this area.
Communication, communication, communication. Have a structured communication plan to all stakeholders (internal and external) with regular updates (at least weekly). In most instances today, people understand if the business needs to downsize. How they respond will be based on the communication processes in place. The more people understand what and why things need to happen, the less resistance there will be and the more ownership people will have. Of particular importance is to ensure your employees are aware of the why/what the business need is, what the timeframes and processes will be.
Be honest from the beginning. If you absolutely believe there needs to be cutbacks or closedowns for example, do not say there will not be. Do not make promises you cannot keep. This is all part of the employees determining whether they and/or their colleagues are being treated fairly and will dictate how they respond.
Be aware of what your applicable employee industrial instruments are particularly in relation to redundancy application, notification and consultation.
Ensure plans are in place to maintain existing business momentum during change and that there are appropriate management structures in place to focus and review this regularly until required.
Assess the talent mix and identify key and potential talent against the future strategy (not current). In an environment where people are certainly key (if not arguably the most important competitive advantage) and on the basis that the difference between the best and worst performer can regularly be plus or minus 20%, ensure you have a strategy in place to protect your best talent to ensure you have the skills and experience to execute your strategic priorities.
If looking at a merger, the importance of implementing cultural integration strategies particularly in relation to values, performance management, governance and reward systems is critical in the overall success. If not looking at a merger, need to be aware and clear of what your current values and cultural strengths and weaknesses are so you can be aware of what the impact of potential cuts/reductions will have on this.
Rather obvious statement I know, however it is important to be mindful of the areas that you cut back in. If you compromise quality or service significantly you will not only lose your employees, you will risk losing your customer in the process.
Set up success measures for each department from the very beginning in relation to post review ie staff retention in key areas, productivity and performance. Respond quickly if required. It is also important to review honestly what was done well and what could be done better and make sure these learnings are added into any ongoing processes.
“Restructuring” can be seen as a dirty word. If carried out successfully, it can be the critical piece in ensuring ongoing business success and can deliver some positive outcomes.
“The unfortunate reality is, firings are a part of a business. But that doesn’t mean they have to end up as the bitter messes they often do. If you handle them right, they’ll never be enjoyable, but they can be tolerable for all involved” Jack Welch, Winning 2005