Organizational Restructuring
Tackle Ineffeciencies Before Innovation
I’ve been swamped with organizational restructuring projects for the last 15 months.
I’ve seen hundreds of processes and practices that needed to be eliminated or restructured significantly, including:
- Irrelevant Processes developed to feed information to software that had been replaced twice since the process was put in place
- Management practices that amounted to “welcome aboard - good luck”
- Leadership practices which indicated that leadership was the first priority right after you got your regular full time job done
- Approaches to organizational change that bordered on “if we don’t acknowledge the need for change we won’t have to change”
At the same time, the latest trend for organizations is the need for innovation. Organizing in new and radically different ways in order to reduce costs, increase profits and improve competitive position. Innovation is great, but….
Shouldn’t we address the “drafty windows” and the “old furnace” in our organizations before adding “solar panels” and a “windmill”?
Opportunities to improve business results by addressing a long list inefficiencies can yield immediate results and build a foundation for creative and innovative thinking. Sure, some inefficiencies are politcally off limits. So, tackle the others so those elephants in the room (related post) stand out more noticeably.
3 Steps To Improve Business Results
- Figure out what to stop doing - such as gathering data no one uses, eliminating the five unnecessary steps in the order entry process, etc.
- Do things differently - improve processes, management practices, etc. and, in the process, get the organization more comfortable with on-going organizational change.
- Then, and only then, consider how innovation can provide the opportunity to dramatically improve the way you do business.
For more insights on improving business performance and results, reference our other blog post categories here. For a no-cost and no-obligation consultation to discuss your business challenges with our Founder and President, contact Jim Connolly here.
What Do You Do After You Cut Costs? Two Things!
After one or two or three rounds of cutting costs, now what do you do?
Cutting costs as a method to achieving profitability rarely works, but this is especially true in the current recession. The falloff in September 2008 was so precipitous that there was no way for companies to “trim the fat” in order to be profitable.
Several companies I’ve worked with on organizational restructuring efforts over the past 15 months lost 30%, 40% and 50% of their revenues. In the most extreme case, one company that asked me to help them ended up losing 68% of their revenues.
There is no way to cut enough costs to make a company profitable in these circumstances. So, what do you do? The only option is to reinvent the company.
It’s about taking a leadership team through a 5 month strategic planning process in 5 days. In essence, it’s about asking “based on these new realities, what are the market opportunities that we are uniquely qualified (compared to our competitors) to take advantage of?” This process is hard to do while the ship is still on fire and sinking.
What’s the secret to successfully navigating these treacherous seas? It’s two things. Use an effective planning tool that bubbles the best opportunities to the top quickly. And, it’s about understanding how humans behave in high stress situations and still being able to capture their attention and creativity while they are in shock and bailing water.
Sure, it’s easier said then done, so proceed with caution. But, it’s often the only way to restore an organization to profitability when cost cutting isn’t enough.
What and Why of Organizational Restructuring
Organizational Restructuring - Defined
Organizational restructuring is the reorganizing of a company’s structures (legal, ownership, operational, etc.) for the purpose of making it more profitable and better positioning it for the market’s changing needs. Notice that there are two goals for an organizational restructuring. First is the short-term goal of reducing the cost structure of the company down to the point so that revenues outpace expenses. Secondly, critical to the company’s future, is positioning the company to adjust to the market’s changing needs.
Why does organizational restructuring become necessary?
In most cases, restructuring becomes necessary because shareholders and business leaders take the current situation for granted. When things are going well, there is a human behavior tendency to prefer the status quo even when there are indications that potential trouble is looming. As one CEO client of mine put it, “we got fat, dumb and happy.”
Sometimes restructuring becomes necessary because of external factors. Case in point is the current global recession. Companies that were weak succumbed more quickly to the pressures of the economic collapse. The choice at that point is to restructure operations, declare bankruptcy or close the doors. Everyday there are reports about companies being affected by the economic collapse.
However, even strong companies have been forever affected by this economic recession. Many companies with strong financial and operational structures thought they would ride out this recession just like they did during the last recession. But, this “recession” is turning out to be different. Steve Ballmer, CEO of Microsoft has said several times in the past few months that we are not experiencing an economic recession. Rather, Ballmer says, we are experiencing an economic reset.
If this is true, what we are experiencing today is the new “normal.” Our economy and our businesses will grow again, but not from where we were eighteen months ago. We will grow from where we are today. This new reality causes even financially strong companies to consider restructuring operations because their customer’s needs will be forever different. Relying on the “rainy day” fund to get through the temporary economic slump won’t work if the “slump” isn’t temporary.
Whether your organization is financially and operationally strong or weak, today’s circumstances may, in fact, be the new “normal.” If that’s the case, what steps will you take to position your company for a strong operational and financial performance?
For more insights on organizational performance, check out our other free articles here.
