Companies go through different phases in their lifetime. Good times are followed by bad times, growth is followed by stagnation. Through their life cycle, companies sometimes need to be restructured, dramatically changing direction to return profitable operations.
In today’s business world companies must face the following tendencies that compel them to restructure continually:
The shift in the demands and expectations of society regarding the new role of business as dominant force is important. In general, business plays a much more important role in society today than ever before.
Company can be defined as a tie of contracts with shareholders, creditors, managers, employees, suppliers and other stakeholders.
Restructuring has also been found to be positively correlated to long term profitability, cost reduction and increase in the market share for the company.
Structure can be defined as an organized unitary whole composed of two or more interdependent and interconnected components (dependent on each other). A company has many internal structures and structures connected with external participants.
Consequently, we can define six categories of structures:
(location, organization, working condition)
(balance of assets and resources)
(the breakdown of responsibilities and duties, information and coordination system)
(the characteristics of employees)
(the prevailing mentality in the company)
Companies must restructure almost on an ongoing basis to keep up with the change. Restructuring is often the company response to the wide ranging structural changes in the environment. To restructure an organization or system means to change the way it is organized, usually in order to make it work more effectively.
The survival and growth of companies in today’s environment depends on their ability to consolidate all their resources and put them to optimum use.
Restructuring is a difficult process, and requires a lot of time and effort to materialize. It is one of the most complex and fundamental development that management experiences. It is designed to address challenges and increase the value of the company. It is a value company tool to use in an attempt to maintain their goals and objectives, to attain greater efficiency or to adapt to new markets. It can be categorized as operational, financial and investment restructuring.
The different forms of restructuring may include expansion, contraction and organization control & changes in ownership.Very often, the purpose of restructuring is not only the financial and economic improvement of the company’s performance, but its very survival. In many cases, restructuring is the only solution. It usually takes place when a business is struggling and losing money. Most of the restructuring exercises are carried out with an impulsive reaction to the market variables or internal problems, without a serious attempt of looking at long term results. Most companies restructure either as part of a bankruptcy or as an effort to avoid it.
Restructuring can be divided into active and passive one. Restructuring processes are active when the owners/managers use various solution to eliminate causes of the crises, improve competitiveness and ensure long term growth and development of companies, or passive, when companies go through insolvency proceedings due to inadequate or late reaction by the owners/managers. This can led to replacement of the management/owners.
Companies are restructuring as business strategy to achieve a higher level of performance, getting an edge over competitors or to survive when the given structure becomes dysfunctional thus to ensure their long-term viability.
In spite of the reasons that lie at the cause of challenges you are facing, the following symptoms indicate that a situation exists where our competencies may be of useful to you:
Today, companies have to be consumer centric if they want to succeed. If consumer behaviors evolve, companies need to adjust their organisations to address these changes. A prominent feature of effectiveness today is satisfying customer needs.
To achieve success, vision and goals of restructuring should be clearly identified and communicated. During restructuring process we reduce complexity, focus on core activity, align structure to strategy, create feasible roles, engage employees, retain the right employees, maintain flexibility and shape future culture. We bind restructuring to organisation mission, values and strategy plan, set realistic timelines and communicate consistently and frequently. New organization structure should clearly facilitate the primary purpose of an organization.
Restructuring is more likely to be successful when owners/managers understand the fundamental business/strategic problem or opportunity that their company faces.
Restructuring starts with its very purpose. It begins with the analysing and redefining of the purpose of doing business. Once the purpose is adequately redefined, scope for restructuring is defined. Sometimes it also happens that realization of the scope for restructuring may bring you back to the purpose and you start rethinking about the purpose.
A company that has been restructured effectively will theoretically be leaner, more profitable, more controlled, more efficient, , more productive, better organized and better focused on its core business with a revised strategic and financial plan and a higher valuation of the company.
Bringing in our competent experts to help with your restructuring project will help to effectively achieve your business’ goals and outcomes with available resources.