Companies facing crises such as a coronavirus or other environmental and financial shocks are often being run by managers working with a set of paradigms that no longer apply to the business’s current situation. This inability to acclimate to a changing business environment can spell disaster for a company.
There are several signs of a company in need of restructuring as a result of being in distress, including declining free cash flow, diminishing liquidity, deteriorating industry fundamentals, and disruption in unionized work. In the current COVID-19 pandemic, many businesses are looking to restructure and find new avenues to create profit.
However, crises are also important opportunities for adaptation. Businesses can utilize their strengths to capitalize on opportunities in the changing business environment, while also work on weaknesses to become more resilient to threats.
RESTRUCTURING IS A FORM OF CHANGE MANAGEMENT
Reorganizing a well-established company can be difficult. It often involves a lot of emotionally charged conversations and involves cross-examination from a variety of perspectives and stakeholders.
TOP TIPS FOR RESTRUCTURING:
- COMMUNICATION – change is difficult and can leave an organization feeling uneasy. Ambiguity can lead to fear and uncertainty, and so during times of restructuring, effective communication is important. Take care of talking to staff and answering questions and make announcements to ensure everyone in the organization is on board with key decisions.
- PLAN AHEAD – implementing change requires careful planning ahead of time. Taking consideration of not only the benefits of restructuring but also the potential impacts of core processes is vital. Establishing contingency plans, I also wise as unforeseen changes are likely.
- MEET IN THE MIDDLE – Talk to various people at various levels of your business to get a varied look at how the business can be restructured. Often, a manager’s vision combined with employee ideas leads to the best solutions, because employees are often able to identify challenges that may be overlooked by upper management.
- LOOK FOR NEW AVENUES – In the current pandemic, looking at how to repurpose your current strengths to work around restrictions and cater to current demand can be a viable method of restructuring. This type of expansion requires ingenuity, but businesses can use available assets in new ways to continue making money.
- STRUCTURE FOR SUCCESS – The virtue of organizational management is to bring a business more successful. Create specific groups to deal with specific problems like process-based teams as well as product-based teams. The key is finding the sources of weakness and centering effort in addressing them.
Restructuring a business can be daunting. However, in times of crisis, a business must look at their internal strengths so that they can respond to environmental threats and opportunities effectively. This flexibility and willingness to restructure and repurpose can allow a company to not only survive but thrive during turbulent environmental changes.