Why there is need for Corporate Restructuring ?

25-June-2019 by Virtue Ventures

Corporate restructuring can be driven by a need for change in the organizational structure or business model of a company, or it can be driven by the necessity to make financial adjustments to its assets and liabilities. Frequently, it involves both.


  •       To reduce costs
  •       To concentrate on key products or accounts
  •       To incorporate new technology
  •       To make better use of talent
  •       To improve competitive advantage
  •       To spin off a subsidiary company
  •      To merge with another company
  •      To decrease or consolidate debt

How to Plan Corporate Restructuring Strategies?

ü  Give importance to quality over quantity

It is highly important to lay special emphasis to quality over quantity both in the size of the company as well as the product development. With such profitable websites which are being run by two people, there are thousands of employees that won’t help you become powerful.

ü  You should be less organized

There are organizational charts as well as major divisions which are designed for the system of railway. Every individual should bring a team of experts and that team should be so flexible so that they can allow people who are involved in a project to freely discuss the concept through development.

ü  With the audience

You have to collaborate first. For this, you have to listen carefully. Understand what your audience needs, introduce yourself and contribute as well. Once you have managed to build a strong rapport, you can begin to ask questions. Give them value and you will receive value.

ü  Collaborate externally

Here you should pay very close attention to people who are on the edge. This includes the entrepreneurs, those who invent and people who influence in niche areas. In the past few years, their output is of having a major impact on the socioeconomic landscape.

ü  Collaborate internally

You should set a few common goals and then ask a whole variety of experts so that it can be considered. And make sure you have the whole team for the process. Just because a person has nothing to do with the issues as such, it doesn’t mean that they don’t have any ideas related to the solution.


Reasons for Corporate Process improvement

Here are a few reasons for Corporate process improvement. There are so many reasons why you should organize your structure as it will boost efficiency and keep technology up to date.

ü  Changing nature of business

In the world we live in today, there is only one thing that is constant which is change. Companies that don’t want to change tend to face huge risks in the line of production and become obsolete with time as well. Because of things like these, businesses also experiment with new kinds of products, explore and go to new markets, visit new customers on a regular basis. Businesses always want new areas so that they can boost sales, boost the capacity and shed off the divisions which don’t add much value. All of these initiatives will need corporate restructuring strategies.

ü  New methods of working

There are traditional systems of organizations that follow the same old 9-5 working hours tradition.  Presence of having telecommunicating employees or temporary employees could enquire an overhaul of all the management parameters, benefits, compensations of the administration etc. The new methods of working require giving emphasis on the results instead of the methods, having a strong policy of communication and reporting of relationships.

ü  Proper technology:

Innovations in technology, the process of working, materials and other factors tend to influence your business and workplace in several ways. It also needs to restructure the organization with time. Failure to do so could result in the system of the company as well as the procedures that turn more discordant and obsolete with time.

ü  Buy outs

There are times when restructuring exercises could result of the whims and other fancies of the owners. For example, the company could have a new owner who would like his stamp or even some personal authority and style in the business. The restructuring will allow the owner to start a fresh and, in that way, he will be able to have better control. It will also allow him to reshuffle the key personnel and provides some power to all lieutenants who are trusted.


Corporate process improvement Strategies

Some basic principles and strategies you must keep in mind before you plan on restructuring the organizational structure and design. Read them carefully before making final decisions.

ü   Align the organizational structure

All organization restructure has to be aligned to strategy. This could seem slightly self-evident to some of you but there are some organizations that fail to do so. For example, if local conditions happen to an important factor, then you should stress on local sales as well as marketing functions instead of a centralized behemoth which tries to matrix using a few local elements.

ü  Cut down on the complexity

If we put things in simple terms, then complexity does cost quite some money. Whether the organizational design and structure is complex, a product is complex and will offer a transactional process, the added cost of complexity shall also drag the performance a bit further.

ü  Focus on having better activity

Always remove any sort of inefficiency that could hamper the process of organization restructuring. This means that you have to know what people are doing at this point so that the chances of danger have been reduced. You must have a good understanding of the tasks by role. This will also make sure that value added activities have been thrown out when removing a role is required.

ü  Creating roles that are feasible

When you are assigning work to some of your people, don’t ever overload them. Always remember that business restructuring strategy will always leave the organization with very few people which could leave you with very few people to work with.

The Implications of Restructuring an Organization

Restructuring of organization happens usually in almost every organization. The reasons can be any like business growth, adding few departments or downsizing the existing structure. Such steps are taken for the betterment of business in all ways. Some of the methods through which the restructuring serves are,

  •       Improved Efficiency
  •       More Administration Work
  •       Cost Implications
  •       More Control
  •       Cultural Changes
  •       Speculative roles & responsibilities
  •       Productivity/KPIs below the standards
  •       Lack of leadership
  •       Under or Over-investment

Few internal reasons behind the corporate restructuring

  •       Lower gross margin
  •       Poor internal communication
  •       Higher cost of operating
  •       Bad cash flow
  •       Lack of proper designs of processes
  •       High labor costs

Advantages of Corporate process improvement

§  The good thing about company restructuring plan is that the cost of operations could decrease in the future. An example can be used to explain this.

§  The payroll expenses will be much lower if the businesses have dismissed some of the employees. there are outsourced operations which are usually less expensive than those in-house labor. When some business eliminates a few layers of management during the process of communication, decision making and restructuring strategy could be introduced.

§  Whether you are choosing to roll out new benefits towards the beginning of a new year or amending a new plan so that the benefits can be provided easily, communication is something that can easily help.

§  Employees always care a lot about their benefits so they could hesitate about any of the changes which are being made. You should remember to communicate with the team members more frequently and in an open manner.

§  Always invite their feedback and let them know about your new plans. Have meeting sessions where you can answer important questions. Offer a grace period to them so that they can allow employees to opt out of the benefits plan that is new.

§  There are two benefits that come with planning. If the plan is defined, then some of the benefits of the employees have been defined and the employer will also have an obligation so that the promised benefits can be funded.

§  The restructuring process is an unavoidable phase in the development of the company. You may also encounter few obstacles for the completion of a process like corporate obstacles or resistance from employees.