A currently changing business landscape from economic downturn or the pandemic may require an organizational restructuring process due To workforce changes.. Even when the economic outlook begins to improve, many small and medium-sized businesses will no longer operate as they used to – if they are to remain viable and growing.
Which should it be – an organizational restructuring process or a downsizing process? “But wait” you might say, “are both not the same?” No, they are not. They are strategically different although they both arise from an external or internal crisis affecting profitability and the continued existence of the business.
“In the middle of difficulty or chaos lies opportunity”
– Albert Einstein
Downsizing vs Restructuring in the Organizational Restructuring Process
The major difference between the two is that while downsizing is mainly about a reduction in the number of employees, restructuring does not always include reducing the number of employees.
What situations would require the use of an organizational restructuring process instead of a downsizing process?
Downsizing can be the best way that a company tackles inefficiency and low productivity, while restructuring is conducted when there is an economic shift or other crisis that could lead to the downfall of a company like debts or even a pandemic.
Restructuring is a reorganization of the entire systems structure and processes of a business. It must include the work profiles of the workforce and ultimately leads to some layoffs. Downsizing on the other hand, also consists of many of the same steps for restructuring however, usually starts with laying off employees.
Does your business identify with any of the situations listed below? If your answer is “Yes”, then organizational restructuring or downsizing is necessary.
- Operational inefficiencies and reduced profitability
- Competitor pressure
- Merger between two or more businesses
- Introduction of new and updated technologies
- Workforce lay-offs and terminations
- Asset disposal
The next question is to determine which of them – downsizing or organizational restructuring – will be required.
To improve efficiency, productivity, and profitability for a business to remain competitive might require downsizing. However, this could lead to the restructuring of the entire organization due to a need to reorganize the management systems (quality, environmental, safety), the work profile.
Common reasons for downsizing include low productivity, a business decision to reduce costs and, the onset of an economic crisis.
The downsizing process can
- Permanently reduce employee numbers and possibly some departments in the company to increase profit. The goal is to generate some cost savings to the business.
- Effect a major reconfiguration and trimming of the organizational structure of the business. It can be an effective strategy to use to focus on customer engagement and satisfaction especially in the early stages of a financial downturn in revenue.
- Redesign and merge work profiles of two or more employees so some work profiles can be eliminated. This strategy evaluates the types of work in your management systems and processes and eliminates unnecessary work and system processes.
Organizational Restructuring Process
Restructuring involves changing the entire organizational structure of the company. It is like “starting afresh” and re-building. Downsizing may be one of the strategic reasons for restructuring.
There are other strategic reasons for why a business might want to restructure. These changes include a new business owner, a new executive at the helm of affairs, downsizing, updated methods of working, new management, technological changes, mergers and acquisitions, buy-outs, operational inefficiencies, financial issues such as debt, and legal problems related to the business.
There are 4 kinds of strategic organizational restructure process situations:
- Merger of two or more businesses into a single entity.
- Acquisition of a smaller business by a larger more profitable business
- Joint Ventures – Are agreements between two or more businesses to jointly conduct work together to address a common goal or for a market share where they expect to benefit from better economic profits and results than if they were to work independently.
- Dis-investment involves the sale of the assets or investments of a business in small or large chunks
Other kinds of organizational restructure can be due to:
- New methods of working: This Includes employees working from home, or introduction of new systems and policies which could change the culture of the working place etc. A new business model which has telecommunicating employees or temporary employees would require an overhaul of all processes, management systems and benefit packages.
- Changing nature of business: Businesses regularly introduce new products and seek new markets and customers.to boost capacity, sales and revenue while shutting down departments that don’t add much value.
- Introduction of new innovations in technology: Create efficiencies
What Solution is Available?
Whether downsizing or re-structuring, the base line requirement will be creating process maps with appropriate documentation specific to your unique business situation and streamlining. As always, process maps serve as the bedrock for how your business gets work done. They also identify areas of opportunity and areas where improvements may be made.
A new owner of a business may not necessarily be the reason for a downsizing. The organizational restructure process on the other hand could involve merger and acquisitions, resulting in a new owner (hierarchical head) for the company.
Contact us to discuss about your unique situation. No two businesses are ever the same, so you don’t need a cookie cutter solution. BCINC Canada will “get down in the weeds” with you to ensure that the job gets done correctly the first time – and – we will not take forever to do so.
Book a No Obligation 30-minute Strategy Call to explore beneficial ways to restructure or downsize your business especially in the wake of workforce reductions