Restructuring a company: it gets down to the nitty gritty

A company crisis can often be recognized by the fact that more and more customers are complaining or sales are declining. In order to halt this negative trend and, in the best case, reverse it, decisive crisis management is required, focusing on effective initiatives to stabilize the company. One measure can be restructuring.

If companies are in a financial crisis, an effective corporate restructuring can often be brought about by reorganizing or restructuring a company. The restructuring measures introduced usually serve two main objectives: to reduce costs and at the same time to increase sales. The first impulse is usually to cut costs. After all, such initiatives are often easier to implement with the help of operational restructuring measures, such as reorganizing the personnel structure and optimizing organizational processes, than trying to tap into new sources of revenue. But many people forget this: A corporate crisis can always also be an opportunity to explore new sales avenues and shape turnaround management in such a way that sales can increase through tailored strategic restructuring measures.

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Restructuring a company: putting your finger in the wound

To turn the tide in a corporate crisis, two requirements must be met: In terms of proactive turnaround management, companies are well advised to take adequate restructuring measures as early as possible. Secondly, the causes of the corporate crisis must be analyzed honestly and with an open mind. Identifying the internal and external factors that have led to this critical situation can only succeed if personal sensitivities play no role whatsoever. This is because the company's own stakeholders are often significantly involved in the crisis and are partly responsible for its occurrence.
 

Operative restructuring measures: Reducing costs and optimizing processes

Initiating operative restructuring measures has the prospect of directly noticeable success. This is because whenever costs rise disproportionately, a company can easily get into financial difficulties. In such cases, it is important to reduce costs promptly and in a targeted manner. Operational restructuring measures are primarily suitable for this, allowing the company to regain its economic balance. Although all cost units have the potential to reduce costs, it is advisable to initially focus restructuring measures on two areas: reorganization of the personnel structure and optimization of organizational processes.

1. Operational restructuring measure: reorganization of the personnel structure

The company's own personnel, along with their specialist skills and experience, are usually among its most important assets. It therefore makes sense to invest in the training and development of employees - even in the event of a corporate crisis. What may initially sound like a contradiction turns out to make perfect sense on closer inspection: those who are better qualified for a task can complete it faster. This means that productivity increases.

Of course, companies must ensure that they start with the right employees and that they provide training content that has a direct positive impact in the precarious situation. For example, it may make sense to increase understanding of the value creation processes in company workflows or to enable parts of the workforce to use modern technologies. Against this backdrop, personnel development is becoming an important instrument of turnaround management that can help to overcome a corporate crisis.

In order to increase productivity, it has also proven effective to increase the motivation of staff. An important restructuring measure here is to reorganize the personnel structure - with the aim of being able to assign employees tasks that the individual person is particularly good at. This type of restructuring measure leads to a more motivated and committed workforce - which has a positive effect on productivity in the medium and long term.

Reducing the workforce can also be an effective restructuring measure. This is because the potential for reducing costs is considerable - especially as companies gain agility through this restructuring measure. This can be particularly crucial in times of crisis. However, parting ways with employees is often difficult on a personal level and sometimes so fraught with conflict that dismissals for operational reasons result in costly and time-consuming labor law disputes. It is also important to think about the time after the turnaround while the company is being restructured: Once the corporate crisis has been overcome, capable and motivated employees are needed to contribute to the company's continued recovery. Staff is and often remains a company's most important asset. Therefore, strategic aspects must always be taken into account during reorganization. Bringing experienced experts who specialize in restructuring companies on board is just as important as intensifying the collaboration between turnaround managers and HR business partners.

2. Operational restructuring measure: structural reorganization and optimization of organizational processes

In addition to reorganizing the personnel structure, the structural reorganization of the company is a second operational restructuring measure for the financial restructuring of a company. However, shaking up the fundamental structure of a company is much more complex than trying to improve the result through pure reorganization. When it comes to structural adjustments to a company, all organizational processes must first be subjected to a careful process analysis. In order to be able to identify relevant potential for increasing efficiency or effectiveness, it is advisable to use suitable benchmarking procedures. Of course, the associated personnel and time expenditure causes additional costs. However, investing in process analysis can pay off in the medium term - namely when it is possible to identify efficiency potential and initiate structural restructuring measures that significantly reduce costs.

Despite their obvious advantages, restructuring measures aimed at reducing costs should be well thought out. After all, a poorly managed crisis can have fatal consequences. Relocating production to China, for example, can reduce production costs. However, the resulting change in the cultural environment, the vulnerability of complex supply chains and the risks of unforeseeable political intervention can become cost traps that require completely different measures than relocating production.
 

Strategic restructuring of a company: everything for sales!

It is of course important and right to reduce costs in the event of a revenue or earnings crisis, and not just with operational restructuring measures. It is just as important to start at a strategic level and try to increase turnover. Restructuring a company in this way is aimed at boosting growth and thus ending the financial earnings crisis. Proven restructuring measures include the following:

• align the marketing strategy with market needs
• Position existing products better on the market
• Launch new products
• remove unsuccessful products from the market
• increase sales mobility
• digitize sales processes

It is crucial for these and similar restructuring measures, to have a tailor-made restructuring concept at hand. Because in order to overcome a crisis sustainably, you need a forward-looking plan that takes all factors of the turnaround situation into account equally. Of course, strategic restructuring measures, such as streamlining the product portfolio, are not unproblematic. The interplay and interdependency of the individual factors are usually very complex. In addition, it takes a certain amount of time to implement such restructuring measures. There is always the risk of losing sight of the strategic goals and getting bogged down in the operational minutiae. This makes it all the more important to rely on competent restructuring advice here too.
 

Change management in a corporate crisis: underestimated but indispensable

If you want to achieve a turnaround in a corporate crisis by deciding to restructure a company, you should manage the reorganization well. Professional change management is a must. It is not just about identifying operational errors, designing suitable restructuring measures and implementing them effectively. It is also important to involve all stakeholders. After all, a company in an acute performance and financial crisis suffers a loss of confidence among all stakeholders, for example with regard to performance, creditworthiness, continued existence and the management's ability to bring about a turnaround by means of consistent restructuring measures.

A loss of confidence of this kind can have fatal consequences in turnaround situations. If internal and external stakeholders stand in the way of the restructuring concepts developed and their practical implementation, it is hardly possible to push ahead with the restructuring of a company with the necessary consistency - and the crisis becomes existential. This can be remedied by consistent change management. It is crucial that change managers take internal and external corporate communication into account in their turnaround concepts and regain trust through effective, transparent and authentic crisis communication. This involves relentlessly disclosing past mistakes, explaining the new mission statement in an understandable way and precisely naming the restructuring measures that have been introduced.
 

Must-have: restructuring advice

In special situations such as a corporate crisis, it can be very helpful to take advantage of professional restructuring advice. This can save companies from insolvency - especially if any restructuring measures have not yet been sufficiently thought through or stakeholder management threatens to get out of hand. Against this backdrop, restructuring consultants provide support not only in developing concepts for strategic reorganization, but also in the operational implementation of the corresponding restructuring measures. If you get help during a crisis, you significantly increase your chances of a successful turnaround.

Is your company in the midst of a serious crisis? Don't hesitate to contact us. We will support you immediately in finding suitable interim professionals for the restructuring of your company!