What is organizational restructuring?

Finance ManagementBanking & FinanceGrowth & Empowerment

Organizational restructuring is a process of reorganizing ownership, operational and other structures of an organization to make an organization profitable. Internal factors or external factors or combination of both are responsible for organization restructuring.

If the restructuring helps an organization to develop and grow, then it is called positive restructuring. If restructuring makes an organization stagnant or downfall, then it is called negative restructuring.

Internal factorsExternal factors
To decrease gross margin.New trends in the market.
Lack of proper communications.New clients/customers.
High cost of operating.Market redefines.
Negative cash flows.
Labor costs etc.
Competitors etc.

Reasons

The reasons for organizational restructuring are as follows −

  • Change in nature of business according to market needs.

  • Cutthroat competition.

  • Implement new methods.

  • New technologies.

  • Merger and acquisition.

  • Financial issues.

  • Buyouts.

  • Bankruptcy.

Preparation and planning for organizational restructuring includes −

  • Focus on quality

  • Be flexible

  • Be collaborative

Strategies

The strategies for organizational restructuring are as follows −

  • Have a clear-cut idea on where your business needs to be.
  • Prepare an effective plan.
  • Line up your strategies.
  • Identifying suitable persons for transitional.
  • Share your plan.
  • Plan/skill assessment.
  • Minimize complexity.
  • Focus on betterment.
  • Assigning work to suitable employees.
  • Create a new structure to achieve goals.

Types

The types for organizational restructuring are as follows −

  • Merger and acquisitions − A situation where more than one company combined to do business is called merger. In acquisition, one company absorbs another company or companies by buying the entire stake of the target company or companies.

  • Legal restructuring − Changes in legal norms (change in ownership, agreements, legal business etc.)

  • Financials − Company changes business capital structure by change in debt structuring etc.

  • Repositioning − Change in business model or new business model.

  • Cost reduction − Reduction in administrative and operational costs.

  • Turnaround − Restructuring company in product, service etc.

  • Divestment − Company sells underperforming assets.

  • Spin-off − Makes a particular business unit of company into a separate company and retains its ownership.

raja
Updated on 17-May-2022 13:28:37

Advertisements