How can I achieve restructuring?
Restructuring is not a single straight-forward direction that a business can take. There are multiple options and many different directions when opting for restructuring, ranging from quick stabilisation measures to exiting the business entirely. As illustrated, there are several phases and steps, with different options and effects:
Time is of essence in a restructuring or turnaround process so it is important to make a quick start and to demonstrate a sense of urgency and speed in your actions. Delivering an early plan of action and being clear about what will need to happen and when is a quick win: it should support a change in governance, demonstrate a robust approach to problem solving and help ensure that the organisation is proactive, not reactive.
In order for you to gain the confidence of the key stakeholders, it is important to demonstrate:
— Impact – Ensure that all stakeholders to whom you speak understand that this is different and real. They need to respond and contribute – there is ‘nowhere to hide’. The resistance curve tool gives useful guidance on how to anticipate and deal with negative behaviours.
— Professionalism – Ensure you remain objective and use a fact-based approach, documenting the outcomes of meetings and the conclusions drawn.
— Rapport – You will be working with your stakeholders and key employees, so do not forget to build trust and generate empathy. It is important to take the time up front to do this: it is difficult to restart relationships later in the process.
— Identifying issues – Have a view about the issues you face and set clear agendas. However, do not adopt a closed approach. People will have experience of the problems, so listen to their views on what has been working and what has not.
— Get urgent actions underway – These are usually pretty obvious – there is no need for lengthy planning or debate – just get on with it. People will respond when they see drive and energy.
— Stabilise the business – Focus the early actions on tactical changes that will deliver increased cash or that will help ensure stakeholder support. You need to review the risks and be proactive about managing them. You will need to take an early lead in these actions and only delegate them once you see the right, proven actions and responses underway.
Quick wins – those measures and initiatives which will bring visible improvement rapidly by engaging available resources – may be financial and these should be actively targeted. They may also be non-financial or indirectly financial; for example, gaining good press or achieving stakeholder support. They can be morale-boosting or address staff retention. From a financial perspective, they form part of a set of improvements along with tactical and strategic gains, discussed in more detail in operational improvement.
Many of your quick wins will be associated with stopping activities. People costs are driven by four key levers and analysing them can yield a diverse range of initiatives, as shown below.
The balance sheet can also be a source of vital cash quick wins. You can:
• negotiate terms and conditions with suppliers or offer settlement discounts
• sell or, in some cases, return, surplus inventory
• chase tax assets (for example, accounting for and reclaiming indirect tax)
• defer liabilities (for example, altering the timing of payment obligations).
You can also enter into agreements with a variety of other stakeholders. This could include deferring pension obligations, delaying lease payments or rents (with caution) or amending bonus payment terms. If it is not assessed as too risky, you could impose these moves unilaterally.
Implementing – making it happen
Gut feeling and consultation can produce quick wins in the right circumstances, without the need for too much work. For example, you might consider:
• requiring supervisor or management authorisation for orders
• limiting the level of reimbursement available for orders
• requiring expenditure to be justified in terms of providing higher returns to the business
• introducing a ban on hiring, pay rises or overtime
These are simple ways to conserve cash in the short term but care must be taken to ensure that short-term actions do not deliver long-term problems down the road.
Before you make major changes to your business, remember that you need the support of your employees to help implement the initiatives and programmes necessary to achieve your goal. Times of change lead to fear and excitement among employees: learn how to anticipate this and use it to your advantage by encouraging employees to help successfully implement the changes and achieve your goals. See motivations and considerations for change for further details.
When making changes, attention to detail is as important as ever. You should establish all the facts related to the process and approach it in a holistic way to cover all aspects. Make it an inclusive process by properly communicating your approach to employees and involving them in the plans. Identify quick wins that will help you achieve momentum and motivate employees, and establish what factors you need to track to ensure employees and processes are adapting to the changes efficiently.
This section covered the key elements of orderly and quick win restructuring initiatives. However, in practice it is often the case that the restructuring processes will be lengthier, overarching processes that may involve one or more of the following steps:
i. operational improvement and restructuring
ii. financial restructuring
iii. insolvency procedures and exit of the business.
Consult the following overview for more details on the options and benefits of the above steps.