What to Include In a Restructure Organization Plan

By Indeed Editorial Team

Updated August 18, 2022 | Published November 5, 2021

Updated August 18, 2022

Published November 5, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

A restructure organization plan can transform and improve your company's infrastructure with a top-down approach to remodelling. The rapid changes in business practices pose new challenges for managers who identify a weakness in policy and process that hinders company growth and adaptive substance. You can use this topic as an introduction to restructuring and adjusting the trajectory of your current business model. In this article, we define what a restructure organization plan is, list the reasons companies restructure, outline the types of restructuring, and include tips and tools for how to navigate environmental changes, and identify organizational weaknesses.

Related: 10 Manager Responsibilities in a Functional Organization

What is a restructure organization plan?

A restructure organization plan refers to the remodelling of various structures across business platforms, with the goal of making more profit and being better organized to meet the goals of the company. Adjusting the operations and functions of a company can occur after changes in management or ownership, or in anticipation of financial loss or gain. Restructuring can also help reduce the cost of buying and selling goods, take the company in a new direction, and rejuvenate employees to enhance production. In some situations, companies reorganize to clear debt, lower expenses, and reduce the risk of investment for shareholders.

Changes in assets or liability can prompt organizational restructuring. The widespread organizational adjustments made to provide more accessible work environments are an example of how businesses accommodate new employees. Companies provide the option for members to work remotely or on-site, while management uses online tools to dispense information and organize tasks. Changing the company infrastructure isn't always a result of financial or legal challenges. Sometimes, companies want to become more efficient and increase profit. Assessing the areas where functioning isn't optimal can help companies move forward with the restructuring process.

Related: How to Calculate Net Income for an Individual and a Business Organization

Reasons companies restructure

Here are some reasons companies restructure:

Mitigate loss during crisis

Altering one or more levels of ownership, production, management, or practices for optimizing profit can help your company reduce the amount of damage or loss sustained. Companies trending with debt can change the trajectory of their finances by selling assets that are no longer applicable, campaigning in a new marketing stream, and negotiating contracts to minimize the cost of labour. Companies can create a more sustainable business strategy by being flexible and adopting more effective procedures.

Greater accountability

Cultivate a work environment where staff is more accountable and responsible. This provides CEOs and management more room to make the best corporate decisions. An efficient and accountable platform is the foundation for companies to increase profit and reduce costs.

Customer retention and acquisition

The percentage of customers kept and gained is an important measure of a company's success. When it comes time to make organizational changes, designing a structure that reaches a wider audience and improves customer service can cause an increase in profit. Marketing campaigns with customer-focused approaches can also lead to faster growth.

Reduce waste

Losses come from oversupply, where the company has to either keep an unused product in inventory or sell certain items at a lower price. Improve an inventory system or change it completely during restructuring to ensure the company can sell items at full price. Calculate the amount of labour hours it takes to complete projects and with what resources to find potential errors leading to wasted product.

Related: How to Create Efficiency in the Workplace

Increase cash flow ratio

Companies keep constant tabs on their ability to meet long-term and short-term financial obligations. If liquidity is too low, this makes it difficult for companies to pay off expenses promptly without sacrificing future investments. If liquidity is too high, you can make long-term adjustments to meet future financial goals. A restructure can increase the efficiency of cash flow and provide a more enduring ratio with limited costs of production.

Types of restructuring

The types of restructuring plan a company uses depends on the size of the company, where excess costs are coming from, the amount of debt, and the outcome of different performance measures. First, determine the needs of the company and what prompted the discussion of how management can maximize profit and efficiency. Before initiating a full restructure, ensure that the company has the resources and accurate financial projections to complete a successful operation. Here are the most common forms of restructuring and how you can decide if any of these apply to your company:

Joint ventures and mergers

Merging is when two companies combine to create a larger one. The benefit of merging with another company is that with added labour resources, production and project management become more efficient. Merging can also prevent companies from having to liquidate their assets to pay off creditors. Integrating with new management replaces flawed systems and helps identify operational problems in both companies.

Acquisitions

Larger companies acquire the stock of a smaller company intending to subsidize with most of the stock. Acquisitions can be mutual, where both companies agree to the benefits given to each individual entity, or hostile, where the larger company purchases stakes in the targeted company without them knowing. Larger companies initiating the acquisition sometimes require the smaller company to liquidate their assets to use as capital.

Transfers

Transferring is when a company sells a part of its business to another company. Transferring can take place as either spin-offs or split-offs. Spin-offs are when a company creates a division of the parent company and operates as a separate entity, and split-offs are subsidiaries of the parent company where shareholders decide if they want to transfer their shares to the subsidiary, or the parent company.

Recapitalization

Recapitalization is a capital structure change. This type of company restructure happens when companies are in significant debt and want to prevent a hostile takeover. When debt is high or the company faces financial difficulty, companies can restructure their capital by purchasing back some of their shares in the open market. Companies may also want to reduce their expenses to increase profit, which increases the overall value of the company.

Change identity and brand

Companies often change their brand and identity to target a new market or to separate themselves from a history of bad press. Identity changes are common when companies merge or become subsidiaries of a parent company. Companies that undergo inventory restructuring also change identity when the products differ from what they previously sold.

Related: How to Calculate Growth Rate (With Formulas and Examples)

Tips on how to approach restructuring

The restructuring process looks different for every company that undergoes one. The specific needs, strengths and weaknesses, goals, and projections include variables that are distinct for each company. It's important to understand how your company functions after the restructuring phase and what to expect from the benefits. Decide how you want to remodel each department, the amount of resources you are willing to spend, and set boundaries for the changes. Here are some tips on how to approach restructuring from a top-down approach:

Outline your goals

Outline what you want to gain from a restructure. Some companies want to reach a new audience or appeal to an additional group of people, others want to design and market a new product or increase profit and lower extraneous costs. Knowing the purpose of your restructure can help you execute and reach your goals successfully.

Related: Goal vs. Objective (Differences, Definition, and Examples)

Know your strengths and weaknesses

Every company has strengths and weaknesses. Some may have very efficient processes and an effective inventory strategy, but have financial obligations that reduce profit. Prioritizing certain components of the restructure leads to a more desirable outcome. Mark down all the important variables from each department and what the pros and cons are of changing the current system.

Explain intent to investors

Be transparent with investors and employees about how the company plans to execute a full restructure and what the purpose of the restructure is. Being honest with investors and team members allows the company to ensure that the restructure adds value to shareholders and others involved in the company. Employees and investors may also offer you suggestions to help strengthen your plans.

Plan a restructure in stages

The timeline of every restructure is different for every company. Some of them take place over six months, others up to a year or longer. It all depends on the extent of the changes. Creating an estimated timeline with dates and goals for each specific step organizes everything into categories, and keeps the process focused and on track.

Create a timeline

Create a timeline to know when to make important decisions, and include estimations for project completion and team responsibilities. Organize the restructure with a schedule to use as a reference throughout the process. Once you have a plan for how you're going to execute, you can adjust your goals and plan as needed.

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