What HR managers should consider during business restructuring
Table of contents
- What is business restructuring?
- Why business restructuring is essential for HR
- Factors the HR department should consider during business restructuring
- Stages at which the HR department is key to business restructuring
- How software can facilitate business restructuring
The HR department is the key to successful business restructuring. Numerous economic and political factors such as Brexit, the pandemic, and war have prompted many organizations to restructure. Every organization needs to plan so that if they need to restructure their business, the process goes as smoothly as possible.
Below, we look in detail at an example of business restructuring and share the stages at which the HR department makes a pivotal contribution.
What is business restructuring?
Business restructuring involves changing a business’s existing financial, operational, and legal structure to improve efficiency, profitability, and cash flow. Restructuring takes many forms, including refinancing, streamlining, and corporate simplification.
Let’s review an example. Say company XYZ is a sole proprietorship. What is an option for this company in hard times? It may grow into a medium-sized enterprise with the potential to expand nationally. It would be in the company’s best interest to register and follow the rules for medium-sized businesses. A good business restructuring plan can minimize financial losses for the XYZ company, reduce its production costs, and even improve its profits.
Why business restructuring is essential for HR
Business restructuring is a great opportunity not only to reflect on the current state of the business but to ensure that it’s aligned with future plans. A well-thought-out business restructuring plan can help an organization better align its resources with strategic goals, improve communication and coordination in the company, and enhance the work process. It can also help an organization eliminate excess capacity and become cost-effective and flexible.
However, there are risks, as business restructuring can lead to job losses, reduced employee morale, and other negative consequences. Therefore, restructuring requires careful consideration and planning in terms of recruitment strategies, training and organizational development, and employee benefits and compensation.
Recruiting efforts may change in anticipation of possible business restructuring. Recruiting emphasizes the need to hire the right high-level managers for the stage of the organization’s development. B. Virany and M. Tushman note in their research that high-performing firms hire managers with skills that match their growth stage (the company’s future plans).
Training and organizational development
Training and organizational development may change because of business restructuring. Thus, you’ll need to provide training to boost employee development in the organization:
- before and after a merger
- to assess both organizational cultures
- to change the role of the manager
- to improve formalized change management and formalized conflict management.
J. Nalbandian, a judge on the United States Court of Appeals, states that people respond best to changes if they can work with them for a certain period. Therefore, additional training before and after the merger plays a vital role in employee retention. Business leaders should assess the skill level and competence of people in key positions and provide training for those moving into areas with a staff shortage.
Assessing both companies’ corporate cultures before any merger is also mandatory. Doing this and taking appropriate steps to integrate the cultures can prevent dysfunctional changes in employee behavior, lost productivity, leadership struggles, and other HR issues.
When office automation occurs, the resulting restructuring will give managers more time to plan, make decisions, and conduct analysis. These changes in the role of managers have significant implications for learning.
Employee benefits and compensation
Business restructuring has various implications for employee benefits. They can be classified as follows:
- The general appeal of overfunded pension plans to corporate employees
- The potential for pension plan redesign during restructuring, especially mergers
- Analysis to be carried out considering other restructuring payments.
You should analyze all aspects of life, including medical and dental insurance plans, to find historical costs, coverage provided, funding arrangements, and whether significant outstanding claims exist. In addition, it’s necessary to evaluate the effect of reaching another group of employees. As such, complex analyses are required to ensure a smooth transition and continuity of care provided by these benefits.
Factors the HR department should consider during business restructuring
Companies may start business restructuring following changes in vision and strategy, hoping to cut costs by streamlining processes or downsizing parts of the company. HR’s influence on job design, assignment, and training can have a lasting impact on the strategic success of a new organizational structure. Below, we highlight four factors the HR department should consider when restructuring a business:
- Workforce characteristics. To develop a strategy, owners should consider the company’s competitive position, including employees’ strengths and weaknesses. HR provides the employer with a workplace assessment and a thorough inventory of skills and other competencies such as education and employee experience. The skills list is compared to the strategies in question to calculate how well the company’s workforce can implement them.
- Organizational structure. At this stage, the HR manager determines work, working relationships, and allocation of resources. Keeping the company’s strategy at the center of structural decisions allows HR to make the best choices. For example, if a small business wants to focus on high-quality, custom-made products, the organizational structure should promote individual achievement instead of mass production.
- Job design. Harvard Business Review states that job design and talent selection are critical to talent management and are significant factors to consider when restructuring an organization. HR must reassess the tasks and work processes required to run the business effectively and compare them to the organization’s existing tasks and processes. Positions can remain exactly as they are, change, or be eliminated. Some tasks may require new positions.
- Redeployment and cuts. HR should consult workforce assessment to find people in changed and new roles. For new jobs that require specific skills and experience, HR managers should rely on aptitude and personality tests to predict how likely a job candidate is to succeed.
Stages at which the HR department is key to business restructuring
HR must ensure that the organization comes out the other side of business restructuring in as strong of a position as possible. The HR department will be vital in informing employees about what changes are happening and how they will affect them. Supporting your HR team during business restructuring can significantly improve its effectiveness.
The following describes the three stages at which HR contributes initiatives that are key to corporate restructuring and details how HR can support each stage.
The planning stages can make or break the restructuring process. The key tasks that should be considered are:
- Setting SMART goals
- Projecting the cost of your transformation plan
- Mapping deadlines for project delivery
- Analyzing the impact on your employees
- Stakeholder mapping
- Identifying skills gaps in your delivery team
- Developing an attractive communication plan.
HR professionals can ensure your team’s potential if it’s too small or not dedicated. They can also give you access to the skills or experience that your team currently lacks to support the restructuring. Finally, HR professionals can increase your team’s flexibility as a resource that you can quickly deploy and redeploy as needed.
Delivery & implementation
Strong HR-led communication needs to be maintained throughout the delivery and implementation phase. You should check the communication and transparency that affect employees’ work lives. At this stage, the key tasks are:
- Organizing meetings with affected employees
- Completing project milestones identified in the planning phase and during in-flight reporting
- Taking specific measures, such as TUPE, a.k.a., Transfer of Undertakings (Protection of Employment), or potential redundancy, and tracking and reporting on anyone affected
- Training, coaching, and mentoring.
The last point is vital for all levels of your organization. Line managers and senior management need to implement changes effectively and may need coaching on how to do so. In addition, individuals may need training to take on new responsibilities due to restructuring to fill gaps created by employees who are leaving if their responsibilities have changed.
Embedding and reviewing
After restructuring your business, check whether employees are motivated to take on new roles and whether they have the skills necessary to fulfil them.
Here, setting the correct goals at the planning stage becomes essential. If your HR managers set goals correctly, it will be easy to assess all the achievements in your organization’s business restructuring. When evaluating your efforts, it’s essential to:
- Make your feedback comprehensive and honest
- Accurately estimate ROI (return on investment)
- Determine your success by analyzing business metrics and behavioral indicators.
How software can facilitate business restructuring
Once you’re aware of which kind of job roles you want to have in the organization after restructuring it, you can translate your business strategy into workforce demands. This is the key use case of the smartPlan platform.
What does that mean?
Let’s say you’re an automotive company and want to move away from internal combustion engines to electric vehicles. The first thing you’d do is look at the job market data and see what roles you need for the future. For example, you’ll need electrical battery engineers. You’ll need several new roles and new skills. What smartPlan does is look at your strategy and what you want to do on a business level in the next five years. For example, you may want to open three new factories and increase productivity with an automation project.
With smartPlan, you have an external view from a big job market data pool. In a business restructuring, smartPeople can help you build your workforce strategy based on business KPIs and have an overview of how many of which roles you’ll need in your company.