Company restructuring has all the simplicity of reorganizing a small country (but with more concern about the lack of snacks). It’s no wonder that, without proper planning, the company reorganization process can go very wrong. In fact, it’s not uncommon for upper management to reorganize the entire company on paper with only perfunctory input from HR, issue an announcement about the reorganization in a company-wide meeting or email, and then, when panic and confusion ensues, act confused and indignant about their employees’ reactions.
A company reorganization process must be undertaken with sensitivity, strategy, and foresight. If you’re planning to shake up the work lives and processes of an entire company, the key to success is planning and communication.
What is company restructuring?
Company restructuring is a corporate management term that broadly refers to a company doing one of the following:
- Changing its organizational structure, which can involve shifting direct reports to a different manager, reallocating resources to other parts of the business, etc.
- Changing its financial structure, which can involve selling assets, refinancing debt at lower interest rates, or even filing for bankruptcy
For the purposes of this article, we'll focus on organizational restructuring.
Why do companies reorganize?
There are as many reasons for company reorganization. The primary reasons for restructuring can include:
- Something is broken. If your organization isn’t meeting its KPIs, if your processes or employees have become inefficient, or if there are essential tasks that aren’t covered by any position, it may be time to consider a company restructure.
- Your company has merged with or acquired another organization.
- An employee in a key position has left, which leaves an opportunity to question the organizational structure.
- You want to make way for a new opportunity, such as launching a new product or capturing a new market.
- The needs of your customer base have changed.
- The organization has grown or is downsizing.
- Managers have too many direct reports.
Occasionally, companies choose to just undergo a department restructure, which means only a specific department will be affected by a reorganization.
When that happens, the company has identified problems or inefficiencies within just one department, but because a company is heavily interconnected, what affects one department often affects other departments. While it’s certainly easier to reorganize a department, it’s not uncommon for a company to overhaul its entire company structure in one fell swoop.
Not sure whether your own company needs to adopt a new org structure? Find out with these 8 signs.
How to restructure a company or department
No matter your reasons for changing your org structure, consider adding these steps to your company reorganization process.
1. Start with your business strategy
The first component of company reorganization strategy is finding out why upper management wants to reorganize in the first place. Without understanding the new direction the company’s heading or defining the problem the company is hoping to solve, there is nothing to guide the reorganization process and no way to measure its success.
The business strategy will arm you with the goals or criteria you’ll need to meet with this company reorganization plan—if such a plan is even practical.
If your company hasn’t solidified its business strategy yet, take a step back and go through the strategic planning process first.
2. Identify strengths and weaknesses in the current organizational structure
With the strategy in mind, you need to consider where your current organizational structure is failing to meet company goals and where it’s working. If you haven’t already, create an org chart to get an elevated perspective on where your company structure stands now.
Part of this org structure evaluation process should be to gather feedback. Too many companies undergo reorganization planning without taking into consideration the people who will be affected by both departmental and company restructuring plans. Your employees often have valuable insights on what isn’t working and what you should continue doing—it’s up to you to gather those insights and include them throughout your company reorganization process.
It’s easier said than done, though. Without feeling that their concerns and ideas are taken seriously and are truly anonymous, your employees will be reluctant to divulge any feedback regarding a company restructure. It’s up to you to foster a safe environment in which employees feel their thoughts are valued. Consider sending out an anonymous survey to ask what they would change and how they would approach a company reorganization.
It’s also important to listen to key stakeholders in the reorganization planning process and to lean heavily on HR. If you’re in HR, don’t forget to communicate nuances to company restructuring that need special approval and consideration. Union agreements, employment contracts, work accommodations, etc. will all need input from appropriate parties.
Make sure to weigh the advantages or profit of a potential restructure against the risk, which includes employees leaving due to organizational change. If the problem won’t be solved through restructure, don’t attempt the reorganization. It’s wasted effort—and a potential loss for your company.
Get your team's support. Learn how to get buy-in for changes to your organizational structure.
3. Consider your options and design a new structure
After determining the problem with the current company organizational structure, gathering feedback from employees and key stakeholders, and considering all the existing job functions, it’s time to create a new organization model.
Bear in mind that this newly restructured model is only a first draft: It will and should change before being implemented. This new organizational structure should include:
- The vertical and horizontal lines of authority
- An indication of who will be making formal decisions within departments
- Attributes of employees, including skills and experience
- The definition and distribution of functions throughout the organization and the relationships among those functions
Consider the pros and cons of different types of organizational structures: hierarchical, horizontal, matrix, etc.
As you’re working through options within your company reorganization process, the best way to see the layout and interdependencies of your new structure is to create an org chart. Lucidchart has a variety of org chart templates available, and you can even import employee data from BambooHR, Google Sheets, Excel, or a CSV to automatically create an org chart that you can easily adjust.
Don’t attempt a company reorg without a visual to clarify your course of action to employees and keep all parties on the same page.
4. Communicate the reorganization
Once you’ve weighed various options in your reorganization planning and determined your best path forward, it’s time to show the rest of the company with a reorganization announcement.
Don’t spring the change on your employees. Make communication and transparency the highest priority throughout your company reorganization process—again, an org chart can help create clarity in this situation, especially paired with details about each role's responsibilities. You might need to communicate separately with managers or anyone with a direct report to ensure that they’ll be able to answer questions and help with execution.
At this point, your employees may provide feedback on the proposed company reorganization. As an HR professional or a manager, this is the time to extol the amount of consideration that went into the reorganization plan and the benefits it will provide to everyone. Welcome questions—after all, carrying out a successful company reorganization process from start to finish takes the cooperation of everyone involved.
5. Launch your company restructure and adjust as necessary
The moment has finally arrived to execute the company or department restructuring. Remember that change can be difficult—give employees some time to adjust to the restructuring to accurately gauge its effects. Think back to your business strategy, and make adjustments if the new organizational structure still doesn’t meet your ultimate goals.
Need help getting employees to accept change? Consider these change management models to help them prepare.
Start planning your company reorganization now
As a leader, your attitude about the company reorganization strategy sets the tone for how it will be received by your employees and co-workers. If you’re excited about the restructuring, that excitement will be reflected in all involved throughout the reorganization process. If you’re somber, expect those affected to be suspicious and maybe even hostile.
The bottom line is that company restructuring can be a fresh start for everyone; it can revitalize a company, reinvigorate employees, and allow for greater career growth. But planning and communication are key—start your company reorganization process early, get everyone involved, and stay organized by creating an org chart that can guide your company to a greater, more efficient organizational structure.
Reorganize your company and plan for the future in Lucidchart.