Restructuring and its impact on HRP23rd February 2021
Restructuring is when an organization changes its internal structure to increase efficiency and cost effectiveness. This act can involve merging two formerly unique entities, separating an entity into multiple parties or incorporating a formerly unincorporated enterprise. Restructuring can occur as the result of one business buying another company or an enterprise increasing in size. For example, a sole proprietorship might grow into a mid-sized business with potential to expand nationally. It would be in the company’s best interest to incorporate and begin observing regulations that apply to a business of its size. Strategic restricting can minimize financial losses, decrease production costs and otherwise impact the company’s bottom line.
Companies may embark on organizational restructuring after changes in vision and strategy, or in hopes of cutting costs by revitalizing processes or pruning parts of the company. When it’s done, a small business will have a new organizational structure and a changed workforce. The influence of the human resources department on job design, assignments and training can have a lasting impact on the strategic success of the new organizational structure.
The organization can be regarded in two ways: as a system or as a form. In management and marketing the concept of viewing the organization as the system is popular and more focused on examining the relationship between organizations and their environment.
From this point of view, we are used to consider the organization “a system built by energetic input-output where the energy coming from the output reactivates the system”. The typical scheme of organization includes the structure with departments, programs, divisions or teams and the organization’s policy, culture, plans and procedures. All of them function in cooperation and combine a kind of summation which results in outcomes and scores of the company.
Human resources should influence the strategic choices leading to restructuring. To develop strategy, the owner must consider the company’s competitive position, including employees’ strengths and weaknesses. HR supplies the owner with a workplace assessment a thorough inventory of the employees’ skills and other characteristics such as talent, turnover, education and experience. The inventory is compared against the strategies under consideration to calculate how well the company’s workforce can enact them.
Once strategy is chosen, HR then evaluates how it must transform the company’s workforce to fill the company’s needs in the context of the restructuring and strategy.
Organizational structure determines job scope, working relationships and resource sharing, so it has a profound impact on how business gets done. Keeping the company’s strategy at the center of structural decisions allows HR to make the best choices. For instance, if a small business wants to focus on fine, custom-built products, the organizational structure must promote individual accomplishment instead of mass production.
Job design and talent choice as critical in talent management generally, and these are especially important factors to consider when restructuring an organization. HR must reassess the tasks and workflows needed to effectively do business and compare those to the organization’s existing jobs and processes. Positions may stay the same, change or be removed. Some tasks may require new positions. Considerations when designing jobs include how specialized a job should be, how much authority an employee needs to accomplish work and how much supervision is needed.
HR Restructuring Strategies for Reengagement
Restructuring is an unsettling process for employees. HR must make sure that the remaining employees are primed to be successful in their new situations. It’s a good idea to create a sample restructuring communication to staff that describes the process, goals and aims of the restructuring, to put staff at ease.
But these parts of organization may also become dysfunctional and bring no effects while they operate in dynamically changing reality. This happens if one forgets about the people inside the organization and sees the organization as the raw scheme from the bureaucrat perspective instead of regarding it as well as the valuable team of individuals. Organizations are also the socio-technical systems including two main components. One is a social component and means people and the other is a technical component which includes technologies and machines. The organization should therefore combine the system approach and the social approach in its functionality, because the most valuable asset the company can possess is the loyal and qualified group of people with the same goals who operate in this structured cluster. The problems inside the organization may occur when it comes to restructuring and at the same time there exists a clash between executives who see the company as the system (departments, divisions, subsidiaries, etc.) and the workforce which considers the company as their source of living and the shared community. The restructuring of organization due to various strategies may then bring negative impacts which frequently diminish the final impression and result of positive outcomes. The task for the executives and representatives in the company should be the correct evaluation of the possible restructuring process results in terms of positive and negative impacts, as well as implementing the most efficient restructuring strategies which will help to manage the process in the most risk-free way.
Motives, strategies and implications of restructuring
There might be hundreds of reasons why the organization need to restructure, but the most significant is the market expectations. The business environment these days is so dynamic and turbulent that it is hard for the companies to keep up and follow the newest trends and frequently they lose their stability, especially the finance one, and competitiveness. Therefore, the companies go through changes and decide to restructure.
Basic reasons to restructure are:
- To make the organization more profitable and integrated
- To achieve efficiency and effectiveness
- To reduce unwanted and overwhelming expenses
- To implement new technologies
- To open to new markets on a global scale
- To meet the customers’ demands in a quicker and smoother way
- To be more competitive and achieve the market advantage
- To raise from the crisis or survive a currently adverse economic climate
- To move in an entirely new direction and enhance the share-holder value.
The changes inside each separate field are the most appropriate in terms of final results. Therefore, it is advised that organization concentrate on individual parts and restructure according to the division into:
- Operational restructuring,
- Financial restructuring,
- Decisive restructuring,
- Restructuring in organization.
The structural change should be done by a particular strategy. There are various strategies which are commonly implemented by many entities in the process of restructuring:
- Downsizing, layoff, rightsizing or smart sizing
- Starbursting or networking
- Business process re-engineering
- Enterprise resource planning
- Total quality management