3 Reasons Behind Company Reorganization

There is no limit or frequency to how often a company should restructure. It has always been done according to specific company needs and circumstances. However, too much of reorganization might cause disrupt in the usual daily operations, productivity and high employee turnover rate. If not careful, it can also be seen as a sign of leadership incompetency to others. Business leaders might want to strategize and create plans very carefully to make sure the next reorganization will improved profits, efficiency of operations or debt paydown, according to the targeted company goals.

Just recently, many companies did a company restructure which is on the early month of August. Discord laid off their nearly 40 employees as a part of their company reorganization. The company informed that the reason for their decision is due to their focus on a long-term growth.

Company reorganization or restructure is a process made by individuals in the leadership position such as the top executives, board members and senior management. They are responsible to observe and analyze the company to identify which areas that need some big or small improvements on the operations and setups. The primary goal to this is to optimize the overall company’s structure and processes which will improve business efficiency and performance. This is to ensure the business to remain competitive and adaptable in a dynamic marketplace.

The most common reasons that will lead to reorganizations are change of identity or management, bankruptcy and when a company merges with another company to develop a new identity. The details are as below:

Change of Identity or Management

Companies often need to have a change in identity or management for a new direction or make their business direction to be more strategic. This will give impacts to how their target audience will perceived the new identity such as new logo, colors, mission and vision of the company. Also, it can be a due to a declining in performance, rebranding, shifts in market demand or the need to differentiate themselves better from other competitors. Overall change of identity can gives a huge impact on how it is recognized by the world.

Identity or management changing may require a strong leadership, careful and strategic planning. In the transition period, leaders should engage with employee by including them in the transition process, providing clear communication which will creates trust with the employees. Leaders must set realistic goals and give frequent feedback to make necessary adjustment to the company. Not to forget, also communicate about the transition with the customers on how it will bring a tremendous benefits to them.

Bankruptcy

Poor financial management can cause in debts and instability to businesses. Few signs that a company fails to manage its finances are such as having negative cash flows and consistently reached limits on budgets. From the stakeholders and employee perspectives, this can be observed when the company do late salary payments, delayed on projects, cutbacks in marketing and public relations effort, cuts investments in employee trainings, extended periods on empty positions, do not pay overtimes and bad customer satisfaction.

In a nutshell, a company who spend excessively over the budget, having inadequate cash flow management or do not have a proper budgeting can result in debt to increase and cause instability for the whole business. A proper financial management is needed to maintain good financial health and sustainability of a company. To combat this, business leaders might have to have a proper strategy such as determining customer base, price to increase profit margin and do a proper budget planning.

Merger or Acquisition

To achieve the goal of the company, two companies might merge with each other or one company might acquire another company. This may involve departments to combine, aligning different cultures and optimizing resources. One of the few reasons of merging or acquisition is company growth. Companies which are focusing in expanding and growing can be driven by market opportunities, customer demands and long term viability. Note that the goals of the companies are depend on the scale and size of the companies. This process can be done successfully by having a clear strategy, effective communications and focus on both short-term and long-term goals.

A successful company reorganization can produce many amazing benefits. One of them is gaining potential investors. By showing the investors how the company will boost overall financial health, efficiency in operations and future growth, the company will look more appealing and the positive image will convince the investors. In addition, transparency will increase and this will bring a clear direction to where the company is going. This will not only appeal to the investors, but also resonates with customers, building trust and a shared sense of direction.