Organisational Restructuring Risks: 5 Common Pitfalls

Organisational Restructuring Risks: 5 Common Pitfalls

It’s common knowledge that restructuring a business can be the key to positive transformation, and breaking out of a financial ‘plateau’ but reaping the rewards of a restructure, isn’t a given. This process can be tricky to navigate, and understanding the risks is even more important than understanding the potential payoffs. 

Here are five common pitfalls to be aware of and avoid at all costs. 

1.    A drop in productivity

It is rare for a business to undergo a significant transformation without some temporary – or long term – drop in productivity. In a worst-case scenario, you could find yourself losing skilled workers who were central to the business. If not, the workforce could still end up suffering from a significant drop in morale, which is reflected in the business’ productivity and finances. 

Plus, the need to retrain new or existing staff in new technology or processes, or communicate new strategies, could also result in a reduction in productivity.

There are ways to prevent this, and the first step is being aware of the potential for the problem to arise. 

2.    Cost implications 

While restructuring a business can improve its finances in the long run, there is a strong chance that the process will have a high cost attached to it in the short term. Training and legal costs need to be considered, but also the financial implications of measures like voluntary redundancies. 

Remember that it is often the longer-serving employees who volunteer for redundancy, which means that you will need to prepare for higher redundancy payments – not to mention the loss of valuable experience.

3.    Difficulties valuing the company

Whenever a business changes shape – whether it sees growth, or has to downsize – there can be issues with valuing the company. Determining how much it is worth can lead to conflict – conflict that can, in turn, damage morale and faith in the business – so it is vital that the business is properly valued during this process in order to reduce the risk of damaging disputes. 

4.    A negative impact on ROI 

Restructuring a business can make things worse before it gets better, and it may be a case of managing (not just weathering) a storm before you can see the true benefits to your decision. 

Businesses must be able to recalibrate their business practices efficiently, so that the workforce (and, of course, their customers) experience the least possible disruption. If a business is not properly prepared for these trickier times, then things can all too easily fall into chaos, and mean that you have twice as many issues on your plate than you did before. 

5.    Lost time 

Even if you navigate every aspect of the process like a true expert, there is no escaping the fact that it will represent a drain on your time and attention. Coordinating all of the necessary legal documents while seeing to the immediate needs of the business, your employees, and your customers is a near-impossible juggling act, and it is incredibly easy to make mistakes. 

As a result, you’ll want to get a corporate solicitor on board with the plans as soon as possible. They will have the experience and knowledge to anticipate issues before they arise, translate complex legal documents to you in understandable terms, and act as an invaluable line of defence against mistakes, oversights, and missed opportunities.