As a prudent business owner, knowledge on when you ought to restructure your business is one of those things you have to figure your way out; since no book out there on team dynamics and organization theory hardly tell us how or when businesses need to be restructured. And neither should the management of the business take the process of business reorganizing lightly as it involves a lot of effort and planning.
Well! Restructuring is inevitable. As there comes a time when a business has to restructure processes, systems, and teams during its lifecycle from the time of inception to its maturity. And from experience, it is those businesses that realize the need to restructure and do it at the right time that remains on the growth trajectory.
The good part is that there are some signs which companies and business owners can check to see if it’s time to restructure.
- Sudden Profit growth decline
You will know there is a problem where there are changes in the profit growth rate. In a circumstance where your business had earlier on shown a consistent growth in profit margins but later on it shrunk for a significant time period, be on the lookout. It is one of those good signs showing that your business requires some structuring to reinstate the revenue levels.
You can audit and adjust some items, like salary to revenue ratio, overall expenses and cost of sales, shrinking your business net profit income. Therefore, it helps to mitigate any surprises when you regularly examine the business books.
- Communication breakdown
Communication is one of those things that significantly affect the success of a business. If you take a business or organization to be synonymous with an ecosystem then communication is like water. Too little or too much of it affects the survivability of the living organisms.
Let’s bring this analogy to the business circles. For instance, in a case where the management lacks the time or fails to communicate to its employees, questions will be raised. People will wonder, are they too occupied with other initiatives or are they just too busy?
Likewise, if there is excess communication in an organization it may also be detrimental. People or the teams will spend too much time communicating about work instead of carrying it out. In that scenario, a reorganization will be needed to streamline the communication level.
- Low morale in the business
Morale in a business set up can be negatively impacted by several of things. Some most prevalent ones are poor management, favoritism, pushing aside of constructive feedback or even being near team members that look cancerous.
For instance, in a place where there is constant ignorance, a team can realize and beg for a drastic change to occur but the management will ignore it. Therefore, for the business not to get into the “too little too late” trap, the management will have to listen to the team members and give them the necessary feedback about improvements.
- Failure of the old systems
As the business expands, the old systems get outweighed. For instance, the processes that were operational when the company had 10 employees can be overwhelmed when the number grows to 50. It does not suggest that the systems will get quite complex. It simply suggests that improvements to existing processes are crucial as the company grows through the years.
- Rampant inefficiencies
Sometimes the business can outgrow the processes and become inefficient. Most business owners would respond to its inefficiency to customers or business through adding more people. But what they don’t realize is that adding more people will reduce the profit as it will imply high payroll.
However, a wise company will add more business without hiring more staff on a constant basis. You may probably need to add software or improve systems to make the internal operations efficient to avoid inefficiencies that will slow down growth.
- Underutilization of resources
In a business organization, some people may feel overworked while others underutilized. It may not mean that the organization should spread the work and hire more people or concentrate the work and reduce some people.
Whenever there is understaffing and overstaffing in some areas, the best thing is not to assume the situation but to collect a lot of information that would guide you on the best decision to take.
- Evolving industry
As time goes by, technology improves, industries change and economies shift. So your business is bound to fall behind in competition if it carries its activities the same way it did a decade ago. For instance, business costs might increase when economic environment changes forcing you to either search for new lower cost vendors or increase the pricing of the products.
- Shifting customer base
Note that apart from the external customers that often pay money, internal teams or functions like the support functions or back-office department can also be regarded as customers.
If the customer interactions towards the business changes, then restructuring is necessary. Business owners may find ways to reduce products and services costs when customers have to reduce spending due to the economic situation.
You may also have to create new service department in case the customer’s request a maintenance service after purchasing the products. In the bottom-line, you will have to realign your organization to serve the customers best.
The take
You should take the restructuring cautiously since when you spot some of these signals quarterly or monthly doesn’t mean you have to make a drastic change. However, when the changes continue year to year, it may be time to restructure and get the business back on track.
Many companies and businesses around fear change and are reluctant because of the uncertainties it brings about. Every company that remains successful usually goes through a phase of evolution through time.
Therefore, proper leadership needs to be put to implement these changes and effectively communicate to the team. In a nutshell, to know that your business is ripe for restructuring just examine if it displays some of the indicators shown above.
The take
You should take the restructuring cautiously since when you spot some of these signals quarterly or monthly doesn’t mean you have to make a drastic change. However, when the changes continue year to year, it may be time to restructure and get the business back on track.
Many companies and businesses around fear change and are reluctant because of the uncertainties it brings about. Every company that remains successful usually goes through a phase of evolution through time.
Therefore, proper leadership needs to be put to implement these changes and effectively communicate to the team. In a nutshell, to know that your business is ripe for restructuring just examine if it displays some of the indicators shown above.
