Corporate restructuring is a legal maneuver employed by a
company with too much debt and not enough income or a business model that is
proving unsuccessful. The effects of restructuring are varied and range from
nervous nail-biting from shareholders to employees wondering about job
security. A corporation with a well-honed restructuring strategy can mitigate
these initial worries and emerge a leaner company with a profitable business
plan.
Find the Specific Problem
A corporate
restructuring strategy must determine and effectively target the specific
challenge or problem the corporation is facing. This allows the corporation's
rebuilding efforts the best chance for success without hindering any parts of
the company that are currently working well. At its best, a restructuring is a
highly targeted surgical strike that fixes the problem without dismantling the
whole company to do it. A restructuring strategy that lacks direction can often
cause more harm for a corporation by worsening an existing problem and
weakening functioning departments or business strategies.
Management Understanding
All levels of
management must have an understanding of the corporation's overall
restructuring strategy. This allows managers to prepare employees for possible
changes within departments, and to develop new operational strategies to meet
shifting corporate priorities. Managers may also have to prepare for the
possibility of difficult business decisions resulting from corporation
restructuring. Department sizes many shrink, causing employee layoffs along
with pay cuts for managers. Departments may also merge with other departments
in a corporation as a result of the restructuring. Managers must understand how
the corporation's new leadership structure operates in order to ensure that
productivity stays at a high level.
Effects on Investors
Corporate
restructuring makes investors nervous. This can cause a stock sell-off that
decreases the overall value of the corporation and exacerbates the underlying
reason for the restructuring.
