Simply mentioning the phrase “organizational restructuring” brings to mind images of employee layoffs, organizational chaos, and loss of valued work relationships. Restructuring, like dental surgery, is one of those things we want to avoid but at times is necessary to prevent even worse pain and suffering.
And if economic predictions about a potential recession in 2023 prove true, it will become more common over the coming months resulting in layoffs in other industries in addition to the 200,000+ that have recently occurred in the technology industry.
Restructuring is often forced upon companies by economic constraints, but even when it is necessary, companies still have considerable control over how it is done and the long-term impact it has on the organization, employees and former employees.
What Does Restructuring Mean?
We define restructuring as any action that significantly changes the roles and reporting structures of employees within an organization. The difference between restructuring and other forms of workforce change is the emphasis on changing the existing roles of current employees.
Many restructurings are accompanied by staffing increases or decreases but staffing changes do not necessarily imply restructuring unless employees are being let go due to their roles being eliminated or are being hired to perform new roles that did not exist prior to their joining the organization.
Most restructurings fall into one of three areas:
Operational: Restructuring designed to support organizational expansion, strategic redirection, or operational efficiency including changes resulting from acquisitions, divestitures or implementation of new work methods and technologies.
Economic: Restructuring designed to reduce or reallocate workforce costs to meet financial targets or respond to market downturns.
Organic: Restructuring resulting from employees initiating changes to their roles within the company including internal transfers, fellowships, gigs and dynamic teams.
The pace of restructuring has increased over the past decade and is expected to accelerate further due to growing economic volatility, continued employee turnover and greater numbers of mergers and acquisitions1.
While each of these restructurings has different characteristics, they share one thing in common: they involve making significant changes to how companies allocate money spent on their workforce and how employees are allocating their time spent at work. They also impact the success of organizations, but whether these impacts are good or bad depends on how the restructuring is managed.
Complete the form below to access the full Research Note