In the present day and age, the business landscape is transforming at a rapid pace. With the changing customer wants and aspirations, cut-throat competition, and strict government guidelines, companies need to continually change their service operations. Businesses need to adapt to changing conditions quickly, and therefore, adaptability has become the most sought business mantra.
Restructuring of service operations is the need of the hour and companies that fail to do so will lag. But making organizational level restructuring operations is an arduous task. It requires considering numerous factors like employees, products, work-processes, vision, mission, goals, and business models.
This article sheds light on organizational restructuring and why scaling service operations have become more critical than ever.
What is Organizational Restructuring?
Organizational restructuring can have a multi-dimensional outlook. It can deal with any or all of the following:
- Management hierarchy
- Operational processes
- Technology/Machines used
- Legal rules
The cause of restructuring service operations can be both internal and external. Internal agencies include changing existing work-processes, buying/renting new machines, implementing ERP System, modifying the management hierarchy, etc. On the other hand, external agents include competitor’s products/services, new government norms, changing business landscape, etc.
The after-effects of restructuring of service operations are many. They can either cause downsizing or upsizing of employees, modification of recruitment policies, etc.
The following are 4 most important reasons for the restructuring of service operations.
1. Changing business landscape
The business landscape isn’t static. It keeps on transforming. The following points shed light on the significant forces behind it:
- Climate change
- Human rights
- Global financial crisis
- Labor rights
- Marketplace integrity
- Digital business landscape
- Environmental deterioration
- Government norms
- Guidelines by international institutions
- Health and safety violations
- Contracts violations
- Insider trading
- Sexual harassment
- Disregard of compliance
- Unethical practices
Apart from the points mentioned above, there are other reasons why the restructuring of service operations has become essential. For example, the recent COVID-19 pandemic has put a dent in the global economy. Numerous companies have shut down and others are on the verge of going out of business. It’s essential to pay focus on service operations management to survive in such dire circumstances.
2. Merging or acquiring businesses
When two businesses merge, or one acquires the other, restructuring becomes necessary. The parent organization, which has the majority stakes, enforces a new set of rules and governing policies on the subsidiary organization. These norms are usually legal, which requires following multiple mandatory organizational restructuring policies.
In most cases, the parent organization may want to rebrand the company or start building it from scratch. Thus, a set of restructuring policies is constituted to quickly and easily perform the function without hindrance.
3. New ways of doing business
The ways of doing business change with time. Technological developments, telecommunication breakthroughs, strategic thinking, changing employee policies, remote working culture, and automation are transforming the way we do business.
For implementing such changes, companies have to make detailed plans and proper arrangements. They have to adapt quickly so that they don’t lose out on the competition. Some of these changes are massive and require a significant investment of resources, time, and manpower. More often than not, the restructuring processes create new departments, divisions, work-processes, and reporting managers.
4. Exploring different directions
The three core attributes of any business — namely vision, mission, and values — do change over time. Businesses are always exploring new horizons. They search for opportunities to decrease their losses and increase their profitability, which requires periodic restructuring of service operations.
After studying the reasons for the restructuring of service operations, let’s explore the various types of organizational restructuring:
- Legal restructuring
This type of restructuring refers to a change in legal norms that affect the functioning of an organization. Examples include:
- Change in ownership
- Change in government rules and regulations
- Downsizing or upsizing of manpower
In this kind of restructuring, an organization adopts a new business model. For example, an IT company that manufactures mobile phones also begins to roll out 4G communication service.
- Cost Reduction restructuring
Companies that shell out significant money for handling their fixed costs adopt tried and tested cost reduction restructuring policies. Examples include automatizing trivial work such as data entry, form filling, etc., and reducing only so much office space as required.
- Financial restructuring
Businesses have a definite capital structure that they follow. But with changes in fixed costs, profitability, and the tax system, it changes. In unprecedented situations, such as the COVID-19 pandemic, the company will deal with its creditors to decrease its debt burden, reduce the interest rate, extend the payment schedule, and redefine the terms of repayment.
- Mergers and acquisitions
In contemporary times, Mergers and Acquisitions (M&A) are happening rapidly. It’s because they are the surest way of saving a bankrupt company from shutting down. Today, M&A is occurring between international companies as well. Companies that want to expand their operations in a new territory look for either merging or acquiring a new business.
Divestment forms an integral part of service operations management.
Nishant likes to read and write on technologies that form the bedrock of the modern-day and age like Web Apps, machine learning, data science, AI, and robotics. His expertise in content marketing has helped grow countless business opportunities. Nishant works for Sage Software Solutions Pvt. Ltd., a leading provider of CRM and ERP solutions to small and mid-sized businesses in India.