5 Signs You Know It’s Time to Restructure

when to restructure a business

A college professor of mine once told me “There is no book on that.  Sometimes you just need to get in and figure your way out.”  Knowing when to restructure a business is one of those things.  Though there are books on organizational theory and team dynamics, there is no textbook out there telling us exactly when or how we should restructure our companies.  And neither aspect should taken lightly because the process of reorganizing a business takes a great deal of planning and effort by management to execute well.  Fortunately, there are signs we as managers should watch out for that can help us identify when it is in fact time to restructure our business or organization.


Why Restructure?

Before we get into the signs that tell you it’s time to restructure the company, let’s first examine why we should even bother.  The answer is simple: things change.  The ultimate goal and purpose of any business reorganization is to either plan, accommodate or react to change.  Typically, those changes will reside in our market, the economy, or our competition.

As a simple example, if our competitor suddenly invests heavily in improved Research and Development, we may find it necessary to create our own R&D group to help us keep up with the competition.

RELATED: Is Your Research and Development Under House Arrest?

Ultimately, restructuring is a necessary process our businesses will need to go through from time to time, in order to react and accommodate changes in our marketplace.  But we should be cautious in how we go about it – the bigger the change, the more planning and communication we need to implement and execute.  Before you begin making changes, you might want to check out our article on how you restructure the organization.


When to Restructure a Business

If we are waiting for an email with the subject line “It’s Time to Restructure,” we will be waiting a while.  While it may not come directly to our inboxes, there signs to tell us it’s time to restructure or reorganize our business.

Reason 1: It Just Isn’t Working

Some time ago, I attended a leadership seminar during which one of the presenters spoke about organizations.  At one point he said “Your organization must drive your success.  If you’re not finding success, change your organization.”  At the time I did not appreciate those words, but years later, having managed large teams and worked in a number of different circles, his point is very clear.

An effective organization is a delicate ecosystem of decision-making, motivation, and measurement.  Too much or too little of any one thing throws the balance off and hurts the entire system.  If we need 4 levels of approval to purchase a new printer, we might have a bigger issue at hand.  If employees feel there is no benefit or reason they should go above and beyond, productivity will suffer.  And if we try to measure everything in the business, we’ll suffocate from data, and let our competitors will pass us by.  But all that said, if things are not working, we need to spend time understanding why.  Then, we sould start making changes.

Reason 2: Communication is Breaking Down (or Supersaturated)

If organizations are an ecosystem, communication is the water that all living things need to survive.  Again, too much or too little, and the system will suffer.  Communication is vital to our organizations’ success – but it needs to effective and sufficient, and not overbearing.  For instance, if managers do not have time or are unable to otherwise communicate regularly with employees, it’s worth examining why.  Are they too busy?  Are there too many initiatives going on?  Is there an appropriate support network in place?  Conversely, if there is too much communication – between people, teams such that people spend all their time talking about work rather than doing it, a reorganization may help streamline things.  Decision by committee can kill productivity.

RELATED: Is Organizational Friction Killing Your Productivity?

Reason 3: Your Customer Base is Shifting

Keep in mind, customers do not have to be the people paying you money. If you work in a back-office department or a support function such as Finance or Human Resources, your customers are likely internal functions or teams.

“Your organization must drive your success.  If you’re not finding success, change your organization.” 

If the way our customers interact with us has changed – due to their needs or our offering, a business restructure might be a good idea.  If the economy has forced our customers to curb spending, we may want to invest resources in finding ways to reduce cost from our products and services.  If our customers are starting to ask that we both sell them a product, and provide a maintenance service to them later on, we might want to create a new services department that specializes in maintaining products for customers after they purchase it.  The point is that our customers will often tell us how to best align your business in such a way that it serves them best… and that should be a key part of our organizational strategy.

Reason 4: The Organization Has Grown (or Reduced)

The term reorganization is often a term corporations use to describe what is in fact downsizing or layoffs.  And while reorganizing a shrinking organization may be the appropriate thing to do, reorganizing in response to growth is also important.  A bigger version of something what was effective when we were small may not be the best thing.

For instance, if we had one person in our 4-person startup responsible for social media and publilcity, by the time we grow to a successful 100-person company, we may need to separate that role into Communications (internal and external) and Marketing.  And if there are small or lesser departments out there following a downsizing event, consider rolling them under a new branch of the organization help maintain alignment throughout the entire business.

Particularly when it comes to restructuring in response to changes in the size of our businesses, we need to consider things like how finances will be controlled and monitored, how goals are to be aligned across the organization, and where decision-making authority will reside.

Reason 5: Manager Span of Control

In 2010, I was a member of an organization that had grown in recent years.  As a result of the growth, the senior manager’s span of control had simply gotten too large for him to effectively maintain (he had 14 direct reports, some of whom had their own direct reports).  We ultimately split the team in half based on the type of work the employees did, and I took over the other half of the team.  We did this to ensure there was a reasonable span of control for the managers, and that we could each spend sufficient time with our employees to make sure things were going smoothly.

There are many schools of thought out there when it comes to management span of control, and it really does depend on the work the employees do.  But if you want a number, 5-9 professional staff per manager, and 12-18 hourly staff per manager is about right.  More than this, and the manager will struggle to effectively keep up with everything going on, and will not have enough time on a per-employee basis.


When to Reorganize Your Team: Key Takeaway

The key take away for knowing when it’s time to reorganize your business it to keep a watchful eye on the trends and  behaviors influencing your business.  While it can be difficult, change is necessary to ensure your company can continue to remain profitable and compete effectively.  And remember those words:  “Your organization must drive your success.”

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