Strategic Restructuring

CONTENTS 

1  Process steps

2  Issues of policy and procedure

3  Implementation management

This document discusses some issues likely to arise during the course of implementing a new structure.  It also offers some suggestions as to how these issues may be handled. 

The document first describes the sequence of events of a typical restructuring exercise (Section 1), and then discusses the various important issues of policy and procedure (Section 2), and subsequently issues related to the management of an implementation programme (Section 3).

1     PROCESS STEPS

The following sequence of events is typical of most restructuring exercises. 

1.1   Strategy

A new strategic plan or business structure often requires a restructuring of the organization in order best to serve a new set of objectives.  Any structural change should be underpinned by a particular strategy

1.2  Design a structure derived from the strategy

The next step is the design of the structure that is derived from the strategy.  It typically has the following components:

1.2.1  Overall structure

The overall “layout” of the organization, the main components of the structure and their reporting relationships are determined.  There is a large body of theory determining the principles according to which structures can be designed.  This design typically also includes the component organizational units of the major groupings in the organization.  A typical structure may consist of a number of divisions, each typically reporting to the CEO.  Each division may be made up of a number of departments and each department of a number of units.  Other terms may also be used; there is no hard and fast rule regarding terminology, but the naming of organizational components is often determined by what the managers of the various components might regard as having status within the groups that they form part of.

1.2.2   Committee structure

A committee structure is also often determined at this stage.  A typical structure might consist of a “top management” group (Executive Committee) and each division might have its own management committee.  These two levels consist usually of formal arrangements.  At “departmental” level there might also be a type of management committee, but here it tends to be less formal and usually has executive powers no larger than the delegated authority of the Chairperson.  It may therefore be regarded as a committee to support the Chairperson is his/her decision-making.

1.3   Description of new structure

1.3.1  Divisional/departmental/ unit functions

The functions to be designated to the various components are then typically described.  This description is most meaningful if it does not seek to go into every minor detail of the tasks and objectives of the various components, since a new structure is a dynamic thing and will tend to refine itself as it becomes operational.  However, it is absolutely necessary to describe the major responsibilities and objectives for the various components, since this information is required in order to allocate staff to the new components, and also to recruit staff where necessary.

1.3.2  Provisional job contents

Provisional job contents are usually also described at this stage, although the same comment applies here:  jobs will tend to develop over time, and it is best to allow future incumbents and their managers some opportunity to participate in the final determination of job contents. 

1.4   Implementation plan

An implementation plan is vital if the restructuring exercise is to be completed within the required timeframes and without disruption.  Such an implementation plan will require at least the following components:

1.4.1  Milestones

It should describe what activities have to be completed by which date, and to which standard.  This is particularly important when certain actions depend on previous actions being completed (e.g. placement of staff will depend on an adequate description of departments and jobs in the new structure)

1.4.2   Policies

A number of policies will be required during the course of implementation, such as an outplacement policy for those staff members who cannot be placed; a policy on the manner and extent of staff participation on their own placement; a policy on recruitment and selection for the new structure.  It is very dangerous to “make up policy” only when the need becomes apparent; staff are likely to view this as indecision or incompetence on the side of management.

1.4.3   Responsibilities

A restructuring exercise is a huge undertaking, and the top management group will find it totally impossible to carry out all the required actions themselves.  Some form of task team approach is therefore likely to be required, and it is important to define which teams and which members should be responsible for what.  It is equally important that a definition of responsibilities include a clear indication of who is allowed to take which decision during the course of the process. 

1.5  Preparing the organization

Preparing the organization to accept and welcome the changes is crucial.  A restructuring exercise is difficult enough as it is; if staff are uninformed or do not see the necessity for the restructuring, they are likely to be obstructive.  The typical preparation takes place over a period of time, and starts when staff becomes aware of the fact that management is reconsidering strategy and structure.  It then moves into a phase when staff is increasingly exposed to elements of the new approach, and are “invited in” to share in some parts of the re-design.  The uncertainty and turbulence of this period is not necessarily a bad thing; a degree of tension tends to operate in favour of management when it becomes clear that the new structure will address a number of difficulties and issues that staff members have been aware of.  The important point about the preparation phase is that management should be as open as possible with staff, and that the process be made as participative as possible without affecting the statutory rights of management to take decisions. 

1.6   Staff placement in new structure

This issue, more than any other, can bedevil a restructuring process. Employees typically feel insecure under conditions of uncertainty, and tend to resist any attempt at change.  It is often the incompetent individuals who are most vocal, since they now run an increased risk of being exposed – it is therefore in their interest to resist the new structure.  Often, where an organization is unionized, the union will be brought in and significant pressure will be brought to bear if there is any indication of job losses.

Techniques for deciding on staff placement include the following:

1.6.1   Voluntary self-selection

If the new organization is described clearly enough, and if the strategic reasons for the restructuring are clear enough, it is often advantageous to give employees the opportunity of indicating where they believe they would be best placed in the new structure.  This is a very participative approach, but obviously subject to the principle that management will take a final decision on any placement.  A typical approach is to ask employees to submit written proposals on their first two or three choices for placement, together with some supportive arguments as to why they should be placed in a particular position.  These proposals are usually submitted to a “neutral” point in the organization, and by a given deadline.  The sum total of the employee proposals will give management a very good starting point for their deliberations on placement.

1.6.2  Selection by management

Management may, however, wish to appoint certain individuals to particular positions for strategic and practical reasons, in which case the decision is a managerial one.  At the same time, some of the staff proposals for their own placement may be unrealistic, or based on a lack of insight by the staff member concerned, and in such cases management will also need to take a decision.  In certain cases, individuals may prove to be incapable of placement in the new structure, at which point an outplacement approach becomes necessary.

1.6.3   Temporary placement to fill gaps

Management may also exercise the option of effecting certain temporary placements in order to develop and stabilize the new structure.  Such temporary placements may be of existing staff (e.g. an extremely capable individual who is given particular responsibilities for a time to develop a function), or of temporary outside contract appointments (e.g. in cases where specific skills and abilities required to develop the new structure simply do not exist within the organization). 

1.7   Recruitment and selection of new staff

Often the new structure will require new and additional skills and capabilities on a permanent basis.  This indicates recruitment from outside the organization.  Two difficulties need to be planned for:  a typical recruitment process at managerial level may easily take six months or longer (affecting the implementation speed), and the recruitment process is complex, time-consuming and subject to various legal requirements.  It simply does not make sense for management to be involved too deeply in this process (at a juncture where they will have their hands full with implementing the new structure), unless the organization has a well-staffed human resource function with spare capacity.  The selective use of reliable recruitment consultants can lessen the burden, but would require a substantial and in-depth briefing of the consultants.  This briefing in turn requires that the necessary structure descriptions are available and have been approved. 

1.8   Phasing-over from old to new structure

There is often a requirement for a phasing-over period, during which time staff members will remain responsible for duties and activities that they performed under the old structure.  This implies that for a period of time they will not be able to devote their full attention to responsibilities in the new structure.  It also implies that the phasing-over process will need to be managed carefully in order to ensure that certain staff members do not spend an indefinite period on “old” activities. 

1.9 New structure fully operational

The final phase will have been reached when the new structure is fully operational.  Some prior thought will have to be given to what would constitute “fully operational”, and how all old activities are to be finally closed off.

2  ISSUES OF POLICY AND PROCEDURE

It is vital that as many policy and procedural issues as possible be developed, cleared, approved and made available before the actual implementation process commences.  There are a number of reasons for this:

• Implementation is a time-consuming and stressful activity for the management committee,who need to make as much of their time and energy available for managing the process.  If policies and procedures need to be created as the process unfolds, this tends to take up a disproportionate amount of time of the implementing body
• Employees exhibit a typically negative reaction when they believe that management  “does not know what it is doing”, or that “management has not planned the process at all”. 
• The chances that a good policy or procedure can be created under stress and time pressure are considerably smaller than when time is available to research and formulate a proper approach.

The following issues are therefore suggested for prior consideration: 

2.1   Implementation date

There should be a clear decision on what the term “implementation date” implies.  The following possibilities exist:

• The date on which implementation commences
• The date on which staff placements are announced
• The date on which staff start working in their new capacities
• The date on which the entire process is completed

It is suggested that the third possibility (the date on which staff start working in their new capacities) should be the definition of “implementation date”.   

2.2   Completion date

What would constitute completion?  This date needs to be determined as a milestone, since all implementation activities would have to work towards this date.  As a rule of thumb, a major restructuring exercise requires a minimum of 3 – 5 months for staff placements to be resolved and implemented; 3 – 4 months for job descriptions and divisional duties to be finalized, and up to 12 months for the new structure to become fully effective and operational. 

2.3   Staff participation

To which extent will staff be allowed or required to participate, in terms of

• Their own placement
• The design of units of the organization
• The decision on phasing-over activities
• The determination of new working methods  

2.4  Outplacement policy

If there are likely to be staff members who cannot be placed in the new structure (or refuse to be placed in the new structure under the conditions laid down by management), how is this situation to be handled?  What sort of outplacement packages can be designed?  Will staff receive any other form of outplacement support, e.g. job search support, counseling, etc.?  What about the question of “voluntary outplacement”, where any staff member can apply for an outplacement package?  If this approach is followed, how do you retain the people that you cannot afford to lose? 

2.5   Design of new divisions and units

Who will be responsible for the final design of various organizational units?  The new managers? A structure committee? The new General Managers? The staff?  What are the non-negotiable elements of the design? 

2.6   Performance appraisal

An existing performance appraisal system needs to be adapted for the duration of the implementation process, since individuals will not be in a position to operate effectively in their new capacities for a period of time.  Hence, some additional requirements may have to be built into the system, e.g. support for the restructuring process and effective handling of phasing-over activities. 

2.7   OD vs. Delivery

An organization development process such as a restructuring exercise can take up a substantial part of the organization’s energies.  An approach would have to be found which places the necessary emphasis on continuing outputs during the course of the restructuring process.  If this is not done, a typical reaction of employees is not to undertake anything new (“since everything is going to change anyway”), or even to lose steam with regard to their normal activities.

2.8  Recruitment and selection

2.8.1   Resources

Specific resources will have to be budgeted for if recruitment by an agency is considered.  In addition, certain managerial resources will have to be tied up (time for briefings, interviews etc.) in order for the process to be successful.

2.8.2   Equity principles

A new structure with a number of vacancies provides a good opportunity for the recruitment of candidates in fulfillment of the Employment Equity Act.  It has been suggested, for example, that certain desk-bound positions in the new structure could provide excellent opportunities for wheelchair-bound individuals.  If this opportunity is to be used to best advantage, person specifications for the vacancies should be scrutinized carefully, and the recruitment consultants should be given specific indications in this regard. 

2.9   Temporary and contract staffing

It may be necessary to employ temporary or contract staffing during and immediately after the restructuring exercise.  Certain skills may just not be available amongst current staff, and the recruitment process might take just too long to enable permanent candidates to be appointed. Temporary appointments could extend as far as the managerial level.  If no internal candidates are currently ready for a managerial position, but managerial capabilities are required urgently, appointments taking the form of contracts or assignments could provide a solution.  

2.10    Communication

Effective communication is a key to successful implementation.  If regular, credible and objective information is available, this acts as a powerful discourager of rumours and “grapevine organization designs”.  Some successful restructuring exercises have gone so far as to specify that there will be a weekly communication with staff on the process, at a given time and according to a given mechanism, even if there is no new news to report.

2.10.1  With staff

The following should be communicated to staff:

• The policy framework
• The implementation plan
• Implementation progress  

2.10.2  With stakeholders

Stakeholders, including governance bodies and even clients, should receive regular information on both the strategy and the process of implementation. 

2.11   Job titles

It is preferable that job titles should be finalized in advance of implementation.  It may, however, be necessary to postpone this until the new organization has settled and operational procedures have become more defined.  Even if this is the case, a decision should still be taken to find some terminology that distinguishes management positions and their levels.  Neutral terms such as “Level 1, 2 and 3 managers” could be considered.

2.12   Training and development for the new structure

Any specific training and development required for the new structure should be planned in advance, if possible, so that certain training activities could take place as part of implementation (e.g. training for a new computer system).  Ideally, staff should be informed of training implications and opportunities during early communication. 

2.13   Handling disputes

A dispute mechanism should be considered, or at the very least an approach to handling disputes arising from the restructuring process.  It is exceedingly disruptive if unexpected disputes arise without any agreed approach on how to handle them. 

2.14   Role and responsibilities of the Board

If the Board is to have a specific role, e.g. running approval of implementation plans, or strategic guidance, this should be spelled out in advance, and the Board should be asked to make arrangements that members can be accessed rapidly for these actions. 

3 IMPLEMENTATION MANAGEMENT

Implementation for a new structure needs to be managed carefully, and a number of specific arrangements need to be put into place. 

3.1   Restructuring committee

A restructuring committee is recommended, rather than making the restructuring exercise part of the normal agenda of the EXCO.  The reason for this is that, at a normal EXCO meeting, standard agenda items tend to be considered first, following which there may not be time to give adequate consideration to restructuring issues.

3.1.1       Membership

Membership of the restructuring committee would tend to include most, if not all EXCO members.  In addition, members might be co-opted on Human Resource and other issues. In some organizations this committee includes a union representative.

3.1.2   Portfolio responsibilities

It is sometimes useful if individual members of the restructuring committee have specific portfolio responsibilities.  Whereas the entire committee might take decisions on various issues, the member in whose portfolio a particular issue falls would take the responsibility for ensuring that action takes place.

3.1.3   Formulating policy and procedures

The Restructuring Committee should ensure that all important policy and procedural issues have been discussed, approved and are in place before implantation commences. 

3.2   Task teams

The Restructuring Committee might appoint task teams to develop particular issues, for example initial Job Descriptions.  The various task teams would report to the Restructuring Committee on a regular basis. 

3.3   Planning meetings

Planning meetings should take place as often as necessary, but preferably at least once a week during the preparation phase when policy and procedures are being designed.   

3.4   Progress meetings

During implementation the course of events would tend to dictate how often the committee meets, but it has been known for a committee to meet daily during particularly complex parts of the implementation process. 

3.5   Communication

Communication must be regular (at least weekly) and up to date.  For this purpose the Communications Manager of an organization is often made part of the Restructuring Committee, but owing to the fact that the process might affect this person, it is not always possible.  If this is the case, then one of the members of the Restructuring Committee should be given the portfolio for communication, and should ensure that adequate briefing of the Communications Manager takes place. 

3.6  Ongoing delivery plan

During implementation, the Restructuring Committee should ensure that a regular agenda item is devoted to ensure ongoing outputs of the organization – regular business should carry on with the minimum of disruption, despite the fact that the restructuring process tends to take up a lot of time.  Keeping this issue on agenda will also provide a platform on which ongoing business developments may be considered in the light of their impact on the structure – for example, a staff member might propose a particular new approach, and the Restructuring Committee will be in a position to judge its relevance in the new structure.

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