Organization Restructuring
Restructuring is the act of changing the business model of an organization to transform it for the better in order to increase efficiency. Organization restructuring can be human resource, legal, operational processes, ownership, among others. This can be caused by internal or external factors.
Reasons for Organizational Restructuring
- Changing business environment
- New methods in organization operation
- When an organisation is bought by another
- Change in business model
Types of Organizational Restructuring
1. Mergers and Acquisitions
This restructuring takes place in case of a merger or acquisition. A merger is a situation wherein two companies combine to do business. An acquisition is wherein a company absorbs another by buying the entire stake in the business.
2. Legal Restructuring
A restructuring as such takes place when the changes in a company pertain to legal norms. These can be changes in ownership, legal business paperwork, agreements, etc.
3. Financials
Financial restructuring arises when there is a change in the capital structure of the business. These can be changes in debt structuring, equity, etc.
4. Repositioning
This change pertains to a transition to a new business model. An example of this can be when an IT firm selling software products changes to being a service provider.
5. Cost-Reduction
A cost-reduction restructuring takes place to cut costs in the administrative and operations section. These can be automating procedures, downsizing, etc.
6. Turnaround
Turnaround is the restructuring of a huge part of the company. It involves changes in the operations side, administrative, products, or services.
7. Divestment
Divestment is a restructuring procedure wherein a company sells an underperforming part of the business in the market.
8. Spin-Off
It is a restructuring process that employers use to attain a higher valuation of a part of the company. It involves making a particular business unit to be a company in itself while retaining ownership.