Small changes to the economic landscape like a new competitor or a decrease in demand can cause really significant impact on a small business. When these companies are hit with hard economic times, many turn to restructuring as a way to save their business.
The restructuring process changes the strategy or direction of the business. Unfortunately, for many businesses this often means downsizing and the dismissal of in-house staff in favour of cheaper labour like outsourcing. If you’re considering restructuring your business, you may want to think about some of the advantages and disadvantages below.
Advantages
How you choose to restructure your business will be unique to you, however, there are some common advantages that result from the restructuring process.
- Decrease in operation costs – if staff are dismissed payroll expenses will be lower and outsourcing labour can be cheaper than in house.
- Increased efficiency and communication – restructuring often gets rid of non-essential layers in the management chain. This opens up the lines of communication allowing for increased efficiency and removes burdens on productivity.
- Increased operational efficiency – if your restructuring sees new technologies being introduced this can increase your operational efficiency. For example, introducing a new fintech could make it easier and more efficient to access business records.
Disadvantages
Like any business decision restructuring comes with its disadvantages that must be considered with care. When considering such a drastic move like restructuring the potential disadvantages for your business are often more important than the advantages.
- Loss of key skilled workers – this could result in a reduction in productivity. Reassigning the workload to another employee could result in a lower quality of work and expenses in training for that employee.
- Drop in moral – Downsizing is a time of uncertainty for employees. With their jobs on the line your business could suffer a drop in moral along with higher levels of stress in your work force. All of which make for an unproductive work environment which could impact customers.
- Re-training – If you are restructuring due to new technologies you may be spending extra money on training for your staff and a drop in productivity as staff get used to the new technology.
