Corporate Restructuring: Definition and Design


Corporate Restructuring is a strategic decision. A corporate takes action to significantly modify the financial and operational aspects of the company through corporate restructuring, usually when the business is facing financial stress. Also, Companies change their business operations and business portfolio in order to assess more profitable business options through the process known as Corporate Restructuring.. In corporate restructuring, there are either operational or functional structure changes or changes in the business model of the company.

Designing Corporate Restructuring Program

Corporate Restructuring is a very crucial strategic decision for any corporation as it includes heavy finance and company’s crucial resources. The decisions taken will have a long-term impact on the company therefore, corporate restructuring is designed or conducted with proper planning and  there are some considerations for restructuring :

Assessing Organizational Competencies and Strategic Capabilities

Before any restructuring, it is essential to assess the internal components of the organization that need restructuring i.e. vision, mission, objective, ideology, culture and strategies, organizational structure, management capabilities, financial and non-financial resources and competencies  etc. Accessing the true standing of the company and designing the restructuring program accordingly requires an understanding of all these aspects.

Corporate Restructuring Techniques
Assessing reasons and need for change

Corporate restructuring strategies are difficult to undo. Therefore, Strategic planning is necessary for corporate restructuring. Before embarking any change, it is must to cope with the need for the restructuring. The management and the concerned authority should assess all the reasons for the change and should justify all the reasons for the change.

Before initiating any restructuring, it is important to assess and well define all the forces associated with the company.

Determining what is needed to be changed

Once we have the answer for why we need to go for restructuring, we should focus the attention towards what needs to be changed. There might be multiple options for restructuring and there might be different approaches to restructure the company and all these factors might impact the business in different ways. For this, management has to decide and come to a conclusion regarding what is to be changed.

In the same process, we need to assess whether the change needs to be radical or subtle and what value will it add to the process, product or service. Management teams need to consider whether the organization is capable of conducting the change and what possible impact will the change make in the situation.

What needs to be changed is greatly influenced by the organizational mission, vision, leadership, long-term and short-term objectives, management composition, organizational culture, resources and capabilities available etc.

We need to evaluate the changes that we need to make and understand the possibilities.

Understanding environmental reactions and analyzing them

An organization has different stakeholders and restructuring decisions directly or indirectly impact all these stakeholders differently. For such a crucial decision, one needs to understand the needs and expectations of all those stakeholders. Their decisions depend on the perception, circumstances and understanding of the process.


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