Restructuring is one of the many business rescue tools that can be used to help turnaround a company’s prospects. As the name suggests, ‘financial restructuring’ involves changing a company’s financial structure and processes to improve profitability, but what is ‘operational restructuring’? Sharing the same aim of making the business more profitable, operational restructuring assesses areas of the company that are underperforming and implements recovery strategies to make day-to-day running operations more efficient. The process does not involve looking at the company’s finances, although operational and financial restructuring often go hand in hand in a company rescue plan.
Now that we’ve established the definition of ‘what is operational restructuring’, let’s take a closer look at some of its key aspects. These include:
Selling/Closing Down Underperforming Parts Of The Business
When discussing the topic of what is operational restructuring, it’s essential to emphasise the importance of analysing the current state of the business in order to find the root cause of the issues. A central part of this is looking at areas of the business that are underperforming or that have become redundant. Selling or closing down certain areas of the business will help to reduce costs going forward, and may allow companies to make a profit through the sale.
Rationalising Parts Of The Business
When it is not worthwhile or viable to sell or close down a part of the business, it may be possible to rationalise certain areas of the company. This involves simplifying processes, such as conserving resources or replacing old machinery in order to minimise costs and increase revenue. Often very small tweaks can make all the difference in turning the prospects of a business around.
Identifying Skills Shortages Within The Team
In order for a business to operate successfully, it’s essential that its employees and management team are doing a good job. Inefficiencies within the team can impact how effectively the company is operating, which, if left unchecked, can have an impact on profitability. That’s why a key part of ‘what is operational restructuring’ is identifying skills shortages within the team, and addressing this by providing more training, adapting team roles or making redundancies and replacements where necessary.
Recommending Cost Reductions
When thinking about the question of what is operational restructuring it’s also important for companies to look at their costs vs revenue. This will allow them to see which areas of the business operations are helping them make money, and which products and services are slowing them down. As a result, a restructuring process can be implemented that will help to reduce overall costs.
In summary, operational restructuring is an efficient method for rescuing a struggling business, that is most effective when used in conjunction with over recovery processes. If your business is struggling and you would like to hear more about the options that might be available to you, please don’t hesitate to get in touch with our experienced team at Ballard Business Recovery today.
