03.12.2019

Restructuring requires expertise, vision and great empathy

By Dr. Ronald Roos

 

Even successful companies have great difficulty retaining qualified employees. And yet motivated, independent-thinking and acting people are the prerequisite for maintaining your ground in a rapidly changing competitive environment. The demands on management are already more complex overall, then the management task of restructuring is even more challenging. Particularly if employees’ expertise and knowledge continues to be needed for some time, but letting them go is unavoidable. 

The support of internal staff is a key success factor

Tough decisions and even letting staff go is unavoidable in restructuring. Restructuring measures need to be worked out and the work performed by departing colleagues redistributed. Accordingly, the stress levels and workload of all employees who are also concerned about their personal future also increases.

They are faced with an external manager charged with the restructuring, who has to develop a new perspective for the company without long-term knowledge of the details and background. If he does not succeed in winning over the internal staff, this will result in disproportionately high costs for management consultants, lawyers and accountants – otherwise the restructuring fails completely.

Solid as a rock

Excellent technical and implementation expertise, analytical skills, fast decision-making capacity and a tolerant demeanor when faced with frustration – these are just the basic requirements of a good restructuring manager. The crucial factor, however, is the ability to persuade people even in complex situations and get them committed to an objective. Absolute honesty is the basic prerequisite for this. False promises should never be made. Unpleasant decisions – particularly letting staff go – always need to be communicated openly and in a timely manner. Otherwise this creates an irreparable loss of trust.

If restructuring managers behave fairly with employees, then the latter are generally happy to get involved with the remaining tasks. Many still have the ambition to do an excellent job in the remaining time.

The existential dimension is of particular importance here: many employees are afraid that they will lose their economic livelihood. It is therefore essential that clear contractual arrangements are made relating to planning security and monetary incentives: payments to employees for remaining during the transition period, bonuses for success and severance pay, as well as the termination date of the employment contract, need to be agreed as soon as possible. The sooner there is clarity about these matters, the quicker employees will return to completing their work in the remaining time.

The wrong cost argument

The focus is often on saving personnel costs. By contrast, the significant and often skyrocketing costs of lawyers, management consultants and auditors is often overlooked. As a result, the savings made by the premature departure of key members of staff is often exceeded many times over by the additional cost of external support. We became very clear of this when disposing of a business unit. The legal signing of the sale only came into effect months after conclusion of the purchase contract. We would have been forced to contract external consultants to complete the remaining work and handle the transaction if the responsible employees had departed too early. The cost disadvantages would have amounted to hundreds of thousands of euros due to the necessary training time and high daily labor rates.

Consultants undoubtedly play an indispensable role in restructuring. But any escalating burden on the company needs to be prevented. The experience and knowledge of the existing team fundamentally needs to be secured with complex contract relations or long-term projects.

What remains

Clear analysis, hard decisions and fast execution are an imperative with restructuring. By contrast, unfair and ruthless ways of dealing with people are inexcusable. It’s all about respect, transparency and appreciation. It is precisely in difficult situations that economic success and fair employee relations become mutually dependent.


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