When Should a Business Consider Restructuring?
Every business faces a pivotal moment when confronting the question: Should we restructure? The mere mention of corporate reengineering often triggers fear, anxiety, and even panic. This fear is so pervasive that some CEOs avoid restructuring initiatives at all costs. There are business theorists who caution against complex reorganizations due to the inherent risks. But since when did fear and avoidance become hallmarks of a successful CEO? Real leaders demonstrate courage, vision, and a bias for action. In today’s article, we explore the benefits and necessity of corporate reengineering.
Why Great Leaders Embrace Change
In a previous post, Leadership Is About Breaking Things, I emphasized the need to relentlessly challenge the status quo. Running a business isn’t a static endeavor; it requires constant adaptation and innovation. If change and innovation weren’t essential for sustainable success, a company could be managed on autopilot by a general manager. But the reality is that few things demand as much fluidity as growing revenue, increasing profits, and building brand equity.
CEOs who do not consistently reengineer aspects of their business typically fall into one of two categories:
- They believe their business is perfect.
- They are ineffective in their roles.
What Sets Great CEOs Apart?
When a business model, strategic plan, and revenue goals misalign, what do exceptional CEOs do? They act. They don’t sit idly by while the business loses market share, margins erode, or brand value declines. Great CEOs are decisive; they make the tough decisions they are paid to make. Confronting reality and making often painful structural changes are the hallmarks of effective leadership.
As the year draws to a close, ask yourself: Who and what won’t be part of your business next year? And who and what needs to be added to drive future success?
Defining Reengineering and Restructuring
To clarify, here is a working definition: “Corporate Reengineering is when leadership identifies, takes ownership of, and acts to correct strategic or tactical flaws or realigns elements of the enterprise to adapt to current or anticipated market changes consistent with the corporate vision.”
This isn’t complex; it’s just sound leadership. In fact, it’s a CEO’s fiduciary duty to make necessary changes to protect and enhance shareholder value.
Why Do Some CEOs Avoid Necessary Changes?
Why do many CEOs avoid making necessary changes? Often, it comes down to a lack of skills, an inadequate executive team, a failure to recognize the need for change, or sheer indifference. Fortunately, each of these problems has a solution: leadership development and talent management can address the first three issues while holding the board accountable can remedy the fourth by replacing an apathetic CEO.
Six Key Signs Your Business Needs Reengineering
How can you tell if it’s time for a reengineering initiative? Consider these six warning signs:
- Declines in Revenue, Margins, Market Share, Customer Loyalty, or Brand Equity: Any unusual decline in these areas should raise a red flag.
- Stagnant or Slow Growth: Even if the above areas are not yet in decline, a lack of growth signals a problem.
- Inability to Recruit or Retain Top Talent: Struggles in attracting or keeping tier-one talent can indicate deeper issues.
- Changing Market Conditions: Anticipated shifts in the market that threaten your business model require proactive adjustments.
- Obsolete Offerings: Aging intellectual property, products, services, or value propositions need refreshing.
- Missed Opportunities: The biggest reason to reengineer is to seize opportunities. If you’re not organized to exploit them, they will pass you by.
Conclusion: Act Now to Prevent Business Decline
Bleeding—whether slow or rapid—can be fatal for a business if left untreated. If your company is involved in products, services, or markets you wouldn’t choose today, it’s time to exit. Stop the losses and reinvest resources into more profitable areas. Corporate reengineering is not an evil; it is a necessary strategic move for business survival and growth.
What are your thoughts? Are you prepared to make the tough calls and lead your business to a stronger future?
