Business and Organizational Restructuring And Its Implications in HRM

  1. Communication with stakeholders

Restructures bring out anxiety in both employees and management, so it is important to ensure constant communication to these stakeholders. Talent Readiness advises that HR’s role is to communicate with management and any external stakeholders on the direction and progress of the restructure.

For employees, on the other hand, HR should clearly build a communication strategy to outline the purpose of the restructure, as well as address concerns and reaffirm business goals to maintain employee commitment. It is also important to communicate information on job implications (compensation / benefits / redundancy) and the supporting HR programs or policies in place to help address employees’ concerns.

  1. Managing employee productivity

During the restructure, it is important for the business to continue running and performing at its optimal level, so a critical component of HR’s role is to manage employee productivity. Restructures are a time when employees lose focus on their work, brought on by the fears of being made redundant.

At this time, HR’s motivational programs become more important than ever. So HR Managers must invest in the time to develop plans, and set measures and incentives to keep employees engaged. Talent Readiness recommends that HR Managers use celebrations, rewards and visible scorecards to ensure employees are focused, committed and that client projects aren’t negatively impacted.

  1. Retaining critical employees

Restructures may provoke sudden departures of employees or management. It is HR’s role to develop employee retention strategies to compel remaining employees to stay with the organization.

Demand Media recommends that HR Managers do some research and identify the most appropriate retention tactics. This may include bonuses, employee training, internal promotion opportunities, as well as improving workplace policies and procedures.

Executive employees, or those employees who are key to the organisation’s success, will need a tailored approach, according to Workplace Info Australia. HR Managers must take into account their entire package including compensation, benefits, provisions, tax issues, etc.

  1. Managing payroll and records

Whilst payroll and record management are mostly administrative responsibilities, it is one that must not be overlooked. Workplace Info Australia notes that some organisations fall into the trap of underestimating the role of the HR back-office and responsibilities such as payroll.

Payroll transactions and record management are very important to manage, especially during restructures as the company’s credibility is at stake. Proper management of this will help restore employee confidence in the organisation. HR Managers must make sure the HR team is clear on their roles during the restructure.

Of course, an HR Manager’s responsibility during an organisational restructure extends beyond the four we covered. But these four concerns highlight the significance of the role of the HR Manager in an organisation. It is therefore important that HR Managers have the right support system in place (through the right HR tool or the right HR team members) to help them manage the restructure efficiently.

While organizational restructuring aims to make a business more efficient, it can also have negative consequences. Before making significant changes to your business structure, consider all of the positive and negative impacts your changes might bring.

Implications in HRM

More Control

One way to restructure an organization is to create departments to handle tasks you previously outsourced. This might include hiring a full-time bookkeeper, information technology person, human resources manager and marketing director. Unlike contractors, employees are at your beck and call, with no other boss to work for, giving you more control over their work.

Improved Efficiency

When many businesses launch, a handful of people often share the large workload associated with running a company. This can lead to different areas of your business being underserved as employees multitask and make choices about what work to put on a back burner. Restructuring results in stronger employee job descriptions, brings specialists to work in each area and results in more accountability and greater focus on individual tasks. A common example of an organizational restructuring improving efficiency is moving human resources out of accounting and creating two separate departments.

Increased Administration Work

As you restructure, you might find you have more administrative work, especially if you hire more employees. In addition to recruiting and training new hires, you must manage them, spending time on departmental goal setting, budget planning and weekly meetings. Before you can create a company budget, for example, you will need your managers to submit budgets for each of their areas and you’ll need to review them before you can begin working on your master budget.

Cost Implications

An organizational restructure can increase or decrease costs, depending on the type of restructuring. For example, if you bring contracted work in house, you will initially increase your costs as you hire new employees but save money in the long term as you eliminate high contractor fees. As you add multiple employees to departments, your overhead costs will increase. If you add sales and marketing staff, their efforts should lead to more sales and revenues that directly pay for their costs. If you add additional finance or human resources staff, they won’t increase your sales, although they might improve your efficiency and prevent decreases in productivity.

Cultural Changes

When a business has a flat organizational structure, where only a few employees report directly to the owner, top staff members have more autonomy and authority. If you restructure by adding departments, former key staff members become one step removed from the boss, often working under a chief operating officer or chief financial officer. If a department such as marketing splits into advertising, sales, promotions and public relations, former allies begin to mark their territories to protect their budgets and their places in the company hierarchy. If the restructuring is a downsizing or consolidation of departments, those who remain might band together in groups they feel offer the best chance for survival and job security.

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