How to restructure your company

Restructuring can help improve your company’s prospects. However, it is often a difficult process and will generally affect your staff and the atmosphere in the workplace. Good preparation, realistic planning, and clear communication are essential. Management consultant Wilco Bontenbal and psychologist Angela Koolmees share their advice.

When times get tough, you have to make difficult decisions to keep your business running. Restructuring your company should be a last resort. There are lots of other things you can do first:

• Start saving on costs and luxury expenses, such as staff outings. This is fairly easy to do.
• If cutting costs alone does not help, you can restructure your company without cutting jobs. This involves letting temporary contracts expire, not replacing workers leaving on their own accord, and requesting short-time work for employees.
• Other forms of restructuring include eliminating departments, closing branches, creating new positions, or starting new business activities.
• If you need to do more, explore ways to restructure wage costs. You want to keep your company afloat and retain staff, but this is not always possible.

In some cases, restructuring is unavoidable. The roadmap below can help you decide on the best approach.

Restructuring roadmap

Restructuring your company is a complicated process. Bontenbal and Koolmees share 7 steps with tips and advice on how to guide your company and your staff through these difficult times.

Step 1. Prepare diligently

“Start by clearly describing why your company needs restructuring. Simply blaming a crisis or economic downturn will not cut it”, Bontenbal explains. “The real reason for restructuring is that you want your company to keep performing, so that you can offer jobs to as many people as possible. Investigate why your company is not doing well. How big are your losses, liquidity issues, or lack of work issues? And why is your company struggling?”

“This is the time to check whether your HR records are in order”, Bontenbal stresses. “Are your job descriptions still accurate? Are there any evaluations or reviews that you can factor into your decision? You can use this information to draw up an action plan and decide whether you need new positions or will have to reassign staff. Tip: If possible, involve an HR officer.” Alternatively, you can enlist the services of an HRM consulting firm or attorney.

Step 2. Draw up an action plan

Once you know why you need to restructure the company, make an action plan. Describe the following four points as clearly as possible:

Determine the objective of the restructuring plan

Determine what you want to achieve by restructuring the company. Your objective should always have a valid business reason. If you have seen sales dry up because of the war in Ukraine? Then your goal may be to rebalance your headcount compared to the amount of work available. Make your objective SMART to make what you want to achieve and why as clear as possible.

Outline your current situation

Get a clear picture of the situation as it currently is. You will need this information in the following steps. Is staff selection necessary? Then make an overview of employees' years of service or all current positions. Study all the information you can find, such as employment contracts, collective labour agreements, and financial statements. Contact your works council, bank, accountant, or Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV) for advice and information.

Make choices

Use the information you have gathered to decide how you will be restructuring your company. Will you cut certain positions, shut down departments, or reassign employees? The outcomes of these choices should help you achieve your objective. Again, you can choose to seek advice from your works council, accountant, industry organisations, UWV, or a corporate lawyer.

Set a timeline

Create a timeline for your plans. A clear timeline will create a sense of calm in the organisation and preserve the momentum of the restructuring process. Keep in mind that certain procedures take time. A request for advice from your works council, for example, may take 6 weeks. Start with the steps that are unavoidable and of little consequence. Add key decision moments and the dates you expect a response from the works council and other advisors to the timeline.

Advice on creating a timeline

• Take your time to restructure properly while striving to complete the process as quickly as possible. “Drawn-out restructuring processes demotivates your staff”, Koolmees explains. “Depending on your financial position, the whole process can take anywhere from 1 to 2 months.” Bontenbal has also seen more prolonged restructuring processes: “Ultimately, it can even take up to 6 months, especially if you want a sound consultative process with all parties involved, such as the works council.”
• This is the phase in which you should decide whether to draw up a social plan. In a social plan, you lay down the joint arrangements and provisions for the remaining and departing staff.
• Create an action plan with a small team. Involve co-owners and board members, HR, and preferably a third-party adviser (in Dutch), such as a management consultant. Ask managers to provide information on employees. Involving managers at an early stage helps prepare them for questions from employees.

Tip: If you are struggling to come up with a plan for the future, use the Business Model Canvas.

Step 3. Plan your first announcement

Plan when you will first announce your plans. Remember that restructuring processes can leave employees feeling insecure, so keep the message short and concrete.

“Vague messages and soothing words benefit no one”, Koolmees points out. “You are not giving your employees good news. Still, it is important that they know what is going on. If you do not explain your reasons for restructuring, people will feel unimportant. Many people have told me so. Give your staff time and space to respond, share uncertainties, and ask questions. Answer tough questions, too. This will make your employees feel like you are in it together and that they are not alone.”

If you will be forced to lay off staff within a few weeks, explain why. You could explain, for example, that you will be unable to pay them starting next month.

Step 4. Listen to your staff

Assemble a larger team as soon as possible with people to provide feedback on all your plans. “Make sure to involve managers and employees”, Bontenbal recommends. “If you have eyes and ears in the organisation, you will know what questions people are asking and how they are feeling. Putting together a team that represents every level of your organisation works best. Older employees who have been with you for years will feel differently than young employees who have only ever had 2 employers.”

“Let your employees know how things are progressing”, Koolmees adds. “You could consider giving a 10-minute update every Friday, for instance. Even if you have no new updates, let people know. That way, they will not feel that you are holding something back and will be less likely to make assumptions. For example, if the manager does not greet them, they might think they will be fired. By keeping employees informed, you avoid negatively affecting productivity and team atmosphere."

Most people who Koolmees has spoken to are concerned about their income or report feeling irrelevant. “Offer mental or psychological support. Employees usually appreciate having an independent counselor who they can confidentially share their feelings with. Supervisors can also help by giving employees compliments as a token of their appreciation. Make sure you frequently speak to those involved face to face. Ask them how they are doing and how they are coping with the situation.”

In Bontenbal’s experience, some business owners also talk to the team about their future plans at this stage of the restructuring process. “The advantage of this approach is that team members feel involved in the process. It is important, however, to stress that there is no guarantee that they will be part of these future plans.”

Step 5. Decide which employees you want to retain

The next step is to figure out which employees you can afford to keep on. According to Bontenbal, there are several ways to approach this. “For example, on the basis of the 'man follows work' principle (in Dutch), where an employee is entitled to his job when that job remains. The ‘last in, first out’ principle (afspiegelingsbeginsel, in Dutch)determines the order of dismissal, with the person with the shortest employment having the highest probability of dismissal. With ‘selection and matching’ (in Dutch), you look at who is suitable for which (new) position. New employment conditions may apply. Look carefully at which laws and regulations (in Dutch) apply to your company."

If you have to dismiss 20 or more employees within one working area of the UWV within three months for economic reasons, it is called collective redundancy. You must then submit a notification of collective redundancy to the trade unions and the UWV before or at the same time as the request for advice to the Works Council.

Step 6. Inform employees who are being laid off

Koolmees recommends personally informing the employees who will be made redundant. “Losing your job triggers a grieving process, which everyone experiences differently. Tell people that you have to let them go as respectfully and directly as possible.”

Koolmees:

• Take your time and be open. Show that you are there for your staff by listening to what they have to say.
• Offer mental or practical support. They may want the opportunity to share their concerns and feelings, for example. You can also help them prepare for a job interview, create a LinkedIn profile, or update their CV.
• Give departing employees a dignified farewell with a personal touch. You could consider sending them a handwritten card.
• Alternatively, ask your network to help former employees find a new job.
• Call people who were laid off after a month to ask them how they are doing.
• Deliver the message personally. One good option might be going for a walk together. If you are forced to use a digital medium, let your employees know that you want to have a personal conversation with them. This gives them the chance to find a quiet place to talk, where they will not be disturbed or interrupted by their kids.

Laying off employees costs money. It may be more beneficial to offer your staff a severance package. Koolmees gives an example: “Suppose you have to cut wage costs 40%. Instead of resorting to layoffs, you can give people the option to leave on their own accord. Tell them about the transition payment and offer to help them find a new job. This shows that you care about the people who work for you. Besides, being transparent will inspire faith.”

Step 7. Finalise the restructuring and look ahead

The final phase consists of updating your payroll records. Employees leaving the company will have to hand over their work. Some employees may have to be retrained or upskilled. This is the time to (further) redesign your organisation. Sit down with your staff to explore ways to do the same amount of work with fewer people. Or decide which work will be less important in your newly restructured organisation.

Want to know more about the rules for restructuring?

Information on laws and regulations governing staff and dismissal for business reasons can be found on Business.gov.nl and UWV‘s (in Dutch) website.