Restructuring an organisation

Sometimes, a business may decide to restructure its organisation. This involves organising the company in a new/different way in order to make it operate more effectively.

The decision to restructure an organisation can be made for a range of different reasons, such as:

  • To make the business more profitable
  • To make it better organised to achieve a particular aim or objective
  • A change in the ownership of the business
  • To help the business respond to or cope with a crisis or major change

Two of the ways in which an organisation may be restructured are delayering and redundancy. Click on the buttons below to learn more.

Delayering

Delayering an organisation involves removing one or more layers/levels of management from the structure of the organisation. Removing layers of management will reduce the organisation’s costs, while the remaining staff are expected to produce the same level of performance.

Redundancy

If an organisation has to end a worker’s employment because the work that the person does is no longer needed by the business, this is known as redundancy. For example, an employee may be made redundant due to:

  • Machines being used to perform tasks instead of the employee doing them
  • The organisation not performing well and therefore needing fewer employees to carry out activities
  • The organisation being closed down completely, meaning it does not need any employees

The law states that, if an employee is made redundant and they have worked for the organisation for at least two years, the organisation must pay them ‘redundancy money’ – this is compensation for the fact that the person is losing their job. The law also sets out the minimum amount of redundancy money that must be paid (although some organisations choose to offer more than the minimum amount).

If an organisation decides that it needs to make redundancies, the first thing it may do is ask for voluntary redundancies. This is when people choose to be made redundant, perhaps because they would receive a good amount of redundancy money, they may be close to retirement age or perhaps they are ready to leave the organisation and seek a change in job role elsewhere.

Delayering an organisation can offer both advantages and disadvantages to a business. Click on the icons below to find out more.

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Advantages of delayering

  • It saves money for the organisation – salary costs are lower, as fewer managers are employed.
  • Communication is improved, as there are fewer levels to pass messages through.
  • Managers that are still employed within the organisation can become more closely involved in key operations (for example, managers may come into closer contact with customers of the organisation, which can lead to better customer service/satisfaction).
  • Employees in the organisation may benefit from increased opportunities to take on extra responsibility – as the number of managers in the organisation is reduced, then more authority is passed down to other members of staff. They are trusted to make decisions and take on more authority, which can make employees feel motivated, confident and satisfied in their role.

Disadvantages of delayering

  • Some organisations may find that their operations are negatively affected when it ‘delayers’ to become a flatter organisation. This may impact on the overall performance/success of the business.
  • Job losses can have a negative impact on staff motivation – when people leave the organisation, employees that remain can feel unsettled in their work and worry about the security of their own job.
  • The organisation may not perform effectively during the period following delayering, as everyone adjusts to new roles and a new way of working.
  • The workload of employees remaining in the organisation will increase, as they take on responsibilities of managers who have been removed from the organisation structure. There is a risk that this increased workload may become too much for staff to cope with.
  • The organisation may lose members of staff who have valuable skills and experience, which can be difficult to replace.
  • While some employees will enjoy the extra responsibility/authority that comes from delayering, there may be members of staff who do not enjoy the added pressure that this brings.