What is organizational restructuring?


Quick Answer

Organizational restructuring is the process by which an organization changes its internal structure by revamping departments, ownership, or operations and processes. The purpose of restructuring is to make the organization more profitable and integrated. Restructuring is usually a result of a merger, lackluster profits or a change in overall goals.

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Full Answer

Restructuring is usually a major change for an organization involving multiple departments and locations, computer systems and networks, legal ramifications and major changes in procedures and processes. When two organizations merge, there is often an overlap of positions, and restructuring can lead to the deletion of jobs and the layoff of personnel. Executives involved in restructuring often hire financial and legal advisers who assist with the details and negotiations. The restructuring may also be done by a new CEO hired specifically to lead the company through the transition. Restructuring generally involves financing debt, selling portions of the company to investors, and reorganizing or reducing operations.

Theoretically, restructuring leads to a more centralized, efficient and streamlined entity. The restructuring process must consider employees' ability to adapt as well as the efficiency of the machine of the organization. After employees have adjusted to the changes, the new environment should enable the organization to better focus on its goals, while working with more suitable strategic and financial plans.

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