Act now to recover: Launching your operational restructuring programme

There is no doubt current market conditions are tough for many businesses. Even the strongest businesses are experiencing unprecedented challenges, and many sectors have been forced to change fundamentally. Many organisations face a combination of commercial, operational and financial distresses that include declining product profitability, high fixed costs, budget cuts, under-utilised staff, covenant breaches and cash flow challenges, in addition to rapidly changing customer needs and competitor landscape. 

Over the coming weeks we will examine the essential first steps to help you navigate the journey to value creation, starting with taking swift and decisive action to preserve value and regain a level of stability. We will explore the four critical value levers of operational and financial restructuring, cash optimisation and strategic M&A mechanisms, and the tactics you can take to plan and implement these effectively to repair your organisation and take back control of its destiny. It all starts by acting now to recover.

Launching an operational restructuring programme allows management to take actions quickly and address these issues, generating rapid results around your urgent short-term cash needs and tactical short-term cost reduction. This is critical as it buys time and breathing room for the business to make strategic decisions and longer-term fundamental changes to drive a strong recovery.

An operational restructuring programme addresses a number of focus areas. Those options generating more immediate results include: 

• Headcount:

  • Having the right visibility of where and how people spend their time leads to a number of opportunities;

  • Rebalance staff across high / low cost locations;

  • Businesses can reshape headcount layers in the business or merge roles to improve individual staff utilisation;

  • Business units can refocus staff in the areas of higher demand which add greater value both to the customer and the business 

• Product portfolio and profitability analysis:

  • Reducing product complexity can drive down cost quickly, as a business operating in uncertain times it’s important to focus on core, profitable products and services rather than ‘nice to haves’;

  • Optimising direct costs through better input cost management, processes and capacity management can lead to long term results.

• Optimising third Party Spend:

  • Embedding commercial levers in key contracts allows for significant savings on core contracts;

  • While aggregating non-critical supplier spend allows for fewer overall suppliers and leaner supplier management activities;

  • Consolidating spend across categories and locations is also often overlooked, as managers focus on their own budgets instead of looking at business wide costs

Combining initiatives like these alongside tactics such as building supply chain resilience, corporate simplification and managed exits ensures a robust and comprehensive operational restructuring programme, with clear targets and results. 

It is key to take action sooner than later, to access and take advantage of a wider range of options on your road to business recovery.

Historically, operational restructuring programmes were looked at as something which only significantly underperforming businesses, or those in distress, needed to consider. In the current environment, launching an operational restructuring programme signals to stakeholders that management can take rapid and decisive actions, setting them apart from their competitors and enabling them to continue to invest in key growth areas that will set the business up for future success. This agility and strategic opportunism is essential not only to a fast recovery, but for emerging even stronger than before.