Restructuring is not a dirty word

dial pointing to optimisationThere is a saying: “If you always do what you’ve always done, you will always get what you’ve always got” variously attributed to Anthony Robbins, Albert Einstein, Henry Ford and Mark Twain.

Whoever said it, the phrase is particularly appropriate for businesses, from SMEs to larger corporates, in that no business can afford to stand still, even when things are going well.

Economic environments and business circumstances change as time passes and so should business plans, models and methods in a process of continuous improvement. If not, a business that was previously performing at the top of its abilities compared with its competitors can rapidly start to drift through inertia into potential failure.

An obvious example of this drift has been the well-known chains in the retail sector, which went through phases of presence on every High Street to shifting to large stores in edge of or out of town retail parks.

Then, when the pace of closures started to accelerate, it became clear that they had failed to factor in the growth of online shopping or react with agility to the challenge it presented.

Inevitably some went into administration and could not be saved, such as Woolworths and more recently BHS. Could they have been saved if they had been less complacent?

A proportion of consumers say they would still prefer to be able to inspect goods before they buy them, but it took a while before the retailers restructured and developed a model that satisfied both online and in-person shoppers – whether easy return by post or click and collect – and those that did have survived and remained profitable in what is a difficult market.

Manufacturing, banking,  estate agency, even legal services are all examples of industries that are undergoing a radical transformation with many individual examples of businesses that are going bust having failed to evolve.

So why does restructuring have such a negative image?

Sadly, many businesses that end up in need of restructure and turnaround leave it too late, until after an insolvency practitioner has been called in because they are in financial difficulties.

This, we believe, is why there is such a stigma attached to the word “restructure”, when actually it could be seen as a positive, agile and forward-looking initiative.

It may be that some have practised continuous improvement to update their business plans, but have lapsed in their rigour.

One issue is that change tends to involve investment in people, premises, equipment, process and marketing which can be expensive and tends to have a negative impact on short term profits. Incentive packages for professional managers have contributed to such short term thinking.

Investment like continuous improvement can involve constantly updating to stay current with the latest developments in an industry, where all too many treat it as a one-off activity that plants the seeds of future failure.

In a fast-changing economic world it does not take long before performance, sales and revenue start to slip, supplier prices perhaps start to rise and before they know it they are facing a cash flow crisis.

In fact, calling in a restructuring adviser when things are going well means a business has access to an objective outsider with the knowledge and expertise to assess their business model and processes and suggest improvements that will help a business to remain prepared for whatever the future may bring and to plan ahead for the investment they may need to make in such things as automation and new technology.

Whether restructuring, turnaround, change or transformation it should be seen as a positive initiative.

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