Founder of VFDS Paul Collis FCCA, talks about the lessons he learnt being part of restructuring programmes with two FTSE 250 listed businesses, Savills plc and DTZ plc, during the last recession – the global credit crisis that began in 2007. This article is part-three of a three-part series on Restructuring.
In the previous two articles, I have talked about my own experience of being part of two different restructuring programmes, plus other types of restructuring programmes often used in business.
I am going to conclude by discussing about what actually happens on a day to day basis, as senior management embark on the journey of changing the way a business operates.
Appointment of external consultants
It is usual that once the decision has been made to undertake a restructure, a business will look to hire an external management consultancy to lead the programme. There are numerous benefits from hiring an independent third party to lead change within a business.
The external consultancy firm will typically have years and years of experience guiding distressed companies through stormy waters. They will cast a fresh pair of eyes over the business and take some of the pressure off senior management, who may be feeling a little battered and bruised from a tough few months leading the troubled business.
Senior management will usually approach two to three management consultancies to tender for the contract before making an appointment. If a company is in serious financial trouble and owes a substantial amount to banks, for example, the bank themselves may have a big say on which management consultancy takes on the work.
A business may opt to hire a consultancy that has industry specific knowledge – senior management can leverage on this to the benefit of their own organisation.
It may be the case that the senior managers have previous experience of restructuring and choose not to hire external help. However, this could be a costly mistake in the long run and if they get it wrong, it could end up with the business going into administration and ultimately being liquidated.
The appointment of a good quality management consultancy can come at a high cost, however, it could be the difference between the business surviving, jobs being saved, or ultimate failure.
Employees and their role during a restructure
The most important part of any business for me, are the employees. It is critical senior management communicate clearly and frequently with employees, throughout a restructuring programme.
Getting the ‘buy in’ from employees at the start of the project is very important – people can be naturally fearful of change and the last thing senior management need is employees who are demotivated and anxious about their own future in the business.
For a restructuring programme to have any chance of success, senior management and employees need to work closely and be led by the external consultancy – everyone needs to be pulling in the same direction.
The cooperation of employees depends largely on the man management skill set of the senior management team. Of course, not all employees will conform to a new way of working, however, its important they are treated fairly and respectfully throughout. It’s in everyone’s interest for the business to survive and come out the other side on a stronger footing.
In summary, I hope the three articles in this series have given readers an insight as to how a restructuring programme works in reality. Many businesses have come through troubled times and emerged even stronger and robust than before. A restructuring exercise should not be all doom and gloom, and I believe if business owners and senior managers act early enough, many organisations can weather this current storm caused by the Covid-19 outbreak and thrive on the other side.
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