How can you tell if a company needs restructuring?

1 Low profitability

One of the most obvious signs that a company needs restructuring is low profitability or negative cash flow. If a company is consistently losing money or failing to generate enough revenue to cover its expenses, it may need to restructure its business model, product portfolio, pricing strategy, or cost structure. Low profitability can also affect the company's ability to pay its debts, suppliers, employees, or taxes, which can trigger legal or financial consequences.

2 Poor performance

Another sign that a company needs restructuring is poor performance compared to its competitors, industry standards, or customer expectations. If a company is losing market share, customer loyalty, or brand reputation, it may need to restructure its marketing, sales, or customer service strategies. Poor performance can also result from internal factors, such as low productivity, high turnover, or low morale, which may require restructuring the human resources, culture, or leadership of the company.

3 Inefficient operations

A third sign that a company needs restructuring is inefficient operations that waste time, money, or resources. If a company has outdated systems, processes, or technologies, it may need to restructure its IT, R&D, or innovation capabilities. If a company has redundant, overlapping, or conflicting functions, departments, or units, it may need to restructure its organizational design, governance, or communication channels. Inefficient operations can also stem from external factors, such as changing customer needs, market trends, or regulatory requirements, which may demand restructuring the value proposition, differentiation, or positioning of the company.

4 Strategic misalignment

A fourth sign that a company needs restructuring is strategic misalignment between its vision, mission, goals, and actions. If a company has unclear, unrealistic, or inconsistent strategies, it may need to restructure its strategic planning, execution, or evaluation processes. If a company has divergent, incompatible, or conflicting interests, values, or cultures among its stakeholders, it may need to restructure its stakeholder engagement, alignment, or integration efforts. Strategic misalignment can also arise from external factors, such as new opportunities, threats, or disruptions, which may require restructuring the vision, mission, or goals of the company.

5 Crisis management

A fifth sign that a company needs restructuring is crisis management that affects its normal operations, reputation, or survival. If a company faces a sudden or unexpected event, such as a natural disaster, pandemic, cyberattack, or lawsuit, it may need to restructure its risk management, contingency planning, or recovery plans. If a company experiences a prolonged or chronic issue, such as a scandal, fraud, or bankruptcy, it may need to restructure its crisis communication, reputation management, or turnaround plans. Crisis management can also involve external factors, such as stakeholder reactions, media coverage, or public opinion, which may influence the restructuring process and outcomes.

Restructuring can be a complex, challenging, and costly process that requires careful analysis, planning, and implementation. However, it can also be a beneficial, rewarding, and necessary process that can enhance the performance, competitiveness, and profitability of a company. By recognizing the signs and indicators that a company needs restructuring, you can take proactive steps to address the issues and seize the opportunities that restructuring can offer.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?