Restructuring a business

[Johann D Landsberg]

I am currently busy with the restructuring of a small company (turnover less than 5 million p.a.) in the service industry.

Identifying the loss making divisions was the easy part.

It is far more difficult to identify which divisions must be closed down and which must be turned around.

[Dave A]

If it's that difficult to decide, maybe try setting a deadline for the problem divisions to turn themselves around.

[Johann D Landsberg]

Hallo, thanks that is not a bad idea. It seems that low productivity is a major contributor to poor results in some of the divisions.

[Danielle]

You could bring in a six sigma consultant... they specialise in business process re-engineering with a specific focus of with: cost reduction, efficiency, reducing wastage... etc

Know people in the six sigma industry if you are interested...

[Retha]

Ah....! Low productivity..... How many staff do you have? How many per function? In a small business so much revolve around the staff you have, and what they can and cannot do. If I were you, I would try to get to know a lot more about every staff member - especially their personalities, knowledge, strong points, weak points, motivation, interest, etc. Then I would try and build the posts arround the people that you have. I think that is one of the big advantages in a smaller firm, that you can do that. I would further see how I can build in small bonusses or commissions for measureable performance, and try and distribute that as evenly as possible.

[Johann D Landsberg]

The total staff compliment is abour 102 people dividid into 9 divisions. About 90 of the staff is unskilled labour, the result is a very high staff turnover. the balance is made up of supervisors technical and admin staff. I dont think it is a good idea to build posts around the existing staff. It is more important to define exactly what you expect of each position and then to fit the correct individual in that position. There is a bonus scheme in place but it does not fit the staff mix, I plan to change it to a scheme that reward the unskilled workers over a short time period and the supervisors etc over a longer time span. I think this will help with motivation as well as productivity.

[Justloadit]

Johan,

Be careful how you present the bonus scheme, worker logic does not work on rational lines. Make sure that the unskilled staff understand the rewards, as you may have a riot on your hands when the rewards are not forth coming due to a lapse in output.

[Retha]

It sounds very interesting. Please let us know what you have implemented and how it worked out!
That way we all learn!

[GuyP]

Johann, it's not clear whether you've considered this, but one of the key things in making your decision from an outside-in perspective is understanding the market those divisions operate in. Perhaps there is a misalignment between the offerings from those divisions and the markets which they participate in which makes them unviable.
If the expense involved in changing the business model (and consequently the operating model to suit) is horrendous, then an exit strategy probably makes sense, unless you can convince investors to invest in the redevelopment of that division given the realisable opportunities there.