What is the best way for my business to approach redundancies and restructuring?
Retailers are often ruthless in cutting jobs when things are tough. But the cuts often come too late, and very often companies seek growth in the good times without thinking through how to structure the business to survive tough times.
John Maloney, a director at Alix Partners, says: “There are three key ways to get the best from restructures. The first is to cut regularly based on performance. The healthiest growing retailers make restructuring a regular habit – often through an annual round of performance-based restructures.”
He adds that while it’s a hard discipline, it’s one that ensures that the business is constantly challenging itself, and it counteracts the tendency of businesses to accumulate fat as they grow. Regular cutting also ensures employees are rewarded for good performance but also that poor performers leave the business.
The second step is to learn how to scale up and scale down. Maloney says: “10% growth with only 5% cost growth is a recipe for success. The best companies establish supply chains and IT platforms that can be scaled up or down, and make costs variable where possible.”
Third, when deep cuts are needed, it’s wise to take a strategic approach. A 20% across the board cut will damage the business, says Maloney. “Making sure you take the time and resources to think through where and how to restructure can mean putting the business onto a better path. As the business recovers it is also important to establish better cost discipline in future,” he says.
One final lesson is to get buy-in from the team. The key to success and long-term improvement is to get the top two or three layers of management to understand the changes and move forward.