9 Signs Its Time To Restructure Your Company
Every company, throughout its lifecycle from inception to maturity, experiences the need to adapt and restructure existing systems, processes and even teams. It is an inevitability. Organizations that quickly identify that need when the time is right continue along their growth trajectory. Those that don't, struggle and often fail.
As a former Navy SEAL, I have witnessed these types of ongoing changes in the SEAL Teams since 9-11. The ever-evolving War on Terror has required that we continually adapt our tactics in order to thwart terrorism and stay relevant as a special operations fighting force. We have improved the way we train, changed the way we fight, and brought previously outsourced capabilities in-house.
Good leaders understand when the time for change has come and proactively take appropriate measures for the necessary transformations to occur. Here are nine signs to watch for as your company grows.
Profit growth has come to a screeching halt. If your business historically has had growing (or at least consistent) profit margins that then start shrinking for an extended period of time, there is a problem. This is a sign that you need to audit you Cost of Goods Sold, salary to revenue ratio, and overall expenses. Some or all of these things are causing your net operating income to shrink. Regularly examining the books will help mitigate any surprises.
Turnover is high. This includes both employee and client turnover. Both need to be watched closely. If your customers start leaving it probably means they are no longer satisfied with your products or services and are willing to try other providers. There are many internal and external factors that come in to play. Building great relationships with your customers and constantly seeking new ways to make their lives better will ensure long lasting partnerships.
Similarly, if your business starts turning into a revolving door where team members are coming and going, something needs to change. There could be morale issues, similar companies with more competitive compensation, or needed change going unaddressed by management. But if you start seeing a pattern, be sure to pay attention to feedback and have a comprehensive exit interview process. Employee frustration is infectious and will spread if not treated with the appropriate level of attention.
Morale is low. There are countless issues that can negatively affect morale. But some of the major themes include poor management, broken promises, constructive feedback being ignored, cancerous team members being allowed to remain at the company, or favoritism. For the purpose of this topic however, I want to focus on feedback being ignored. When management realizes that drastic change is needed, it is quite common that the team has been begging for this change for some time. So management needs to make sure they are listening to their team members and applying that feedback towards making improvements in the way the company does business. Don't get into a "too little too late" situation.
Old systems no longer work. The processes that work when your company has ten employees are not the same ones that will be needed when you have fifty. It's not to say that systems must be increasingly complex as the company grows. In fact it's quite the opposite. As your company grows it is typical to change or at least improve upon existing processes every few years.
Inefficiencies are rampant. When a company becomes inefficient it has probably outgrown processes that used to work. The answer to more business or customers for inefficient companies is more people. And more people means higher payroll which decreases profit. Efficient companies however can keep growing and adding more business without having to continually hire more staff. Many times it is as simple as improving systems or adding software to streamline internal operations. Whatever it is, inefficiencies going unaddressed with guarantee slowed growth.
Team members are overworked. This also involved inefficiencies. If people feel overworked it doesn't necessarily mean you need to hire more people and spread out the work. There may be better ways to do things or people might be spending too much time on the wrong things. Whatever it is, it needs to be fixed or those people will leave, increasing turnover, and negatively affecting morale.
Others are underutilized. Again, there are many factors to be considered. If some people are overworked and others are underutilized you should probably audit the existing teams and structure. You may be overstaffed in some areas and understaffed in others. But don't assume either. Collect plenty of information and let the data direct your decisions.
The ball is being dropped. Constant mistakes being made is a result of misalignment, poor communication, and lack of management. And that's everyone's fault. Not just that of those making the mistakes. When people feel overworked, are distracted, poorly managed, and working within systems that no longer work, mistakes are inevitable. Before fingers start getting pointed you may want to take a deeper look under the hood to identify the root causes of the mistakes and address them accordingly.
The industry is evolving. If you are doing business the exact same way you were ten years ago, you are probably falling behind. Technology improves. Industries change. Economies shift. Economic changes for example might increase your costs of doing business which means you probably need to increase your pricing or find new vendors with lower costs. Either way, good companies pay constant attention to what's happening in their industry and the world around them.
Noticing a few of these signals from month to month or even quarter to quarter may not necessarily mean it's time for drastic change. But if you see these things happening year over year the time has probably come to adapt and get back on track. Many companies fear change and see the need for it as a bad thing. Not at all. Every successful company evolves over time, and good leadership must champion these changes and communicate the reality of the situation to the team.