RESTRUCTURING

Businesses operate in a challenging environment where the economic climate and other external forces can leave a business with little choice but to realign, restructure and reorganise to become more competitive or to maintain an existing position in the market.  Operational changes can create opportunities for both the business and employees with regards to skill and personal growth, leading to better and more efficient use of human resources and the implementation of better procedures, ultimately improving efficiency and profitability.

WHAT IS RESTRUCTURING?

Restructuring is the act of reorganising a business’s structures (legal, ownership, operational or other structures) for the purpose of making it more profitable or better organised for its present requirements.

WHEN DOES RESTRUCTURING TAKE PLACE?

Restructuring will most likely take place in cases of operational changes, for example a change in structure (ownership, management, or departments), goals and vision, financial position (the economy, amended legislation impacting on the cost of doing business, entry of competitors into the market, the minimum wage, recent drought, etc.) and technology (progress in terms of new techniques and methods of completing tasks quicker, as well as technological inventions).

FOLLOW THE CORRECT PROCEDURE

Section 189 of the Labour Relations Act specifies a strict procedure that employers must follow when considering restructuring and/or retrenchment.  Employers must take care to follow this procedure and avoid making any unilateral changes to the employment contract.

Is it possible to do a restructuring without a retrenchment?  Yes, should an employer change the vision of the business and requires the employees to have different roles in the business, then the employer may propose such a change in the consultation process. The employees however need to accept the change before it can be implemented as the employer cannot make any unilateral changes to the employment contract.

Restructuring is a formal consultation process that allows both parties to engage in discussions to consider other alternatives, minimise changes, establish timeframes and reduce the negative impact of restructuring.  The employer should in all good faith keep an open mind throughout the process and seriously consider proposals put forward by employees.  Meetings should be held with all possibly affected employees as well as the trade union where applicable.

COMMUNICATION IS KEY

Communication is key.  Change is difficult and can leave employees anxious.  Employers should be open and clear with regards to why changes are needed and to explain the business’s needs and goals, as well as make regular announcements to all employees in terms of progress made.  Restructuring is more likely to be successful when managers understand the fundamental strategic problem or opportunity the business faces.