What is reformulation in advice

Restructuring (company) - definition

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Definition and explanation of the management term "restructuring (company)":

In a business context, the term reorganization describes the restoration of a company's competitiveness so that it again achieves the sales and earnings required for its existence and ideally operates successfully in the market not only in the short and medium term, but also in the long term.

Refurbishment requires a turnaround

The term rehabilitation has its roots in the Latin verb “sanare”, meaning “to heal”, “to restore”. Correspondingly, a corporate restructuring - figuratively speaking - is always based on an "illness", i.e. a crisis situation that threatens the existence of the company. The reasons why a company becomes a restructuring case can not only be very diverse, they are usually also quite complex.

This is why a whole bundle of measures, including those in the business, financial, organizational, tax and legal areas, is usually necessary in order to eliminate the company's immediate threat to the existence of the company and to create the so-called turnaround - i.e. the company, for example, from the loss back to the Profit zone to lead.

Refurbishment is a complex change project

The restructuring of a company is usually accompanied by a reformulation of its strategy; furthermore often a new or restructuring of his organization so that the company becomes competitive again.

In addition to realigning the business, the restructuring is often associated with job cuts, which leads to resistance in the organization. Therefore, a renovation is ultimately a highly complex change project that also places special demands on management.

A crisis is usually the result of a lengthy process

If a company gets into a crisis that threatens its existence - such as insolvency so that it can no longer service due liabilities - then this usually has historically grown reasons: such as an outdated, no longer marketable product, production costs that are too high.

These are usually the result of a lengthy process in which the management either did not recognize the dangers on the horizon in time or either did not react appropriately or too late. Therefore, a renovation is often accompanied by an exchange of at least parts of the management.

The different dimensions of a renovation

If a company becomes involved in a restructuring case, the reasons for this must first be determined in order to derive from this which measures are necessary to save the company and get it back on the road to success. It is important to differentiate between different levels of renovation, which in turn require specific measures or interventions.

Financial restructuring - measures for example:
  • Development of (new) sources of finance and capital,
  • Supply of new capital through self-financing (e.g. capital increase, sale of assets that are no longer required) or external financing (e.g. deferred payments, additional loans)
Portfolio restructuring - measures for example:
  • Optimization of the product or service portfolio from the point of view of increasing value (such as growth, risk, return),
  • Concentration on core business areas
Organizational redevelopment - measures for example:
  • Restructuring / optimization of the structure and process organization,
  • Reduction of interfaces, optimization of the technical infrastructure
Culture change - measures for example:
  • Establishing a new leadership culture,
  • Increasing customer orientation or agility,
  • Anchoring a new understanding of quality.

Rehabilitation report and rehabilitation concept

If a company is in need of restructuring, a restructuring report is often drawn up first. In it, the continuation and restructuring of the company is determined on the basis of a new business plan - by a neutral third party. Among other things, this report is important for negotiations with lenders and lenders (such as banks, investors, suppliers) and aims to maintain or restore their trust through transparency.

The renovation concept is based on this. It lists the individual measures with the associated (partial) goals with which the competitiveness of the company is to be restored and it is to develop again into a healthy, profitable company that operates successfully - and growth-oriented - in the market.

Advice on change project renovation

The restructuring of a company is a highly complex change project that places special top-down requirements on all process participants in the company - both management and employees. The management consultancy Dr. Kraus & Partner helps companies to design this process - at all levels - in such a way that the associated goals are achieved.

K&P advisor video: Strategy, structure, culture - the K&P advisory model

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