Restructuring - Are you considering changes for your business or team?

The Reserve Bank raised the Official Cash Rate by a record 75 basis points at the end of November.  Inflation is biting and having real impact on our daily lives and commentators seem to be unanimous in the view that New Zealand is heading for a recession in 2023. 

As a business owner or leader, you might spend some time over the Christmas and New Year break reflecting on the year that was and wondering, worrying, and planning for the year ahead. 

We have clients already considering and seeking advice from us on restructuring their business and managing redundancies falling out of those restructures.  With the complexities and risks for employers for these types of decisions its timely to look closer at this process and what you can be considering as you start to plan for the new year. 

What is a restructure?

Simply put, a restructure is changes that could affect functions, positions or duties.  It could include adding new roles, replacing roles and/or disestablishing roles.  It could be about sale of a business or part of it. 

Where the outcome to a  restructure results in any positions no longer being required or positions being substantially changed this is commonly referred to as a redundancy situation. 

So if you are thinking about the shape and structure of your business heading into 2023 while turning sausages on the bbq over the summer break, there are two fundamental things you need for a successful restructure process:

  1. A genuine reason. 
  2. A robust process.

Your ultimate test is “what could a reasonable employer have done in the circumstances”. 

Genuine Reasons

You must have a genuine commercial reason to undertake a restructuring process. 

A trap for employers here is that a restructure must be about roles and positions not about people which is why using a restructure to rid yourself of a troublesome employee is high risk. 

The most obvious genuine commercial reason is financial, but it’s not the only one.  It could be that you are looking at new ways of working, owners are becoming more hands on in the business, new markets, products or services requiring different services as examples. 

Thinking carefully about the reasons for a restructure is a crucial first step.  Should a restructure be challenged down the track, the genuine reason behind it will be looked at, and you will be required to show that you had a genuine reason and that it justified the restructure.

A robust process

Once you have formed the genuine reason you can then create a proposal that outlines what you are consulting about, your reasons and how your proposals could impact.

The robust process step of a restructure essentially involves consulting with employees that could be affected by what you are proposing.  This is critical and must done carefully and genuinely, despite the circumstances often being difficult. 

Broadly, there are two key ingredients to ensuring this process is robust.  Communication and time. 

Communicate clearly and often, and take your time.  Remember, when you as the employer are at the point where you are presenting your proposal to restructure to staff, you will have been working on it and will be well acquainted with it.  For the potentially affected staff members, it may come as a shock, and they will need time to catch up to where you are in the process.  Give them that time.

Once your proposal is presented, you must give affected staff proper opportunity to consider it and give their feedback.  Once received, you must genuinely consider all feedback before deciding on the way forward.  The feedback may change your mind, or it may not. 

If a decision is made that results in roles being declared redundant or substantially changed you must act in accordance with the terms of the employment agreement and you must also consider if there are any opportunities to redeploy that employee.   You have heightened obligations at this point to do what you can to mitigate redundancies.  Consideration may also need to be given if the roles

How Grow HR can help

A successful restructure process follows a fairly linear step by step process.  But as with most employment processes there is risk that small aspects of the process are missed or done poorly.  If that happens, you can find yourself in some difficulty. 

Elements that commonly come under attack in a personal grievance include the genuine business need, the consultation process and decision making process.  If you had ulterior motives for the restructure, this is where they will become obvious.  Having a well thought out and documented rationale for the restructure, right from the beginning usually proves invaluable and this is where Grow HR can start to help.  From here Grow HR can guide you through the process step by step and be as involved as much or as little as you need.

If you are thinking about making changes in your business give us the team at Grow HR a call so you are supported from the start.