Craig McIvor: Transformation the key to survival - if you start at square one

Sales and cashflow forecasts signal what you and your management team already suspect: current operational costs far exceed the income being produced, forcing an immediate decision to restructure the business.

The key question now becomes: how can you move to a new organisational form that costs less but produces the same output?

It is the equivalent of coping with an instant Ice Age. A new evolutionary form needs to take shape and the clock is ticking.

Making a decision too quickly can mean a solution does not go far enough, leading to a slower demise. But procrastinating or relying on "It will come right" unbridled optimism will have the same outcome.

Restructuring in these times is not simply renovating or tinkering around the edges, but more akin to rebuilding the house. A blank piece of paper is needed as well as a determination to save the business through invention and ingenuity.

There are three distinct stages you should consider, with some common themes that thread their way through the entire process.

The first stage is diagnosis, or understanding what you do at the moment. Many readers may feel this is a given. It is not. The thinking has to move away from what people are doing now to what they are trying to achieve. The quality of the diagnosis and the information produced will determine the rest of the process.

The second stage revolves around innovation using a holistic approach. Creative and lateral thinking are vital for finding new paradigms.

Use the information from the diagnostic stage to develop new ways of operating by concentrating on what needs to be achieved. Stir up debate, test theories and make sure you consider an array of solutions. Get external input to provide out-of-company thinking.

Now that you have come up with the new organisational form, the next stage is its implementation. If there is insignificant buy-in by key staff from the second stage, or if decisions were not clearly understood, this may be the death knell of the change process.

Getting this stage right is critical to the success of the restructuring, so tight project management is essential. Stay vigilant across the organisation to ensure everyone is singing to the new songbook.

The common themes throughout the stages are people, communication and customers.

During the diagnostic stage, the focus is more on what needs to be done, than on who should do it. Your staff should not be exempted from discussions as they often hold the key to new organisational forms and ways of operating that senior management cannot comprehend. Through the entire process, your people need to be treated with the respect they deserve.

Once a new organisational model is formed, the company needs to think about what sort of people, and attitudes, are needed to make the new form work. "Form follows function" and existing staff should be measured against the new criteria to ensure that functional requirements are met.

Throughout the change process, managers must have communication at the top of their agenda. At each step, stop and think about what people need to know, when they need to know it and what is the best way to communicate it.

Time constraints are often used as an excuse for why the appropriate form of communication was not used. Always put yourself in other people's shoes before acting and allow time in the schedule to negate potentially damaging side effects. If you remind yourself "it's not what you do it, but the way that you do it" you will stave off many communication-related issues.

Customers are too often neglected in this process. Ideas that assume certain actions by customers should be examined - preferably with the customers themselves. A lean organisational form is of no use if you do not keep the support, loyalty and recurring business of your customers.

It is unlikely you will move to a restructured business without encountering issues you did not contemplate. Again, it is not about the problems you encounter, but about the way you deal with them.

Organisational forms have different philosophies and business leaders need to ensure that their attitudes align to those. Moving from a Qantas full-service type business to a Jetstar type model, for example, implies a complete change in the way of thinking about customers, staff, and future decision making.

A word of warning for companies looking to undertake this metamorphosis. Be careful when assuming the current leadership can or will look at their own roles dispassionately. True organisational transformation must have all options on the table from the beginning, which includes the potential to change every function in the organisation - no matter how senior. To help overcome this tendency, external scrutiny is useful to give the entire process some credibility and maximise the outcomes.

Birth, death and birth again is the cycle of life and of business. Restructuring is a way of a business continuing its life, but in another form. Looking back at the great icons of business - such as Kodak, IBM or even the United States motor companies - shows restructuring has been a way of life for decades. Longevity in a changing world requires businesses to employ evolutionary processes that have served the animal kingdom well. The only difference is, we need to do it by next quarter.

Craig McIvor is the managing director of Corporate Management Advice

www.managementadvice.org