Companies must frequently restructure to remain competitive and agile in today’s business environment. Whether driven by technological advancements, market pressures, or internal inefficiencies, business restructuring initiatives often require a fundamental rethinking of strategy, operations, and financial positioning. For such initiatives to gain the approval of C-level executives (CXOs), they need a robust business case that outlines a comprehensive framework. This framework demonstrates the necessity of change and provides a roadmap for achieving long-term success.
Components of a business case for change
A well-structured business case for restructuring must address several critical areas to ensure alignment and mitigate the risks associated with such transformative efforts. These areas include:
Strategic alignment
The first step in any business restructuring effort is articulating how the initiative aligns with the company’s broader strategic goals. This layer of assurance could involve adapting to market shifts, enhancing competitiveness, or improving operational efficiency. For example, General Electric (GE) announced a significant restructuring in 2021, driven by the need to streamline its operations and focus on high-growth sectors such as renewable energy and aviation. In this case, GE’s restructuring referred to its strategic objective of becoming a more focused and profitable company. CXOs need to see how the restructuring aligns with their long-term vision and competitive positioning in the marketplace.
Financial justification
The business case should quantify the financial benefits of the restructuring initiative. This information includes potential cost savings and anticipated revenue growth or profitability improvements. A restructuring plan should include detailed financial projections, cost-benefit analyses, and possible risks supported by data and benchmarks. Unilever’s 2023 restructuring, for example, was primarily driven by the company’s need to improve its margin and cost base. By presenting a clear financial rationale, Unilever gained investor support and navigated a period of significant change.
Commercial considerations
Any restructuring initiative must also evaluate the commercial impact on the business’s core activities. This approach involves assessing how the restructuring will affect customer relationships, supply chain dynamics, and competitive positioning. Companies must also evaluate external factors such as market trends, regulatory changes, and competitor strategies. For example, during its 2020 restructuring, BP emphasised its transition towards renewable energy sources, aligning with shifting consumer and regulatory demands for sustainability.
High-level plan and roadmap
Restructuring efforts need a high-level plan that outlines key milestones, timelines, and deliverables. This plan provides clarity to CXOs and other stakeholders about the expected duration and stages of the transformation. It should include a phased approach to minimise disruption while ensuring quick wins. A compelling example of this is Ford’s restructuring plan, unveiled in 2018. The company presented a multi-year roadmap focused on electric vehicle production, reducing operational costs, and exiting unprofitable markets. This approach allowed for both short-term improvements and long-term strategic shifts.
Roles and responsibilities
Clearly defining roles and responsibilities within the restructuring process is critical to ensure accountability and smooth execution. CXOs expect clarity on who will drive the change at the executive level and throughout the organisation. A common pitfall in restructuring initiatives is the lack of ownership, which leads to confusion and delays. Businesses should establish cross-functional teams with clear reporting lines and escalation mechanisms.
Desired business capabilities
A successful restructuring effort should focus on developing the business capabilities for the future. This approach could involve technological innovation, operational efficiency, or market agility to enhance the company’s core strengths. For example, when Microsoft restructured its business in 2014, it shifted its focus to cloud computing, which became a significant growth driver. Today, Microsoft Azure is one of the leading cloud platforms, demonstrating how a well-executed restructuring can help a company thrive in a new business environment.
Key performance indicators (KPIs)
Establishing KPIs is essential for measuring the success of the restructuring initiative. CXOs need visibility into tracking progress, and KPIs or OKR (operational key results) must be financial and operational (non-financial) or material. These could include cost reductions, revenue growth, employee engagement, and customer satisfaction. During Tesco’s restructuring in 2015, for instance, the retailer focused on improving its customer service metrics, which played a crucial role in its turnaround.
Technological enablers
Technology plays a crucial role in successful business restructuring. Companies must evaluate how technology can optimise operations, enhance decision-making, and elevate customer experiences. McDonald’s utilised digital tools to improve customer engagement as part of its restructuring in 2017, resulting in higher sales and customer loyalty. CXOs must consider how technology investments can contribute to long-term growth and operational efficiency.
Business case bEST PRACTICES
When presenting the business case for restructuring to CXOs, it is essential to keep the following best practices in mind:
- Use clear and concise language
- Highlight quick wins
- Provide a risk management plan
- Engage stakeholders early
For a restructuring initiative to gain approval from top executives, the business case must include a comprehensive framework covering strategic alignment, financial justification, commercial considerations, and operational impacts. By incorporating best practices and learning from industry examples, companies can navigate the complexities of business restructuring and emerge more assertive, competitive, and better positioned for future growth.