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In Practice

How to Lead a Restructuring in Uncertain Times

Business people playing musical chairs

Recently, many organizations have been stretched to the breaking point as they try to remain cost-effective, agile and ultimately profitable. Reorganizations have become an unfortunate side-effect of the pandemic and, although the economic outlook appears more positive, the sense of uncertainty will continue.

Many predicted that large companies would need to restructure during COVID, but most have remained resilient. However, as government support and capital become more restricted, those with higher debt loads and incurring structural market changes may find themselves in need of help.

Numerous companies took on significant debt during the pandemic. Global corporate debt rose 10% in the one-year period between quarter three 2019 and in 2020, compared to 3 to 4% per year in the preceding decade (with no increase following the 2008 downturn). This increased leverage will affect companies’ balance sheets for many years to come. 

As businesses continue to navigate challenging circumstances and restore value, there is greater pressure to chart a profitable course for the future.

When teetering on the brink of a restructuring process, business leaders must establish a clear vision that restores stability and defines their future business model. In our experience, there are five actions that should be taken to ensure successful restructuring: engage advisers early, create transformational champions, set appropriate targets, have a clear and detailed plan and recognize the importance of change management.

Engage Advisers Early

In all cases, identifying and diagnosing issues early is the best defense. CEOs should always have, and boards often require, a downside plan. With early diagnosis, a company can fully evaluate options and avoid being cornered. Engaging early, by way of an out-of-court restructuring, is often the most viable and pragmatic option. Here, having the right advisers is crucial.

Advisers form a three-legged stool: lawyers, debt-advisers and business consultants. They all need to collaborate with company management and with each other. It’s important to select those who have experience both in restructuring processes and in your specific industry.

Create Change Champions

At face value, restructuring looks like an economic problem that can be fixed by making swift top-down decisions to address debt loads and pushing through operational changes. However, if businesses are to truly transform, they need to start by finding the right people for the journey.

The first step is to identify and select leaders at each critical level of the organization who can become “change champions.” These well-networked people will embrace the vision, drive the change process and influence those around them. This strengthens the accountability and viability of the transformation.

For example, a retail client needed to restructure following a multi-year decline in sales. They assembled a transformational leadership team that was fully aligned with the restructuring vision and able to quickly implement a new course for the future. This leadership team and alignment was recognized as a key success factor in the client’s return to growth and increase in profitability.

Set Appropriate Targets

The future needs to be different than the past. This can be communicated through financial targets that the company sets and the business strategies it employs.

Targets should be both realistic to ensure credibility and ambitious enough to see that change occurs. Achieving this balance requires teamwork and constructive discussion within the leadership team. Once targets are set, a small number of clear and specific metrics should be communicated and brought to life by business leaders in each area.

During the restructuring process, think outside the box and set demanding goals and milestones that align with your strategic objectives. Envision where you want to be in the future instead of pursuing incremental change based on your current state.

This change only works if there is a high degree of psychological safety, where employees can vocalize concerns and opinions without fear of repercussion.

Organizations should be wary of implementing across-the-board cuts during restructuring proceedings. While this may be a common approach, these one-size-fits-all reductions can result in incorrectly sized departments and poor employee morale. Instead, use nuanced analysis by function.

One transportation client started its restructuring by benchmarking itself against the lowest cost competitor in the region and setting bold efficiency targets in every department. Many targets could be achieved immediately, while others required the company to define a plan to overcome roadblocks and reach strategic objectives within six to 12 months. This resulted in near-term cost savings ranging from 20 to 60% across several business functions, with an average cost reduction of approximately 40%.

Have a Clear and Detailed Plan

When developing an operational turnaround plan, it’s important to gain rapid clarity about future organizational needs, minimizing or eliminating excess wherever possible. Tools such as zero-based organization (ZBO) and zero-based assets (ZBA) can help reach ambitious targets. In a restructuring, it is important to demonstrate to internal and external stakeholders that the organization is prioritizing the highest-impact activities, such as rightsizing the footprint, supply chain and headcount to align with future strategy.

These tools can also help to invest in activities that are central to the organization’s value proposition or eliminate activities that no longer support the strategy. Likewise, it’s important to pinpoint the one-time costs required to implement these changes. Digitization is a crucial enabler of long-term cost reduction, however, it should only be used when the appropriate people and processes are in place.

By using a ZBO approach, two different airlines managed to reduce their management and administrative costs by between 37 and 42%. Through categorizing and benchmarking all activities against the CEO’s future state goals, they were able to differentiate activities that would drive the future business from those that could be automated, simplified or eliminated. 

In a restructuring, you also need to move fast. It is critical to maintain a simple, documented list of significant transformational milestone activities and dates for transparency and accountability.

Recognize the Importance of Change Management

Change is challenging; therefore, engage your employees using reason and emotion to help them embrace the transformation. The most successful change management programs focus significantly on shifting culture, but this change only works if there is a high degree of psychological safety, where employees can vocalize concerns and opinions without fear of repercussion. Listening to ideas for improvement that have been overlooked or thought difficult to achieve is critical, while focusing on the most impactful items.

Careful communication is essential. Before making external announcements, internal changes should be communicated using in-house forums such as town halls and department meetings. Employee sentiments should be distilled regularly.

Your leaders should be prepared to over-communicate, clearly articulating to employees about the challenges and the opportunities that lie ahead as the turbulent times pass. Empathy and humility are important traits to reassure your people that leaders are supporting them despite the hard decisions.

Final Thoughts

While in the very short term, “cash is king,” in a major restructuring, it is vital that the collective team focuses on maximizing long-term value that supports the strategy. This sets the context of the entire transformation and allows employees to feel a sense of ownership rather than resisting change. Done well, it gives leaders the opportunity to reframe the organization for a more resilient future.

Thanks to Morgan Zaidel for contributing to this article.


Jared Yerian

Partner at Oliver Wyman

After starting his career in commercial banking, Jared moved into the consulting world, where he developed a niche in driving the growth of large firms’ restructuring capabilities on the global stage. Over the past 25 years, he has performed over 50 transactions exceeding $100 billion in value throughout North and South America, Western Europe, the Middle East, and Asia.

Steve Walsh

Principal at Oliver Wyman

A principal in Oliver Wyman’s Dallas office, Steve is an expert in business transformations and restructuring. He has deep expertise in developing business strategies and deploying operational plans that drive significant improvements in results and transforming underperforming assets and business units into best-in-class performance.

Tim Hoyland

Partner at Oliver Wyman Transportation Practice

Tim Hoyland is a partner in the transportation practice of Oliver Wyman with more than 15 years of consulting experience. He is an expert on restructuring, supply chain, and operations in the aviation industry, with a focus on catering, aircraft acquisition, and maintenance, repair, and overhaul.

Emily Harte

Partner at Oliver Wyman

Emily is a partner in Oliver Wyman’s Chicago office and has global expertise in enterprise transformations and transactions.  She has deep expertise in corporate restructurings of distressed and healthy companies, executing debt recapitalizations and operational turnaround plans, and providing stakeholders with advisory services for both in-court and out-of-court financial restructurings across multiple industries.

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