Company Reorganization Terminations & Announcements

Company reorganization vs restructuring

Is there any real difference between company restructuring vs reorganization? That’s up for debate; most people consider it to be a case of semantics as the terms are generally used interchangeably.

However, a useful distinction has been made by Harvard Business Review, whereby restructure is defined as one type of reorganization, while reconfiguration is another type (emphasis added):

“Restructuring involves changing the structural archetype around which resources and activities are grouped and coordinated." 

“Reconfiguration involves adding, splitting, transferring, combining, or dissolving business units without modifying the company’s underlying structure.”

For the purposes of this article though, we’ll be using reorganization and restructure interchangeably.
 

Announcing company restructuring

There are multiple groups that need to be informed of a company reorganization, and your communication with each one might be slightly different. Let’s look at the most common parties that will need to receive the announcement:

• Employees
• Shareholders
• Customers
• General public
   

Does reorganization always mean layoffs?

While business reorganization often involves redundancies, they’re not necessarily a foregone conclusion. There are numerous instances in which a company might be able to reorganize its debt or reconfigure the workforce without letting anybody go. A business debt restructure could involve the consolidation of debt and renegotiation of payment terms, and even a debt for equity swap, for example, without staff cuts.

However, it is often the case that a company’s chapter 11 reorganization plan involves at least some employee terminations. How you go about it could mean the difference between a successful reorganization and a PR nightmare (or worse).
 

Reorganization terminations: best practices 

Reorganization terminations are usually a necessary evil—but there’s a right way and a wrong way to handle them. Follow these best practices:

1. Be sensitive to their feelings

A termination is a bit like a breakup; it’s a blow to the ego of the person on the receiving end. So as the employer, it’s important to be cognizant of the employee’s embarrassment and try to minimize it wherever possible. One way to do this is to choose a quiet time and place to conduct the meeting.  

2. Assist where possible in their hunt for new employment

Helping the employee to find new work can assist in smoothing over the termination process. The easiest way to do this is to provide them with a positive reference. You could also suggest other business owners and contacts you know that may be hiring.

3. Keep it short and to the point

Do not leave any room for debate. Make it clear that this is not up for discussion. It’s an unfortunate turn of events but it will be going ahead. 

4. Prepare their severance package 

If your employee feels as though they’re being unfairly treated, they could choose to go quietly or very noisily indeed. Be prepared to negotiate a severance package so that they feel adequately compensated.