What is the rationale of announcing company restructuring months or even years before it actually happens?

Question

I am working for a IT shared services company that belongs to a large group that operates in Europe and Asia.

As I see it the whole group suffered a slight business decline and was forced to shrink (sold some parts of its business). This initially led to important changes also in the IT company by implementing large programs such as transition to Agile.

This was not enough and more drastic measures were taken to counterbalance the financial problems:

• an important part of its business was announced to be sold a few years ago (let's call it company X).
• more recently, a special program (let's call it Phoenix) was started. IMO Phoenix means significant restructuring (externalizing a big fraction of the shared services and some layoffs). However, this program is accompanied by a great marketing effort (a big Intranet page describing in detail the steps, list of possible companies where some products and people will migrate etc.).

While I find these changes normal when looking at the bigger context (huge legacy products, teams that did not "convert" to Agile, market pressure), one aspect makes little sense for me: why make these changes so transparent? This led to unpleasant situations like the following:

• when a misunderstanding in the business flow led to a bug in a product shared by both the X and other group companies and this was not fixed immediately, a X boss complained that "they are not sold yet"
• Phoenix program created confusion and fear among several of my colleagues and their motivation has plummeted

I have seen restructurings in the past and they were typically handled with way less information. The line managers knew all the details and talked 1:1 with each employee to settle the future. Typically a financial compensation (several monthly salaries) was offered to ensure a smooth transition.

I have asked a couple of managers about why this method of announcing these changes and I could not get a clear answer.

The only justification for such an approach would be a commitment to transparency made by the top management, but this seems to back-fire quite a lot.

Question: What is the rationale of announcing company restructuring months or even years before it actually happens?

Answer 1

more recently, a special program (let's call it Phoenix) was started. IMO Phoenix means significant restructuring (externalizing a big fraction of the shared services and some layoffs). However, this program is accompanied by a great marketing effort (a big Intranet page describing in detail the steps, list of possible companies where some products and people will migrate etc.).

Because it's better than the people learning in the last moment and getting panicky?

Because it should make people feel they are involved in the decisions and prepare them to accept decisions they wouldn't otherwise accept? (Pay-cuts, lack of salary increases, etc.). It legitimizes the changes. You yourself write that "these changes (are) normal". Also some people will start searching for new jobs, solving part of the company's problem.

Apart from that, there's one important, if not the most important, factor. In some cases, companies are obliged to inform their stock holders about the company situation and the media report about it. Even if they aren't, it's frequently difficult to keep such changes from the press. In this case, it makes sense to inform the employees simultaneously. Otherwise they learn about the changes from the press, which creates a bad impression and distrust towards the company.

Basically, the problems you describe are nothing compared to what could happen if people weren't informed. It's choosing the lest bad solution.

Answer 2

when a misunderstanding in the business flow led to a bug in a product shared by both the X and other group companies and this was not fixed immediately, a X boss complained that "they are not sold yet"

Soooo never, ever in your company no one ever made a mistake of ommiting some divisions or totaly forgetting they exist and let them knwo about some changes? I doubt it's the first case. I think you only know about this one.

Phoenix program created confusion and fear among several of my colleagues and their motivation has plummeted

Great. That's the point. Those are the first ones to go. Either by their own will or by being laid of as not very productive workers.

There is a ton of question on Workplace.SE about companies that tried to squeeze employees of all overtime and work while beng fully aware they won't pay for it or they are running out of money (I think there is even one asked in last 24 hours).

Comapny made is so transparent because they treat you like partners. They expect, from bigger part of employees, that they will look at those changes and think "Oh, it's good to know. I will prepare myself for that by maybe looking for other job or saving some money or by securing my place in new company that I can clearly see from stated process is avaiable to me".

Company don't care about unpleasant situations created by employees on their own. If you are grumpy and unmotivated by the fact that company made you aware that there will be changes, and how they will look like, in the next 12 months it's on you. Company tries to be as fair as possible.

Answer 3

When restructures are expected to take a long time - such as a year or two - it can create a lot of instability in the business and make many people (who are otherwise safe) fear for what's going on and leave prematurely.

In these cases, being open about the changes coming - so people feel that the changes are expected and know they will continue over a set period of time - helps reassure people that if they're not affected, they should be OK. It also helps show that this is a clear plan to the business recovering, and not a series of last-minute cuts being made (that have the potential to keep going).

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For the business itself, some other reasons it can be a benefit include:

• People are signed onto "will not leave before x date" agreements, helping the business ramp down slowly; at the expense of a slightly higher severance package. At this point, most of the office would find out through gossip anyway.

• The business may not want to pay out (sometimes massive) severance packages; sometimes hoping for people quitting can reduce the cost of laying off staff.

• The business hopes it may light a fire under some departments; and make them work hard to keep their jobs. This one I'd say is honestly rarer, but there are cases of companies pitting departments against each other in this way, to motivate them to achieve more.

Answer 4

They can either be public about the restructuring process or they can be private about it.

Twice in my career I have been an employee when a company split into two companies.

The first time it was a surprise. Everybody got an email on Monday morning saying the company was splitting in 30 days. But several changes started that day. You couldn't jump from a company A project to a company B project unless you were unemployed for 30 days. Some people would have to move offices within the next 30 days, because their project was in the wrong floor/building. Everybody needed new badges. There were a ton of questions, and a lot of discussion and complaints. There were no benefit changes for a year. One employee set to join our project the next week couldn't because their current project was on the other side of the split from us.

The other one I worked for announced the split a year in advance. Nobody knew which company they would be in for 6+ months. There was more time to move sides which was a good thing, but eventually they limited movement. We had months to move offices. We knew the benefit differences between the companies after the freeze but before the split. There were a ton of questions, and a lot of discussion and complaints. They encouraged people to burn vacation hours pre-split so that the liabilities would be smaller.

Both approaches had benefits and problems. Ultimately both worked. Now neither was a result of a company in financial distress, they were companies that believed they need to split for regulatory reasons. In both cases the Wall Street analysts debated the split, the difference was the order of events.

In your case they believe a public restructuring helps them meet their goals, or buys them time to make the changes.

Answer 5

What is the rationale of announcing company restructuring months or even years before it actually happens?

One of two reasons seem possible.

Firstly there may be another agenda (or several agendas) quietly doing it's thing while everyone is looking at this.

Secondly it's just an idea someone at the top convinced everyone else was great. I've seen some strange things happen.