By EMA Employment Relations Consultant Lisa Oakley
When done properly, restructures can streamline operations, cut costs, and position your business for future success. But when carried out incorrectly or without the right advice, you may find yourself defending a personal grievance, which is the last thing a business needs.
So, where can restructures go wrong? What pitfalls and errors should be avoided? And how can a well-meaning restructure sometimes turn into a full-blown disaster?
Organisational Design
Think of organisational design as the foundation of your restructure that aligns with your company’s strategic objectives. Without it, your restructure may not get the results you seek, whether it’s efficiency, reducing costs, removing duplication, improving communication, or something else.
Make sure you undertake a critical analysis before you start making any moves. Is the new structure you’re proposing going to address the current issue you’re facing? Will implementing it support your goals, or will it have unintended consequences? You need to know this and gather sufficient evidence to support your rationale before you start the process.
Timelines and Stakeholder Expectations
Restructures often come with ambitious timelines, and the reality is these are often unrealistic.
Before presenting your proposed timeline to employees and stakeholders, make sure you take into account the complexities of consultation and incorporating feedback, as well as redeployment considerations. Rushed decisions will only increase your risks and compound the negative consequences of change.
Managing Change
Humans are sensitive to change, which can result in a range of emotions – we only need to refer to any change management model or the Kübler-Ross change curve to learn why this is so.
If my 20 years’ experience has shown me anything, it’s that the most challenging emotions can sometimes be displayed by those who are minimally affected in a restructure. It could be someone particularly precious about their title when several of their colleagues are leaving the business.
To keep it fair, identify your risks up front and adopt a plan that will manage communications to people affected in different ways.
Position Descriptions and Selection Criteria
The devil is in the details, and that couldn’t be truer in terms of position descriptions and selection criteria.
To ensure fairness and to mitigate the risk of grievances stemming from perceived procedural flaws, employers must consult thoroughly on both the selection criteria and their application, ensuring adherence to principles of natural justice.
Good Faith Obligations and the Fair & Reasonable Test
The Employment Relations Act mandates that employers must act in good faith (s4) and be fair and reasonable (s103a), particularly during restructuring. This includes providing all relevant information relating to the continuation of an affected employee’s position, and offering genuine opportunities for feedback on this information before finalising any decisions.
Preparing and presenting a comprehensive restructure proposal, with all of the relevant information attached, is a critical part of the employer’s duties during a restructure process, and it can also save both parties some time. It will reduce the need for the employee to go back to their employer asking for more information. The employer can then run a smooth consultation process knowing that the employee has everything they need in order to prepare informed feedback.
If your business fails to meet these obligations, it can result in findings of unjustified disadvantage or dismissal, even when you believe that a legitimate business rationale may exist.
Today, employees are more aware than ever of their rights, and procedural missteps can inadvertently trip employers up.
Misuse of Restructuring and Risks Around External Hires
Suppose you’re using the restructuring to disestablish the role of an underperforming employee, only to reintroduce it under a different name? Or hiring externally to fill gaps left behind by the restructuring? Well, you might be putting your business at risk.
Long gone are the days when restructuring was perceived as a silver bullet for exiting underperforming employees. Restructures should be genuine – there are more appropriate and cost-effective processes to deal with problem employees.
The Importance of s149 Settlements in Mitigating Risk
Employers often overlook the benefits of section 149 Settlements (ERA) or ‘Record of Settlement’ agreements, but they can be a valuable tool.
This formal agreement, certified by a meditator, is a complete resolution of all matters relating to an employment dispute – and disputes are not uncommon in restructuring when parties disagree. Once both parties sign a s149 Settlement, and it’s certified by a mediator from MBIE, this concludes all matters relating to the employment or termination thereof.
Don’t try ‘without prejudice’ conversations though – there are certain criteria that need to be met for this legal privilege to apply. Make sure you get good legal advice beforehand.
EMA Workshop: Restructuring Misconceptions and Unintended Consequences
You can hear more on this subject at the Restructuring Misconceptions and Unintended Consequences workshop that I will be presenting at the EMA on 28 May in Auckland.
Ultimately, restructuring is often a necessary strategy, particularly given the recent uncertainties of the economy. However, there are many potential pitfalls, and they serve as a reminder that employers must conduct their plans with both strategic objectives and legal obligations in mind.
