Team structure and restructuring
Businesses need the right roles and structure to operate at their best. As your business develops and your market changes, the right roles and structure might change too. Restructuring can be difficult for everyone involved, but it should be easier if you follow the process and act in good faith.
On this page:
- Why restructure
- When restructuring isn’t the right option
- Genuine business reasons for restructuring
- How to restructure - the principles
- How to restructure - the step-by-step process
- Common pitfalls
It’s important to regularly check that your business is structured the best way for success. Having the right roles structured the right way means you can meet the needs of your customers and take your business to the next level.
If things have changed and you think a new structure could improve the way your business operates, you might want to investigate restructuring. This doesn’t necessarily mean making employees redundant (though that could happen) but it might mean peoples’ roles change. Please note that labour laws protect some groups of employees in certain restructuring situations.
Restructuring can involve:
- adding new roles
- merging two or more existing roles
- losing roles that are surplus to requirements
- a combination of these things.
Restructuring is about making sure you have the right roles to deliver to your customers and your strategy — it’s not a way to manage individual employee performance issues.
If you’re having an issue with an employee’s performance, you can’t ‘restructure’ to get rid of them — you need to manage their performance through the proper channels.
If you’re restructuring, you need to have a genuine business reason — otherwise you could face personal grievance cases.
You need a genuine business reason to restructure your business. You’ll need to state this clearly as you go through the process.
Genuine reasons include:
- realignment of brand
- changing your product or service offerings
- financial issues resulting in the need to downsize or realign
- no longer using a department
- wanting to outsource certain business functions
- merging with another business.
If a restructure might impact people’s jobs, there’s a process you need to follow. As with anything involving employee relations, it’s underpinned by the principle of ‘good faith’ — meaning you and your employees act fairly in your dealings with each other.
This means you:
- are both communicative and responsive
- don’t mislead or deceive one another
- both be active and constructive in establishing and maintaining a productive relationship.
During a restructure, ‘good faith’ means that employees who might be affected have the right to comment on and feed into the restructure. When you propose the new structure, you need to genuinely consider any feedback, including their thoughts and suggestions.
Throughout the restructuring process you can keep some information confidential – but there has to be a good reason, like you’re:
- following statutory confidentiality requirements
- protecting your employees’ privacy
- protecting your business’s commercial position.
The process isn’t prescribed exactly, but case law has helped to establish best practice. The steps and suggested timeframes are outlined below, and also in these handy guides:
- Restructuring steps - Checklist [114 KB, PDF]
- Restructuring steps and suggested timeframes - Task list [91KB PDF]
Step 1. Document your proposal
You need to document your proposal, so you can communicate it to your team.
Your proposal needs to talk about roles, not people. It needs to clearly state the reason for the restructure, and the expected benefit — though you can keep the details high level.
You need to clearly explain:
- your genuine business need to restructure
- what you propose the new structure to be
- how that will impact the current structure
- roles that are being disestablished or substantially changed in this proposed restructure.
If you include specific facts, like how much money you need to cut from the business, you need to make sure those facts are right. You have to be able to back up what you’re saying if you’re asked in a grievance process.
Bob found that demands on his IT consultancy business were changing. He realised that his customers no longer wanted to try and learn how to fix their own computer problems, they wanted someone else to fix their problems for them. So the training end of Bob’s business was declining, but the workshop end of his business was under high demand. Bob decided to restructure to respond to his market’s needs. He needed fewer trainers, and more technicians.
Bob carefully thought about the structure his business needed and documented his proposal. He explained the business need; the market drivers that he wanted to respond to. He outlined the current structure, and indicated the jobs that were going to go or substantially change under the proposal. He set out the proposed new structure, and indicated the roles that were new.
When he shared his proposal with his team, they had the information they needed to understand where Bob was coming from. Even if their role was affected, and they worried about their income, they could understand Bob had good business reasons. They also had the information they needed to give Bob suggestions, to help him shape the new structure to be the best it could be.
Jane was concerned about the cost of running her hairdressing business, and proposed a restructure to cut 10% of her wage costs by replacing a senior stylist role with a junior stylist.
Her staff gave feedback on other ways to reduce costs, but she felt that they would not make enough difference, so she went ahead with her proposed restructure, making Alan, one of her senior stylists, redundant. The savings on wages equated to 6%, not 10% as Jane’s proposal had stated. When she confirmed the new structure, she didn’t state why she was rejecting the alternative measures suggested by her staff.
Alan took a personal grievance case to the Employment Court. The Court upheld his claim, finding that Jane had not genuinely considered her employees’ feedback and there was not enough justification to have made Alan redundant.
Redeployment and downsizing
There are specific rules around redeployment — when you create a new role that isn’t substantively different from an old role. In that case, you must redeploy a person in the current role to the new one. This is a technical area, and legal advice might be valuable.
There are also specific rules around downsizing, when you’re reducing the number of a certain type of existing role. For example, if you currently have three Junior Hairdressers, but you think you only need one, you’ll need to set out specific details in the proposal, including the selection criteria for how you’ll select the successful individual. If you’re not familiar with these rules and process, you should get help from an expert. This is a technical area, and legal advice might be valuable.
Step 2. Invite people to a meeting
Email or write to your employees, letting them know that you’re proposing a restructure and inviting them to a meeting to hear about it.
- Advise and invite people whose roles might be affected (but you might want to include your whole team).
- Let people bring a support person or representative to the meeting, and tell them they can in the invitation.
- Leave enough time between the invitation and the meeting date that they can digest the news and get support in place, but not so much time that it leaves them hanging. Two or three working days is about right.
Step 3. Hold the meeting
The meeting can be with everyone at once. It can be informal.
In the meeting, you must talk through your proposal and give your expectations on timeframes. You must:
- Talk them through the proposal document, and provide the proposal as a handout.
- Outline the process that you’ll be going through to determine the restructure, and provide the process in a handout.
- Set expectations regarding timeframes for the process, and provide timeframes in a handout
- Be clear on the roles that are affected under your proposal.
- State that anyone can provide written feedback to you, or request a private meeting to give feedback, and that they may bring a support person or representative to that meeting (they’ll need to tell you that they want a meeting, so you can schedule it in).
Tip: You might want to put times in diaries now for other phases in the process. That way, you have the correct time set aside and you are signaling to your team that you mean what you say about the timeframes.
Step 4. Gather feedback
Your employees can submit feedback in written form or in meetings with you. It’s important that you consider what they have to say about your proposal.
Give them enough time after the proposal meeting to digest your proposal, think of suggestions and get support, before you close feedback — but not so much time that it leaves them hanging.
The feedback process usually needs about a week.
Step 5. Genuinely consider the feedback
You must genuinely consider the feedback that you’ve received, and whether you’d benefit from a different structure than you proposed. This process takes time — leave yourself at least a couple of days after closing feedback for consideration.
If you still think your original proposal is best, go to Step 6.
If you want to change your proposal, you should go back to Step 1. This is particularly important if your new proposed structure affects different roles.
Step 6. Confirm the structure
This step assumes you’re happy with your proposed structure — if you’ve made changes to your original proposal, you need to go back to Step 1.
You must provide the outcome of your consideration in writing, to the affected people. You need to:
- confirm that the proposed structure will be the new structure
- outline the feedback you considered, and what your decision is regarding that feedback
- be clear about the roles that are affected and what this means, including details of follow-up meetings and a notice period if relevant
- offer to have individual meetings to discuss the outcome.
In some cases, you will be making roles redundant.
Step 7. Have meetings to talk about next steps, if required
Schedule and hold meetings with affected employees to discuss next steps. Give them the option to have a support person or representative at the meeting, and enough time to organise them to come.
See the redundancy page, if you’re making roles redundant.
When dealing with downsizing and redeployment, legal advice might be valuable.
Alternative steps if you can’t meet face-to-face
It’s best practice to follow a face-to-face process for restructuring. But if a meeting is going to be hard for you - logistically or emotionally - you can follow a written process for some steps.
In that case:
- at Step 2, send an email giving them a heads-up that a proposal for restructuring will be sent to them on a certain date
- instead of Step 3, send them the proposal on that date, along with the steps and timelines for going through the process.
Leave enough time between sending the email and the proposal that they have chance to digest the news and get support in place, but not so much time that it leaves them hanging.
To reduce the risk of a personal grievance, don’t fall into these common traps:
- treating the proposal as a done deal before you’ve heard and considered feedback
- leaving too little time between stages — your employees need time to consider things and arrange support
- not being clear about what the proposed structure is
- giving out confidential information, or refusing to give out information that you should disclose.
Restructuring and Redundancy – MBIE