Restructuring for cost transformation: Nine questions to make the most of your reorganization

Restructuring your organization under financial pressure is sometimes unavoidable, especially in an environment of increasing complexity and stakeholder scrutiny. As businesses across sectors consider how to manage their reorganization, it’s critical that they take a strategic, long-term approach with practical, human-focused initiatives that will help them avoid the pitfalls that can come from a singular focus on cost-cutting. 

In a cost-cutting reorganization, many leaders’ natural instinct is to cut headcount in alignment with immediate strategic or operational needs. But this narrow, intense focus will almost certainly do more harm than good. Indeed, while cost savings may show up quickly, they often come at the expense of innovation, growth, and the ability to execute on the organization’s strategy. In the bigger picture, strategic drift, talent loss, and erosion of trust that tend to follow can—and often do—cause ripple effects with large, ongoing negative consequences on performance, brand, and culture.¹ In contrast, companies that focus on leadership and culture as part of their approach will reap long-lasting dividends. 

In other words, restructuring shouldn’t be thought of as just a tactical move even in the context of cost transformation; it should be undertaken with the goal of shaping an organization’s future capabilities, culture, and competitiveness. Restructuring can create long-term value when it reinforces strategic clarity, strengthens leadership capability, and sustains a culture that supports performance, enabling leaders to rebuild the business with intention and purpose, so it is more fit for the future. Getting this right requires recognition that culture and leadership are not soft factors but structural foundations of execution, resilience, and growth.

Align with strategy, lead with capability

While restructuring often happens in the face of threats to performance, it’s critical to view the process as an opportunity to double down on the capabilities that drive long-term success, not just to reduce cost.  At the same time, the act of restructuring can and should pressure-test your strategy, revealing what capabilities truly matter, forcing much-needed trade-offs, and challenging whether your organization’s vision is still fit for purpose. The relationship is bidirectional: your strategy shapes the organizational model, and the process of building that model informs and may, in turn, evolve the strategy. 

With that in mind, to craft and execute the best restructuring approach, posing the three broad questions below is a good starting point: 

1. Strategy: How will you retain and invest selectively in the capabilities most critical to delivering on your strategy?
2. Leadership: Do your leaders have the capability and capacity to take on expanded remits and lead through transformation?
3. Culture: How will you maintain your organization’s cultural DNA—what makes your business what it is—through the process of restructuring?  

Assess and support your leaders

Too often, those shaping a restructuring assume existing leaders can simply absorb more scope related to new roles and responsibilities. But when your answer to question 2 above is “not yet,” you must assess and align your leadership talent with new demands—proactively, not reactively. As part of that mandate, recognize that structure should not dictate talent; it should reflect and amplify it. A human-centered design process ensures that the organizational model is not just technically sound but also leader-ready, supporting a culture and environment that will bring out everyone’s best.

Three key questions to ask about the leadership component of any restructuring are:

1. Can leaders scale with the new structure? Objectively and comprehensively analyze leadership capacity and capability to handle increased complexity and span of control and develop measures to help leaders scale with the new organization.
2. What leadership support is needed? Beyond scale, assess how best to help leaders adjust to the other short- and long-term impacts of a planned restructuring and implement measures ahead of the reorganization.
3. What risks emerge in the new model? Understand how shifts in reporting lines or team configurations could affect leadership dynamics and decision-making and work proactively to de-risk the transformation.

Preserve and enhance culture

Heidrick & Struggles research across 100 global companies has found that organizations employees scored highest on key cultural dimensions including clarity, resilience, and leadership excellence greatly outperformed their peers on revenue growth.²

Significant organizational change—of which restructuring is a prime example—can either reinforce or destabilize the norms that guide how people work, collaborate, and lead. But too often, culture transformation lags behind structural change. Waiting to react isn’t enough, because culture, we know, is directly tied to business outcomes. 

Therefore, paying attention to and actively shaping culture through any transformation, especially restructuring for any reason, is a determinant of success. Organizations must proactively influence culture in ways large and small, anticipating, defining, and embedding the behavioral norms, routines, and expectations that support new ways of working. Strive to not only address pain points but deliberately design a culture that enables your overarching business strategy to succeed.

Three critical questions to ask about culture when approaching or implementing restructuring are:

1. What behaviors are essential to preserve or promote in the new organizational model? Identify the cultural traits that will support your strategy and be strategic and deliberate about embedding them into role expectations and decision rights. Ensure communications throughout the restructuring also align with these principles.
2. Where might culture be misaligned with the new structure? Material changes in hierarchy, spans of control, or team composition can unintentionally weaken collaboration or create uncertainty. Design with these dynamics and pitfalls in mind.
3. How will leaders model and reinforce the desired culture? Leaders are the signal carriers of culture. Equip them to communicate change clearly, act with consistency, and support people amidst ambiguity through proactive discussion of values, development of cultural artifacts (signs, symbols, and so on), and other means. 

The bottom line 

Cost transformations may ease immediate financial pressure, but when done without strategic, leadership, and cultural alignment they can undermine core enablers of long-term success: talent, culture, and trust. Restructuring should not just be a response to constraints. Use it instead as a deliberate opportunity to realign the organization with its future direction, asking and answering the questions we’ve laid out. 

We recognize that doing this work is hard. Resources are inevitably limited, and barriers to progress are real. But with the understanding that perfection isn’t the goal, you can move into restructuring deliberately, strategically, and with care, taking steps to unlock high organizational capacity and performance for both the short and long term.

About the authors

Jarrad Roeder (jroeder@heidrick.com) is a principal in Heidrick & Struggles’ Philadelphia office and a member of Heidrick Consulting, specializing in strategy and organizational transformation.

Jennifer Streitwieser (jstreitwieser@heidrick.com) is a partner in Heidrick & Struggles’ Philadelphia office and a member of Heidrick Consulting.

Jacob Cridland (jcridland@heidrick.com) is an analyst in Heidrick & Struggles’ New York office and a member of Heidrick Consulting.

References

¹ Ron Carucci and Mindy Millward, “When Cutting Costs, Don’t Lose Sight of Long-Term Organizational Health,” Harvard Business Review, February 7, 2023, https://hbr.org/2023/02/when-cutting-costs-dont-lose-sight-of-long-term-organizational-health.

² Proprietary Heidrick & Struggles research, forthcoming.