This week we are talking about value chain, what kind of challenges the company will be facing when the company is growing? Why does it have anything to do with value chain?
Main learning objectives of the week:
Why do companies need to restructure their operations when the company size changes?
Restructuring is about making sure you have the right roles to deliver to your customers and your strategy, when a company facing size changing, it usually comes with role changing.
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 should result in smoother, more economically sound business operations. After employees adjust to the new environment, the company should be better equipped for achieving its goals through greater efficiency in production.
(Source: Restructuring Definition | Investopedia http://www.business.govt.nz/staff-and-hr/employee-and-team-performance/team-structure-and-restructuring)
What steps does a founder need to take to restructure the company?
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.
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.
You must:
- 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).
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.
What is value chain?
A value chain is a set of activities that an organization carries out to create value for its customers. Porter proposed a general-purpose value chain that companies can use to examine all of their activities, and see how they're connected. The way in which value chain activities are performed determines costs and affects profits, so this tool can help you understand the sources of value for your organization.
What impacts does value chain have on a company?
Value Created and Captured – Cost of Creating that Value = Margin
Businesses aim at enhancing their margins and thus work to change input into an output which is of a greater value than what it was at the time of entering the process (the difference between the two being the company’s profit margin). Thus the logic behind it is simple; the more value a company creates, the more profitable it is. When more value is created, the same is passed on to the customers and thus further helps in consolidating a competitive edge.
Value Created and Captured – Cost of Creating that Value = Margin
Businesses aim at enhancing their margins and thus work to change input into an output which is of a greater value than what it was at the time of entering the process (the difference between the two being the company’s profit margin). Thus the logic behind it is simple; the more value a company creates, the more profitable it is. When more value is created, the same is passed on to the customers and thus further helps in consolidating a competitive edge.
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