There's nothing wrong with crisis restructuring by itself. However, this restructuring is more apt to occur from the bottom-up versus the top-down. In other words, revenue producing functions or people may be prematurely cut.
These people or positions may be, at a minimum, covering their variable expense and contributing to some degree toward fixed costs. This creates a redistribution of fixed expenses which may now jeopardize the profitability of some other segment or division.
This can create pressure to close other divisions and business segments or cut deeper into revenue producing functions that are contributing at least a portion to fixed costs, thus creating “The Death Spiral.”
The right approach is to view restructuring from the top-down, including taking a serious look at corporate and/or family overhead. You begin this diagnosis by asking questions like the following:
What is the situation you are really facing? If you are the owner or the CEO it is often difficult to admit the facts.
If that’s the case, it is highly recommended that you hire an outside pair of eyes to help you through this assessment process as defined in the previous chapter. During the final assessment review you should be able to understand the scope and severity of the situation you find yourself in.
Get each member of your executive Leaders to go through this exercise for each department. When all the soul searching has been done, meet with your executive team to review the entire process and formulate a contingency plan.