Corporate restructuring is the process of significantly altering a company’s financial, operational, or ownership structure to improve performance, efficiency, and profitability. This can be a practical strategy for growth or a reactive measure to address financial distress, and includes actions like mergers, acquisitions, divestitures, and changes in management or debt. The goal is to stabilize the business, increase shareholder value, and better align the company with its current market needs. The process of corporate restructuring is considered very important to eliminate the financial crisis, employee distress, rejuvenate supply chain,  and enhance the company’s performance. The management of the concerned corporate entity facing the financial crunches hires a financial and legal expert for advisory and assistance in the negotiation and the transaction deals.

Corporate restructuring is an action taken by the corporate entity to modify its capital structure or its operations significantly. Generally, corporate restructuring happens when a corporate entity is experiencing significant problems and is in financial trouble. The 2018 merger of Vodaphone and Idea Cellular is an example of corporate restructuring. These two telecom companies created one of the largest operators in India to compete in a market with Reliance Jio.  Bharti Airtel acquired Zain Africa through a leveraged buyout, financed primarily by borrowed funds, to expand its operations into the African continent.

Usually, the concerned organization looks at debt financing, operations reduction, any portion of the company to interested investors. In addition to this, the need for corporate restructuring arises due to the change in the ownership structure of a company. Such change in the ownership structure of the company might be due to the takeover, merger, adverse economic conditions, adverse changes in business such as buyouts, bankruptcy, lack of integration between the divisions, over-employed personnel, etc.

Common reasons for corporate restructuring:

Financial distress

Organizations go in for restructuring to address ongoing financial challenges and improve stability. The State Bank of India’s merger in 2017 with its associate banks such as State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore, and State Bank of Hyderabad  was to create a single large lender.

Underperformance

It means failing or defeat. To fix failing divisions or a lack of synergy between business units. Vodafone Idea faced crippling financial distress from declining revenues and massive statutory dues, known as Adjusted Gross Revenue (AGR) liabilities. To ensure business continuity, the company negotiated a debt-to-equity conversion with the government. This allowed the government to take a significant stake in the company in exchange for converting a portion of the dues into equity. This financial restructuring provided breathing room for the company by reducing its immediate debt burden. However, it led to a temporary dilution of existing shareholders’ stakes.

Market and economic conditions

To adapt to adverse economic situations or changing market demands. While Hero Honda dominated the Indian commuter bike segment, the market was beginning to see a rise in demand for premium motorcycles. Honda wanted to compete independently in this high-margin segment, and Hero sought to develop its own research and development (R&D) capabilities to enter the global market. The Munjal family bought out Honda’s 26% stake in the joint venture. The company was renamed Hero MotoCorp, signalling its independence. The split freed Hero to establish its own R&D centres and independently pursue its international expansion plans. This allowed the company to evolve its product portfolio to better address new market segments and global opportunities.

Strategic realignment

To align the company with new goals or a change in ownership structure. In 2018, U.S. retail giant Walmart acquired a 77% stake in the Indian e-commerce company Flipkart. For Walmart, the acquisition was a direct entry into the Indian e-commerce market, a crucial new goal for its global expansion strategy. The move positioned Walmart to compete directly with Amazon in India and leverage Flipkart’s established market presence and customer base. The acquisition initiated a period of corporate restructuring to integrate Flipkart’s supply chain, logistics, and technology platform with Walmart’s global operations. While Flipkart was allowed to operate largely independently, its back-end infrastructure and strategic direction were aligned with Walmart’s broader goals for the Indian market.

Improving efficiency

To streamline operations, cut costs, and optimize resource allocation. In 2025, Mahindra & Mahindra announced a plan to restructure its core business into three distinct units, though its automotive and tractor divisions would remain united. The proposed move is intended to improve operational efficiency, to enable more focused growth strategies, and enhance capital allocation by creating sharper business verticals. Likewise, Reliance Industry demerged its financial services arm to create Jio Financial Services in 2023. This strategic move was aimed at allowing each entity to focus on its core operations, thereby enhancing efficiency and shareholder value.

Management reshuffles

Changing leadership and reporting structures to improve efficiency and decision-making. In 2025 to create a more focused strategy for its Fast-Moving Consumer Goods (FMCG) ambitions, Reliance restructured its retail business. Reliance moved its FMCG brands, including Campa and Independence, into a new, separate subsidiary named New Reliance Consumer Products Ltd (New RCPL). This allowed the FMCG business to operate independently with its own management team and attract dedicated investors. The move allowed the management team for the retail and FMCG businesses to focus on their respective areas, refining strategies and accelerating growth in both competitive markets. Though not a direct result of this operational move, it followed broader leadership restructuring announced in 2023, where Mukesh Ambani appointed his children.  to the board and assigned them key leadership roles in the company’s different business verticals.

An organizational structure is the formal system that defines how an organization’s activities, roles, and responsibilities are organized to achieve its goals. It establishes the hierarchy, lines of command, and reporting relationships, clarifying how work is coordinated and information flows between individuals and departments. The structure of a company directly impacts how quickly decisions are made, how teams collaborate, and how work gets done. According to McKinsey, companies that have adopted more agile, purpose-driven organizational are more likely to be profitable and nearly twice as likely to outperform peers on growth metrics.  Agile organization structures include Flat, Hierarchical and Network structures, which are characterized by decentralized decision-making, cross-functional teams, open communication, and a focus on adaptability.

For example, Tata Steel is a strong example of an Indian company with excellent decision-making and collaboration, known for its strong workplace culture, cross-cultural collaboration, and employee-centric practices that foster loyalty and a sense of belonging, aligning with traditional Indian values of teamwork and shared goals. It follows Hierarchical structure.

Organizational structure fosters collaboration by defining clear communication pathways, creating interdisciplinary teams, and establishing a supportive environment for shared goals and innovation. Structures like team-based and matrix organizations explicitly encourage collaboration by dissolving traditional departmental barriers and enabling diverse skill sets to work together, while a well-defined hierarchy ensures clarity in roles and responsibilities, facilitating smoother project execution.

Some of the common structures of organization

Functional Organisational Structure

A functional organisational structure starts with positions with the highest levels of responsibility at the top and goes down from there. Primarily, though, employees are organized according to their specific skills and their corresponding function in the company. Banking, Financial Services & Insurance companies  (BFS)

Divisional organizational structure

A company’s divisions have control over their own resources, essentially operating like their own company within the larger organization. Each division can have its own marketing team, sales team, IT team, etc. For example, Indian Railway.

A matrix organizational structure

The chart looks like a grid, and it shows cross-functional teams that form for special projects. For example, an engineer may regularly belong to the engineering department (led by an engineering director) but work on a temporary project (led by a project manager). The matrix org chart accounts for both roles and reporting relationships. Examples are TCS, IBM.

Team organizational structure

Team organizational structure is far from the traditional hierarchy, focusing more on problem-solving, cooperation, and giving employees more control. Example is Bharati Airtel.  A team organizational structure arranges employees into self-managed units to achieve specific goals, focusing on cross-functional collaboration and shared responsibility rather than traditional hierarchies. This structure promotes faster problem-solving, increased employee engagement, and improved communication by giving team members the authority and freedom to make decisions

Network organisational structure

Few businesses have all their services under one roof, and juggling the multitudes of vendors, subcontractors, freelancers, offsite locations, and satellite offices can get confusing. A network organizational structure makes sense of the spread of resources. The Starbucks coffee chain is structured as a network of independently owned and operated stores, each of which licenses the Starbucks brand and sells its products.

Hierarchical Shaped Organization

Hierarchical Shaped Organization is also known as Pyramid shaped organization. It’s the most common type of organizational structure in which the chain of command goes from the top (e.g., the CEO or manager) down (e.g., entry-level and lower-level employees), and each employee has a supervisor. HDFC Bank.

Flat organisational structure

Flat organisational structure is also called horizontal organizational structure. It fits companies with few levels between upper management and staff-level employees. Many startup businesses use a horizontal org structure before they grow large enough to build out different departments. Cipla, Dr. Reddy

Autonomy changes based on organizational structures

Autonomy levels directly change based on an organization’s structure, with decentralized, flatter hierarchies offering more freedom and centralized, hierarchical structures imposing greater control and constraints on employees. While traditional structures limit autonomy, modern approaches like self-management and decentralized decision-making foster increased employee independence, ownership, and innovation by allowing individuals and teams to decide how to achieve outcomes rather than just following directives.

To achieve autonomy, design a decentralized organizational structure that grants decision-making power and resource control to individual teams and employees. A flatter hierarchy and clear operational processes support this by clarifying roles and responsibilities, allowing for independent work and faster decision-making. Resource allocation should then be based on these clearly defined, empowered units, ensuring they have the necessary tools to operate autonomously, even at the risk of duplicate resources to foster innovation.

Cipla, Vedanta, Dr Reddy’s, Apollo Tires, and Future Group have adopted flatter structures over time to improve agility and competitiveness.

Reliance Industries’ subsidiary, Reliance Retail Ventures Limited (RRVL), acquired the retail, wholesale, logistics, and warehousing businesses of Future Group in a 2020 deal valued at ₹24,713 crore, though a subsequent legal battle with Amazon temporarily halted the process. While the legal complexities eventually resolved, Reliance effectively took over the operations, including the flagship Big Bazaar stores and other retail units.

Cross functional structures change as per organizational structure

A cross-functional structure change involves shifting from a traditional, department-based structure to one organized around autonomous, self-directed teams comprising individuals from various functional areas. This organizational transformation, often depicted in a matrix org chart, breaks down silos, fostering improved communication, enhanced creativity, better problem-solving, and increased productivity. The goal is to create a flexible, networked organization that can respond more effectively to complex, fast-changing business environments.

IKEA has a unique organizational structure cantered on a complex franchise system managed by Inter IKEA Group, with a hierarchical framework for strategic direction and product development. This system involves the franchisor and independent franchisees, like Ingka Group, operating under a single brand while adapting to local market conditions, creating a decentralized yet brand-unified structure. Ingka Group (Ingka Holding B.V. and its controlled entities) is the largest of 12 IKEA franchisees, representing around 90% of total IKEA sales.

At IKEA product launches require input from marketing, engineering, and sales; for sustainability initiatives at IKEA sales and marketing team up to improve customer experience. This example shows different departments with diverse skills pooling their expertise to achieve shared goals, fostering innovation and efficiency in the process.

At IKEA, cross-functional activities involve empowered, agile teams of designers, technical specialists, and market experts who collaborate from the initial project phase to ensure holistic development and rapid adaptation to customer needs and market changes. They bypass traditional hierarchical approvals, focusing on customer-centric, iterative development with integrated sustainability and digital strategies to drive innovation and efficiency across the value chain, from design to customer delivery.

For better understanding I am giving one more example.  An example of cross-functional collaboration at Taj Hotels is the “Guest Experience Committee,” which brings together staff from various departments, including Front Office, Food & Beverage, Housekeeping, Sales, and Marketing to enhance overall guest satisfaction. These teams work together to develop personalized guest experiences, resolve complex guest issues, and implement new service standards, ensuring seamless and memorable stays that align with Taj’s core values.

Conclusion

A well-defined organisational structure can enhance efficiency, decision-making, and communication. Depending on the structure and type of business, decisions can be made faster, tasks can be more focused, and operational processes can be optimised. A well-designed structure allows for business growth and expansion.

Some serious work has been done on span of control by management experts; and according to them, the span of control should not be more than 1:6 at the top level, while at the lower level of management, the span of control should not be more than 1:20. This means, the superior at the top level should not have more than 6 subordinates under his control. Similarly, the superior at the lower level should not have more than 20 subordinates under his control. However, these are only theoretical figures. In practice, the span of control depends on many factors such as nature of work, ability of supervisor, ability of subordinates, philosophy of the organization, structure of organization etc.

The concept of Span of Control was developed, initiated and popularized by British Army General Sir Ian Standish Monteith Hamilton (1853-1947) through his 1921 published book titled “The soul and body of an army.”

Over the years, however, there have been so many differing views about the optimal span of control and its inevitable conclusion is that it is capability and grasp of the supervisor. The ideal span is partly determined by the nature of the work involved. With craftsmen the number can be quite small because the level of supervision required is high; and at the shop floor, with mass production, however, the span of control can be many times higher because each worker has a clearly defined task to perform which requires little regular oversight. The contemporary view is that spans depend on both the nature of industry and constitution of a firm.

In a multitier management structure more approval layers lead to slower decision making processes. In their eagerness to exercise authority, managers often obstruct, rather than expedite decision making. Besides managers add overhead, and as an organization grows, the costs of management rise in both fixed and relative terms. Also bias cannot be overruled in decision making. In a hierarchy if the power the decision making is vested in a single person, he may distort decisions. The danger is greatest when the decision maker’s power is, for all purposes, uncontestable. Thus, span of control in organizational development becomes vital.

Spans of control can be consciously enlarged by making workers more autonomous and more capable of managing themselves. They can also be distended by increasing the number of rules and constraining the freedom of junior employees to make mistakes. As a span of control gets larger, it exponentially (and dramatically) increases the number of relationships among individuals within each management cell. One manager and six subordinates, for instance, create 222 relationships among the seven of them; one manager and 16 subordinates create over 500,000 relationships.

Traditionally managers were rewarded according to the number of employees under their control. Those at the top are not only responsible directly for the employees who report to them, but also (indirectly) for the lower-level employees who report to their subordinates. The route to higher rewards was to move up the pyramid by climbing the corporate ladder.

In 1800s, Eli Whitney (an American inventor best known for inventing the cotton gin) has experimented by giving his managers different spans of control at his gun factory. Whitney in later part of his life had turned his talents to the manufacture of firearms. He had established his machine shops at Whiteville, near New Haven. Whitney was a multi-faceted person. Almost 200 hundred years later, Eli Whitney’s readings on span of control still continue.

Narrow span of control: Narrow Span of control means a single manager or supervisor oversees few subordinates. This gives rise to a tall organizational structure.

Wide span of control: Wide span of control means a single manager or supervisor oversees a large number of subordinates. This gives rise to a flat organizational structure.

There is an inverse relation between the span of control and the number of levels in hierarchy in an organization, i.e. narrower the span, the greater is the number of levels in an organization.

Narrow span of control is more expensive as compared to wide span of control as there it involves more number of superiors and therefore there are greater communication problems between various levels of management. Wide span of control is best suited when the employees are not widely scattered geographically, as it is easy for managers to be in touch with the subordinates and to supervise them.

In case of narrow span of control, there are comparatively more opportunities for growth as the number of levels are more. The more efficient and organized the superiors are in performing their tasks, the better it is to have wide span of management. Also, the less motivated and confident the employees are, the better it is to have a narrow span of management so that the supervisors can spend time with them and take charge of them well.

GE’s success in the early ’90s is credited to its philosophy of span of control; when some managers had as many as 10 direct reports to look at and it was evident that it could partially work. Managers were forced to loosen their control-orientation and empower their subordinates because there wasn’t enough time in the day to supervise everybody as they had done in the past. So instead of checking up on people they began to add value in other ways through strategy development, increased customer contact, process improvement, mentoring and coaching.GE’s former CEO and chairman, the legendary Jack Welch, believed that the right number for span of control was between 10 and 15. “This way you have no choice but to let people flex their muscles, let them grow and mature,” he said. “With 10 or 15 reports, a leader can focus only on the big important issues, not on trivia.”

Historically, the concern over span of control was based on the idea that some optimal number of manageable subordinates should exist. Researchers in the past, such as Col. Urwick, stated that the optimal span of control was five or six. This assumption was based on a feeling that managers have a limited span of attention, energy and time. If a manager was responsible for more than five or six subordinates, it was felt that the manager would lose track of what was happening. This was illustrated mathematically by A. V. Graicumas, whose work indicated that the number of potential interactions with subordinates will increase geometrically with respect to the manager’s increasing span of control.

The 2009 economic crises caused a significant decline in automotive market shares. According to the Research and Statistics Branch at the United Nations Industrial Development (UNID) Organization, this decrease in market share and market demand, forced the Big Three GM, Ford, and Chrysler LLC to shut down plants, layoff employees, cut production and make organizational changes such as increasing the span of control. Post 2009 the Big Three started looking at different organizational strategies in order to reduce cost. A particular attention was given to the span of control; looking at its efficiency and effectiveness.  According to Stephen Wunker (2012) the new trends within the Big Three are based on downsizing and flattening the organizations; thus, increasing the span of control of the top brass.

The moral of this article is emphasizing on a healthy span of control for success of the business.

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