Organizational consolidation has many potential benefits for an organization seeking to make better use of resources. A team examines all resources belonging to an organization, including assets, locations, equipment, personnel and organizational structures. After analysis of all factors, the team creates a more logical scheme to utilize resources. Those resources no longer needed under a new scheme are sold, closed or disposed of in a cost-effective manner.
An organization that consolidates multiple units into a smaller number of units wants to trim the fat in the budget to prepare for growth. Eliminating programs, buildings, positions and other resources that drain an organization's budget creates more room in the budget. The savings are reallocated to new initiatives or to remaining programs needing more money.
Improved Service Delivery
Sometimes improved service delivery is both a business necessity and a benefit of consolidation. For example, two local hospitals might consolidate because customers demand a higher quality of service, and they don't feel the community needs two hospitals with duplicate services. Closing down one hospital and moving resources over to the other hospital might be the solution, or one hospital might be converted to an outpatient center. An organization must choose a new set of goals to meet customer demands and consolidate in a way that meets those demands.
Some types of consolidation create more capital for a new organization. For example, if one company merges with another, the new company has the capital and assets of both companies. This type of capital building enables the newly formed organization to pursue more costly new initiatives. With the right amount of capital to spend towards common goals, both old companies can benefit from expansion.
More Effective Organizational Structure
Another benefit of consolidation is creating a more responsive workforce that is less costly to the new organization. In consolidation, existing positions may be cut, but a new structure provides jobs for the most qualified people. Consolidation may also be a great time to get rid of people who don't carry their share of the weight and to offer early retirement packages. Remaining employees can also contribute their ideas for a better organizational structure in response to changed conditions in the industry.