I didn't have to do much to fix this problem.
I brought in the sides at the top then created a waist by adding pinch-type pleats on each side, in the back and then two in the front. This shaped the skirt much better and gave it some movement.
Then I cut off the long sleeves to make them 3/4.
My (dark) after photo is following a long day at work, I styled my refashioned dress for the office with all black accessories - tights, belt, cardigan and a chunky black necklace.
You can read more details on the process on my blog, ProbablyRachel.com.