Corporate Restructuring of Company | Company Management

The corporate restructuring strategies of a company can be thought of from two aspects:- Hardware Restructuring and Software Restructuring.

Hardware Restructuring:

This involves redefining and/or modifying the structure of the organisation so as to make it more efficient in decision-making, responsiveness, and intra-organisational communication, etc.

Some suggested strategies are as follows:

(i) Identification of core competency and portfolio pruning:

This involves a detailed analysis of the inherent strengths of the company in certain areas. Core competencies are the things that an organisation does well—so well, that they are an advantage over similar organisations. The same with respect to the competitors also requires identification as the competitors will not take long to enter into the area of another weak competitor.

The portfolio pruning refers to sharpening of the portfolio strategies in the areas of product/market scope.

(ii) Flattening of organisational layer:

This involves minimisation of organisational layers in order to have the desired responsiveness of the company towards company policies or strategies. This scheme will enhance the efficiency of the communication systems.

(iii) Down sizing:

Over the years many organisations have accumulated fat in terms of overstaffing and excessive working practices. A lean organisation is the need of the hour to stay competitive in the market.

(iv) Creation of self-directed teams:

These teams should be such that they will not wait for the directions from the higher-ups. They will have a kind of autonomy in functioning.

(v) Benchmarking:

This is a continuous process of measuring the products, services and business practices of a company against the toughest competitors or those companies recognised as the industry leaders. It is the search for industry best practices that lead to superior performance.

Software Restructuring

This involves cultural and process changes required to create the more collaborative environment needed for the renewal and growth of the company.

Some suggested steps are:

(i) Communication of the business strategy:

By creating transparency in the organisation and its systems and convincing each employee about the need for the restructuring exercise, the same can be carried out in an effective way otherwise it will run into problems. Good strategies are useless if they cannot be implemented for people not enthused about it.

(ii) Creating support in the organisation:

This involves developing relationships between various positions, both vertically and horizontally, in the organisation—through training and guiding rather than command and control and competition. This has the effect of renewing corporate vitality.

(iii) Trust:

It is a vital ingredient of behaviour values in the context of risk taking activities. On the organisational trapeze, it provides the confidence necessary for someone to let go of the security of business as usual and take a leap in the belief that he will get a supportive hand in the organisation.

Key behaviour values here are openness in communica­tion. discipline and responsibility, accepting genuine mistakes and fulfilling promises, etc.

(iv) Stretch:

Tightly defined business boundaries constrain the generation of new ideas. Thus, stretch is the liberating and energising element of managerial context that raises individual aspiration levels and encourages people to lift their expectations of themselves and others.

(v) Empowering people:

This involves replacing the top-down decision-making by decentralised bottom-up decision-making. This step requires replacing the very concept of orders from the top with ideas from the bottom; thus, begetting in the process a truly empowered organisation.

(vi) Industry foresight:

It is not vision but foresight to understand as to what is changing such as technology, demographics, regulations, etc. It is like how do I use these changes to bring about a change in the industry environment. It is much less about predicting the future and more about imagining the potential future that the company could bring about.

This can come by involving people who are close to the periphery of the organisation.

(vii) Training of everybody in the organisation:

This involves implementation of continuous training programme for all to weed out the out-dated ideas from the mind of people.

Restructuring Strategies—Corporate groups’ outlook:

The business groups of different sizes have got their own kind of threats and opportunities. organisational efficiency and inefficiency, operational constraints and limitations and also advantages and disadvantages. Therefore, each group has to have its won type of restructuring strategy/strategies.

This is discussed below group-wise:

1. MEGA Groups:

(i) To sell off the companies that do not fit into the vision of where the group should be in journey 2000-2010.

(ii) To merge common businesses set up by different companies with a view to creat­ing just one Strategic Business Unit per business area.

(iii) To diversify only into businesses which have same synergies with the current areas of operation.

(iv) To play the role of visionary and give the Chief Executive Officers as much freedom as the group can bear.

2. BIG Groups:

(i) To develop core business areas and exit from the unrelated diversifications of the past.

(ii) To expand the scales of operations in the main business areas to global levels.

(iii) To merge the smaller companies so as to consolidate each business under one unit.

(iv) To look for foreign partners with whom the group can have alliances in non-core businesses.

3. MEDIUM Groups:

(i) To consolidate and expand manufacturing capacities to attain economies of scale.

(ii) To diversify quickly to create more than one core business with growth potential.

(iii) To start strategic alliances so as to access international customers and global markets.

(iv) To professionalise the organisation so that the group can manage growth better.

4. EMERGING Groups:

(i) To integrate forwards and backwards so as to ensure synergistic growth.

(ii) To make alliances to preempt transnational’s entering the group’s product segments.

(iii) To diversify into the infrastructure sector if the group has the capital.

(iv) To develop global markets along with home markets so as to ensure rapid growth.

5. PUBLIC Sector:

(i) To convince the government for a time-bound privatisation programme.

(ii) To select the specific business areas that the PSU is best equipped to operate in.

(iii) To design voluntary retirement schemes and redeployment programmes so as to reduce the huge workforce.

(iv) To inculcate a new work culture and ethics that will allow people to cope with competition.

Corporate Restructuring—Implications:

Implications of corporate restructuring are many and varied in dimension.

Of them, the following four major dimensions are discussed below:

(i) Reduced number of players in the market segment:

Due to the phenomena like mergers and acquisitions, only the companies with competitive edge are the players in the particular field. As a result, the weak, inefficient and unviable companies will either die or be gobbled up by other stronger players.

(ii) Emergence of new look companies:

The companies emerging out of the process of restructuring and renewal exercises are better equipped to face the transnational companies or enter into alliances with the same.

(iii) Healthy economic state of the nation:

The newly acquired better health of the companies can directly contribute to the growth of the national economy.

(iv) Social discontent:

Large cases of laying off, shutting down, increasing number of BIFR cases and increasing gap between the rich and the poor may prove to be a great national obstacle in the path of growth of national economy. Also such phenomena leads to political instability.