Restructuring

7 Key excerpts on "Restructuring"

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  eBook - ePub

  Corporate Level Strategy

  Theory and Applications

  • Olivier Furrer(Author)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  Finally, some innovations in management practices diminish the advantages of scope that a firm might gain through vertical integration or horizontal diversification. As we discussed in Chapter 11, new forms of strategic alliances permit firms to benefit from economies of scope without incurring the related administrative costs. In response, many firms have reduced their scope through Restructuring, divestments, and outsourcing. For example, long term strategic alliances between a firm and its suppliers offer a viable economic alternative to vertical integration and competitive bidding, as in the automotive industry.

  However, Restructuring is not always cause by internal or external problems. For example, Capron et al. (2001) argue that resource redeployments and asset divestitures after an M&A might provide a means of reconfiguring the structure of resources within the firm and that asset divestiture could be considered as a logical consequence of this reconfiguration process.

  Restructuring Strategies

  In Figure 12.1 at the beginning of this chapter, the Restructuring strategies were organized into three categories: organizational Restructuring, financial Restructuring, and portfolio Restructuring. Even without an exact one to one match between the causes of poor corporate performance and the type of Restructuring strategy, specific Restructuring strategies generally should be used to target particular causes.

  Organizational Restructuring

  Organizational Restructuring refers to significant changes in the organizational structure of the firm, including divisional redesign, changes to the management incentive system, and employee downsizing (Bowman & Singh, 1993 ; Bowman et al., 1999 ). Organizational Restructuring therefore usually helps solve internal problems, such as poor management or high costs. Its main objective is to improve efficiency.

  Change of organizational structure, systems, and processes

  Organizational Restructuring can be defined as any major reconfiguration of the internal administrative structure (Bowman & Singh, 1993 ). In Chapter 10 , we argued that as firms grow and diversify, coordination and control problems and crises are likely, requiring changes in the organizational structure of the firm (Churchill & Lewis, 1983 ; Greiner, 1972 ). We also have contended that different corporate level strategies might require different organizational structures (e.g., Chandler, 1962 ). For example, related and unrelated diversification strategies need to be supported by different multidivisional structures (Hill & Hoskisson, 1987

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  The Executive Guide to Corporate Restructuring

  • Francisco J. López López Lubián(Author)
  • 2014(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  5 1 Restructuring: A General Overview 1.1 Chapter overview A company needs a Restructuring process when it is facing a situation of economic distress. A company is in a situation of economic distress when it does not generate enough cash flow to cover the payments required by its debt with financial entities. Of course, this lack of cash to cover payments for the service of debt must be a permanent situation, since any temporary imbalance might be covered with money coming from the shareholders. Restructuring a company means introducing changes to a company to make it viable and profitable, given that it is currently unfeasible and unprofitable. Although any corporate Restructuring implies financial Restructuring, it doesn’t necessarily need to be only about its refinancing. The objective of any restruc- turing is to implement changes in the company so that it will generate enough FCF to cover the service of debt and remunerate its shareholders satisfactorily. A Restructuring process is a process of negotiation. As in all negotiating processes it is important to understand the interests of all the parties involved, recognizing their strong points and weak points, their negotiating clout, and so on. 1.2 What is Restructuring? A company is in need of a Restructuring process when it faces a situation of economic and/or financial distress. A company is in distress when generated cash flow is insufficient to cover its debt payments due. In other words, a company is in a situation of economic distress when its operating cash flow is not enough to cover its debt service. Restructuring is therefore a negotiated 6 The Executive Guide to Corporate Restructuring process whereby a company optimizes operations and adapts financial and trade payments aspects to its cash flow generating capacity. Since Restructuring is related to cash flow generation, let’s define in a more precise way what we mean by cash flow.

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  Corporate Finance

  Economic Foundations and Financial Modeling

  • Michelle R. Clayman, Martin S. Fridson, George H. Troughton, Michelle R. Clayman, Martin S. Fridson, George H. Troughton(Authors)
  • 2022(Publication Date)
  • Wiley

    (Publisher)

  Several factors contribute to this happening, including insufficient effort by management, falling customer demand, a worsening competitive landscape, or increasing overcapacity. Three alternatives are available: cost Restructuring, balance sheet Restructuring, and reorganization. • A cost Restructuring refers to actions with the goal of reducing costs by improving operational efficiency and profitability, often to raise margins to a historical level or to those of comparable industry peers. Cost Restructurings tend to follow periods of company underperformance and are often part of larger structural changes to focus the corporate issuer’s operations, to realize synergies after an acquisition, or when there is a threat of activist investors or an unwelcome acquisition by another corporate issuer. Two common ways of reducing costs are outsourcing and offshoring. • A company outsourcing internal business services subcontracts specific, standardiz- able business processes, such as IT, call centers, HR, legal, and finance, to specialized third-party companies that can offer these services at lower costs through economies of scale from serving many clients. Manufacturing can also be outsourced; perhaps the best-known example is Apple outsourcing manufacturing of iPhones to Hon Hai Precision Ltd. Outsourcing reduces headcount, costs, and time spent on managerial oversight. Depending on what business processes are being outsourced, it can also free up expensive assets, such as office, manufacturing, and warehouse space, that can be disposed of or repurposed for alternative use. Apart from structural changes across the business, there are additional considerations, such as managing multiple contractual obligations with the outsourcing company that can introduce new risks in the decision to outsource.

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  Strategic Redundancy Implementation

  Re-Focus, Re-Organise and Re-Build

  • Madeleine Stevens(Author)
  • 2022(Publication Date)
  • Routledge

    (Publisher)

  There are three different types of corporate Restructuring: Portfolio, financial and organisational Restructuring. This book focuses on organisational Restructuring, which could result in changes in functions, with the ultimate aim to improve efficiency and productivity. Restructuring is usually implemented as a result of an organisation’s ambition to adapt their staffing requirements to best suit their changing needs for sustainability or ultimately growth. Consequently, employees are ‘reshuffled’ according to their strengths and best match to organisational departments. This could include the harmonisation of two departments, such as Marketing and Communication, which will become one department. The intentional outcome would be a more streamlined function with enhanced collaboration between employees with the aim to be more aligned with the organisation’s strategic goals. Organisations choose to restructure for reasons other than implementing redundancies such as the ones similar to driving efficiency or effectiveness. Restructuring often occurs as a result of a change in the organisation’s portfolio offering. Such organisational changes in the strategic structure will lead to corresponding changes in the organisation’s authority and decision-making hierarchies. Restructuring, however, does not always have to lead to a head count reduction; however, it often does lead to the implementation of redundancies. Definition of downsizing Downsizing presents itself with various meanings, often dependent on the country where downsizing takes place. Shaw and Barrett-Power (1997 :109) define downsizing as a ‘constellation of stressor events centering around pressures toward workforce reductions which place demands upon the organisation, work groups, and individual employees and require a process of coping and adaptation.’ Freeman and Cameron (1993) complements this definition of downsizing as an intentional reduction in the number of people in an organisation

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  Making Sense of Change Management

  A Complete Guide to the Models, Tools and Techniques of Organizational Change

  • Esther Cameron, Mike Green(Authors)
  • 2024(Publication Date)
  • Kogan Page

    (Publisher)

  On a macro level, the survey found that during the 1990s the top 50 UK companies moved from having on average one major reorganization every five years to having one every three years. On a micro level, individual managers had personally experienced seven reorganizations within their organizations. Not all of the seven were major organization-wide change, some were more local. Nonetheless managers encountered various challenges as a result: managing the changes within themselves, managing the changes within their staff, ensuring that both large-scale and minor changes were aligned to the wider organizational strategies, and last but by no means least, delivering on business as usual and ensuring staff were motivated to deliver on business as usual.

  Reasons for Restructuring

  We are concerned in this chapter with the dynamics of change and Restructuring, less so with why the organization or part thereof is being restructured. Restructuring can occur for numerous reasons:

  • downsizing or rightsizing (market conditions or competitiveness);
  • rationalization or cost-cutting (market conditions or competitiveness);
  • change in operating model (strategy implementation);
  • efficiency or effectiveness (drive towards internal improvement);
  • decentralization or centralization (drive towards internal improvement);
  • flattening of the hierarchy (drive towards internal improvement);
  • change in strategy (strategy implementation);
  • merger or acquisition (strategy implementation);
  • new product or service (strategy implementation);
  • cultural change (strategy implementation);
  • internal market re-alignment (strategy implementation);
  • change of senior manager (leadership decision);
  • internal or external crisis (unforeseen/unplanned change).

  We believe that Restructuring should only take place as a result of a change in strategy. It should have a clear rationale and should be done in conjunction with other parallel changes such as process change and culture change. Of course this is not always the case. Sometimes other events kick off Restructuring processes, such as a new boss arriving, a process or product failure, an argument, a dissatisfied client or an underperforming person or department. In these cases it is sometimes difficult for employees to curb their cynicism when changes in structure seem to be a knee-jerk reaction that lacks direction, appears cosmetic and fails to lead to any real improvement.

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  The Ethics of the New Economy

  Restructuring and Beyond

  • Leo Groarke(Author)
  • 2006(Publication Date)
  • Wilfrid Laurier University Press

    (Publisher)

  Training (and retraining), departmental reorganization, revision of job descriptions, renegotiations of collective agreements, alterations in product design (sometimes a complete change of product) have been extensive responses to technological change. The changing financial climate also has provided organizations with a challenge which may have even more sweeping implications: Restructuring. The Restructuring process generally includes, but is not limited to, the following: • Consultation with client/customer constituencies regarding products, needs, and services • Identification of core organizational values • A study of the institutional/company human resource demographics • A review of the organization's mission statement • Options for optimizing current resources/maintenance of quality plan-ning • Development of a plan for change • Education of employees regarding change • Implementing changes • Continuous monitoring to ensure quality of results and meeting of goals The key in Restructuring, as in employment equity, is the skills of the workforce: what cannot be copied are people's skills, expertise, expe-riences, intelligence, and ways of thinking (a primary component of the organization's intellectual capital) that can be applied in creative, innov-ative ways to meet the organization's goals and objectives (Lynn and Bazile-Jones 1996, 10). Fair Change: Employment Equity and Restructuring 183 What is striking about the steps in the Restructuring process listed above is that they are in essence the same as those in the process for employment equity, including the employment equity census, the employment systems review, the setting of goals within the context of institutional values and objectives, education of the employees, and the monitoring of change.

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  How to Increase the Value-added of Controlling

  A Guide to an Efficient and Sustainable Management Support

  • Valerian Laval(Author)
  • 2018(Publication Date)
  • De Gruyter Oldenbourg

    (Publisher)

  7 Enhancement of organization with portfolio-based Restructuring

  This chapter is based on presentation from the author in November 2015 on the 3rd “International Conference on Business Administration, Marketing and Economics” (BAME) in Bratislava, Slovakia which was published in the “International Journal of Economics and Statistics” (Laval 2015d).

  7.1 The importance of Restructuring projects

  Following the “Controlling Process-Model” set up by the International Group of Controlling (see Table 7.1 ) the scope of this chapter can be primarily allocated to the process ten which covers the “enhancement of organization, processes, instruments and systems.

  Besides the general management support, the controlling function can contribute its specific competencies out of other controlling processes such as “forecasting”, “cost accounting” or “project and investment controlling” to make Restructuring projects a success. Also the knowledge of processes such as “strategic planning” or “operative planning” add to the expertise of the controlling department that offers its support in Restructuring projects. On the other hand, it has to be pointed out, that the controlling department does not have a monopoly to provide such support to the top management, but that it stands in an internal and external competition. The chapter aims to contribute to the understanding of how the controlling function can apply its competencies to play an influential role in Restructuring situations.

  The volatile business environment and the constantly increasing global competition are forcing companies to regularly strengthen their competitive base. Companies who do not review their cost structure risk to slowly eroding their competitive position. The chapter will outline how the performance of Restructuring projects can be increased by combining potential measures in an optimized way. For this, the chapter will introduce six characteristics to evaluate Restructuring measures and explain how to balance them to the specific Restructuring needs of the company using portfolio management techniques.

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