Call it downsizing, layoff, rightsizing or smart sizing; in essence, it is all one and the same thing. This restructuring strategy is about reducing the manpower to keep employee costs under control.
Take the case of auto-giant General Motors, which in 1991 decided to shut down 21 plants and lay off 74,000 employees to counter its losses.
IBM, which had never laid off staff ever since its incorporation, but had to layoff 85,000 employees to stay in business. This type of restructuring is tough to manage and is mostly adopted to overcome adverse situations. Downsizing is not always a result of business losses; it may be needed even in cases of takeovers, acquisitions and mergers, where duplicity of the staff propels this form of organizational restructuring.
This is the latest in restructuring trend, wherein an organization restructures itself to offer tailored products and services to cater to the requirements of a specific industry.
In 2002, HCL verticalized its operations to meet the specific demands of five different industries: retail, media and telecom, manufacturing, finance and life sciences. This type of restructuring opens up avenues for specialization.
Today’s businesses prefer to outsource some of their processes to other firms. There are two ways outsourcing benefits a business; first, it helps in reducing costs and second, it allows the business to concentrate on its core business and leave the remaining tasks to outsourcing firms.
Whenever a business plans to outsource one of its processes, it will cause some major restructuring and reshuffling within the company. Downsizing is common when a business outsources its processes.
For instance, Nokia plans to layoff 4000 of its employees by the year end 2012, as it will be outsourcing the production of its Symbian operating system
De-layering involves breaking down the classical pyramid setup into a flat organization. The main objective of this type of restructuring is to thin out the top layer of unproductive and highly paid ‘white collar’ staff. General Electric has reduced the number of management levels from ten to four in some of its work facilities in order to improve overall productivity.
This restructuring strategy involves breaking a company into smaller independent business units for increasing flexibility and productivity. This may be done either to dissect the business into manageable chunks or when the business wants to diversify and foray into unrelated areas.
One of the latest examples of this strategy is Pfizer’s decision to spin off four non-pharmaceutical firms this year.
Starbursting may also be used for expansion of the existing business such as when a business decides to spin off subsidiaries to handle business in different geographic areas.
This strategy involves pushing employees outside the office to places where they are more needed like at the client’s site. It also involves upgrading to technology, which allows unmanned virtual offices to be set up.
The ATMs offered by banks are their virtual units.
7. Business Process Reengineering
This type of restructuring is carried out for making operational improvements. It begins with identifying how things are being done currently and then it moves on to re-engineering the tasks to improve productivity.
Business process re-engineering usually results in changing roles. While at times BPR may lead to layoffs, it can also create new employment opportunities.
When Ford Motor was trying to reduce its cost, it found that the process at its accounts payable department needed to be re-engineered. The reengineering helped in simplifying the controls and maintaining the financial information more accurately, that too after laying off 75 percent of the staff from the accounts payable department.
8. Strategies, which are based on realistic goals:
Successful strategies are the one, which is based on realistic goals. Such a strategy that focuses on the realistic goals and fulfill the realistic target
9. strategies, which are based on right people, involved
Such, a strategy, which involves the right people. This leads to the success of the strategy. Such h a strategy rarely leads to unsuccessful path
10. Strategies, which are based in the sufficient data:
A strategy, which is based on sufficient data, and all the required information and data, is being taken in the analysis while making up the strategy, such a strategy is said to be a successful strategy