Organizational Restructuring

Copyright © 2016 by Dr. Yash Paul Soni.

Library of Congress Control Number:   2015921027

   ISBN:    Hardcover        978-1-5144-4798-7

                Softcover         978-1-5144-4797-0

                eBook                978-1-5144-4796-3

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

Any people depicted in stock imagery provided by Thinkstock are models, and such images are being used for illustrative purposes only.

Certain stock imagery © Thinkstock.

Rev. date: 12/30/2015

Xlibris

800-056-3182

www.Xlibrispublishing.co.uk

718308

CONTENTS

Acknowledgements

Declaration

Preface

Chapter 1 Introduction

Brief History of Organizational Restructuring

Need for Restructuring and Organizational Change

What Is Organizational Restructuring?

Why Are Companies So Focused on Restructuring?

Setting Restructuring Goals

Realistic Approach to Set Up Goals

Assessing Organization’s Progress

Restructuring Organization Goals

Repositioning Organization Vision

Business Process Re-Engineering

Advances and Changing Attitudes

Role of Organizational Culture and Leader

Chapter 2 Diagnosing the Problem Evaluation of Organizational Business Divisions

Analysis of Porter’s Competitive Forces

Barriers to Entry and Exit

Barriers to Entry

Exit Barriers

Substitutes

Strategy Performance against the Competition

Chapter 3 Roles of Organizational Leaders during Organizational Restructuring

Chapter 4 The Organizational Restructuring Activities on Leaders: Use of Power

Friendly Support

Summary

Chapter 5 Credibility Required within the Organization

Organizational Leaders Need Information

The Challenges Faced by Organizations Today

Challenge for Organizations: Globalization

The Role of Managers and Leaders

Role of Leadership in Successful Corporate Restructuring

Example: Qatar Airways

Significance of Corporate Restructuring in Qatar Airways

Role of Leadership in Corporate Restructuring of Qatar Airways Company

navigation

Strategist

Entrepreneur

Mobilizer

Talent advocate

Captivator

Global thinker.

Change driver.

Enterprise guardian

Practical Example of Implementing Change in Qatar Airways Company

Change Management Model

The Use of Strategic Leadership in Implementing CRM in Qatar Airways Company

Conclusion

Chapter 6 Organizational Restructuring and Business Process Re-Engineering

Chapter 7 Implementing Change

Chapter 8 Conclusion

Bibliography

Endnotes

LIST OF FIGURES

Figure 1: Resistance to change.

Figure 2: Leadership competences (Hamel 2011).

Figure 3: Leadership strategy (Drew 2013).

Figure 4: Change management model.

Figure 5: CRM (Gaertne 2012).

Figure 6: Strategic leadership (Gaertne 2012).

This book is dedicated to these very special people in my life: my parents (both are deceased); Alka, my wife and my best friend; and my son Akash and his family. I am also grateful to Mr Alan Sindra, who helped me in my research process.

Acknowledgements

Declaration

Signed: _________________              Date: __________________

Preface

Organizations in the past operated in a stable environment where external pressures were relatively less and markets were predictable. The changing market conditions mark the scenario in the twenty-first century. The organizational structure is radically changing—restructuring, flattening, downsizing, rightsizing—and the quest for global competitiveness is real. In the turbulent environment of the day, managers have to confront an accelerating change in the innovative and information technology era. An entrepreneur may be able to assemble the resources and take ample risk, yet he may not be able to sustain the pressures of the environment.

Organizations can invent, discover, or develop basic assumptions related to values and norms of behaviour over a period of time. These values and norms are considered to be valid over time and therefore practised by the members of the organization. Teams are the basic bricks of an organization over which an organization is built. Teams are assigned a specific work, and they work under the guidance of superior–subordinate relationship that is required to be built on the basic norms of the organization.

It is essential for the organization to invent and discover a suitable organization culture. Employ people with required skills, introduce various processes and systems that are competitive, possess world-class technologies, evolve suitable training and development programmes, and apply organization development strategies so that the organization becomes competitive in world and the social obligations to the society are met. In the light of the above, the book offers a practical and realistic approach to the study of organization restructuring.

Chapter 1

INTRODUCTION

Brief History of Organizational Restructuring

What if the organization’s pillar shakes and walks like a dead man? How did backing the wrong horse in a competitive business orbit force Japanese companies to restructure since the bubble economy blast? How did the evolution of financial restructuring and strategy dominate since World War II? How did restructuring greatly impact the large-scale industrial organizations? Fashion is changing, and so are business structures. Why don’t we find out some historical glimpse of organizational restructuring?

The middle of 1990s figures a shrill growth in various restructuring programmes on Japanese land. The firms there started taking distinct actions to qualify their organizations in their former position. Japanese employed various restructuring methods, such as cutting jobs, divesting assets, and merging supplier portfolios. Restructuring is a global business tool, which does not differ whether it is an American approach, European approach, or Japanese approach.

Large number of employers believed that there has been incredible change in corporate priorities, as professional investors have strengthened conventional rights of possessions over the prerequisite right. In the period of 1980s, corporate services faced competitive threat from external analysts who confidently declared a broadening gap between corporate performance and investor expectations. Charges of indifference, self-dealing, inefficiency, incompetence, and wastefulness were employed for raising a conventional shareholder electorate for voting to have a new leadership.¹

The political climate of 1990s was the time for introducing a change in businesses structure. People who grew up in the era when such professionalization of corporate management in America had been acclaimed are the most stable competitors to stand in the modern business sphere. The corporate structures seized with the struggle for potential wealth and personal power and bring business affairs into the degree of vision. There are many examples portray the emergence and end of corporate restructuring in the decade. In 1982, the most ill famed takeover attempts took place when the chief executive officer of Bendix, William Agee, plunged his proposal to get Martin Marietta. Both organizations were piled up as one had its roots in aircraft and the other in automotive parts. The aim was to reassemble and merge the elements of these two organizations into a new empire, thus creating new value for the shareholders of Bendix.

In contrast, Martin Marietta reacted with a counterproposal to take over Bendix, in which both organizations took heavy burdens of debt for acquiring each other’s stock or big fractions. Eventually, the control of third and fourth party was fallen into the struggle, and lastly, Edward Hennessy of Allied Corporation intervened and took over the control of the outsmarted Bendix and forced this organization to clutch on Martin Marietta and ask it to move freely. Allied held less than 40% of Martin Marietta after the settlement and focused to repurchase by Martin Marietta which was consequently accomplished. Few managers of Martin Marietta secretly agreed to it however unvalued and unplanned it was at that time, but the attack of Agee contained an advantageous and positive outcome. The tensions took place by corporate structures and strategies out of the connection with the capital and product market atmosphere that intra-corporate into shifting directions that sometimes bring dramatic results. At the ending part of the decade, a settlement took place within the organization of General Motors and its board of directors. The inflexible issues faced by the famous United States automaker, evidenced in competitive position and corporate performance, were vigorously brought to public notice by the acquisition of H. Ross Perot (as a board member) and Electronic Data Systems (as a subsidiary). However, the variance with Roger Smith over the company’s directions was terminated with the resignation of Perot from the purchase of his stock and the board of General Motors.

However, these instances of restructuring might be considered now as a public label of contemporary business governances. Some people might argue, and the rest would seek out the system of work. Simply, in each case, the structure of corporate domination in which shareholder delegates, executive officer, and board of directors had failed in preventing a shortfall performance tends towards dangerous and far-reaching intervention.²

Need for Restructuring and Organizational Change

What would a company do if it were out of money to pay its employees? Would the employees work without pay and wait for the company to gain financial stability? Obviously not; the heading flow of global recession will certainly gulp them in its depth. If an organization will not meet its payroll requirement, the workforce will certainly walk out, and the period of demolition will begin. And this will be only the starting gear of the problems. Many countries put certain obligations on firms or companies to pay salaries or wages within the assigned number of days. Adherence towards such obligations is significant, or else the organization’s worst period starts and apparently moves towards the most unpleasant situation. Therefore, few diagnostic tests are essential to understand the reasons of underperformance and real trouble within the internal and external boundaries. It is not important that every business failures end in bankruptcy, but there are many other ways to firm back the position of the organization. No matter what kind of failure comes; it normally results in wealth loss and holds negative impact on the reputation of the organization.

For any structure, a model is a simple draft that explains how something works. If you really want to boost back your organization, first you should create a model for its improvement. After designing a model, you will find a systematic way for assessing the impacts of changes. Research reveals that an income statement is a key model for the assessment of a company’s good or bad condition, but there are also other constructive models. An income statement has a problem if it is much filled with minor details and is not well arranged for restructuring. If an organization is not generating profit, it means that it is doubtful to pay bank loans, investors’ money, which results in the reluctance of extending credit to the organization with uncertain prospects. If profit generation header shows zero profit, it is unlikely to have money for investing in the development of new products, marketing, or advertising.

Dreaming a restructure by shifting things and number would be so great, but that can only be possible at an imaginative land. Restructuring primarily means change, and it is not important that every person incorporated to the company would be comfortable with the change, particularly with the radical change. Employees would like the change if that joins their own benefit and when they understand why the company or its department is being restructured. Smart and growth-seeking employees will push the company for the organizational change, and work-shy employees will enjoy standing on the same position. It is essential to understand that restructuring brings balancing situations between managing costs and efficient people. The issues of people will come up in front of the company’s employees, board of directors, organization owners, shareholders, suppliers, bankers, government, and financiers. The corporation can likely be restructured, with the outcome of the developmental process that ponders strategic investment resolutions in the company’s history.

It is significant to understand that restructuring takes place when the organization is not willing or want to operate or expand the assets and potentialities, employment opportunities, incomes, and career routes of most people that might be changed by restructuring.³ Few employees having long-term thinking might find that the organization no longer requires their services. Other employees might find that continuing their current job standard will help them to work for several organizations or in several locations. In common cases of restructuring, these alterations cannot be controlled. The key exception is a management overthrow, in which managers are usually encouraged to find more possibilities of gaining command over the situations