Corporate Restructuring and Downsizing

Launched June 2014 Updated July 2014 9 lectures
Dr. Kenneth P. De Meuse
President, Wisconsin Management Group, USA

Executives have continually reshaped and reformed their corporations through the hiring and firing of employees since the beginning of organizations. Inefficient and technologically outdated facilities have been closed and modern new plants have opened. Divisions have been bought, sold, and consolidated. Outsourcing, strategic alliances, and mergers have been part of... read morethe corporate landscape for decades. Indeed, executives continue to implement a myriad of strategic “resizing” efforts in an attempt to become more competitive in today’s global marketplace.

Restructuring an organization is necessary when the company has grown to the point that the original structure no longer can effectively manage the output and general interests of the company. For example, corporate restructuring may require the spinning off of some functions into subsidiaries as a means of creating a more efficient management model or taking advantage of tax breaks that enable a company to divert additional revenue to the production process. In this case, the restructuring is a positive sign of growth. On the other hand, corporate restructuring can occur in response to a decline in sales due to a sluggish economy, quality concerns, the advent of a new competitor, or a spike in manufacturing costs. When this happens, a corporation may need to significantly reduce costs as a means of keeping itself operational through this difficult time. Costs may be cut by scaling back production, combining divisions or departments, selling certain product lines, outsourcing non-core job functions, and/or reducing the number of personnel. With this type of corporate restructuring, the focus is on survival and typically it involves downsizing staff rather than expanding the company to meet growing consumer demands.

Corporate restructuring and downsizing often is viewed as a necessary evil. Economic recessions are times when restructuring and downsizing frequently take place, primarily for financial reasons. However, such strategic interventions can be a great way for a company to refocus efforts on its original mission, become more operationally efficient, cut labor costs, gain market share, and enhance its overall profitability. If executives take the time to look holistically at their strategic business models, workforce capacities, and organizational debts, they can use the restructuring process to turn around their companies. Companies that have been restructured properly are leaner, more efficient, better organized, and more focused on their core businesses.
The purpose of this series of talks is to systematically examine corporate restructuring and downsizing with an eye to ascertaining how they can be implemented effectively. Special attention is devoted to the following three areas:

Part A:
Background information on various issues and topics related to such strategic interventions will be presented (e.g., forces driving corporate restructuring and downsizing, types of efforts, myths, and talent implications).

Part B:
Several organizational and individual effects associated with restructuring and downsizing will be discussed. For example, what impact do such efforts have on a company’s financial outcomes, the performance of employees, and its ability to retain customers? Also, how do such efforts affect employee health and job attitudes?

Part C:
During this part, a series of talks will explicitly address topics related to the successful implementation of corporate restructuring and downsizing. Specific recommendations on how to facilitate them effectively are presented.