Corporate Downsizing and Restructuring Challenges

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Table of Contents

Abstract
Introduction
Background information
Issues and Challenges of downsizing and restructuring
Conclusion
List of References

Abstract

Corporate “downsizing & restructuring” is essential to overcome challenges in modest business marketplace. Most companies carry out restructuring and downsizing in accordance with the requisite of their businesses. This is aimed at enhancing the aspects of competitive advantages and critical business strategies. Evidently, some organizations do this through acquisitions, mergers and divisions as well.

There are other organizations that make structural alterations and conduct resource optimization in an organization. However, there are some issues and challenges related to downsizing and restructuring. In this report, these issues and challenges are analyzed based on information from already established works.

Introduction

Since 1980s, different organizations and companies have embraced various strategies to minimize costs and maintain competitive advantages (Shiva 1999). Approaches like downsizing and restructuring were intended to change organizations from unproductive formalities and embrace the aspects of active client-driven businesses. However, professionals have been questioning whether these strategies are effective in both short term and long term objectives of the business.

Research conducted on various organisations that adopted downsizing and restructuring without proper communication of their intentions, visions and missions indicate that they failed. Most firms have embraced downsizing and restructuring as a means of conserving resources and minimizing expenses. Concurrently, the market has become fiercely competitive, profitable, and with significant reforms.

There has been a raging debate on whether restructuring and downsizing are necessary for competitive advantage of a business. However, in spite of the benefits of these strategies there are issues and challenges associated with them, which forms the basis of this report. This research seeks to find out the benefits as well as challenges of implementing these strategies with relation to gaining a competitive advantage (Alkhafaji 2001, p. 151).

Background information

Sometimes in the past, the management of corporations and organisations showed very little concern on their HR departments. This was a critical observation following its ability to affect the business progress and the general prosperity of the organisation.

The trend was meant to downsize, restructure or right-size the business with an aim of producing more returns from its investments. One of the most effective way of generating short term profits was to decrease head count to enhance overhead savings (Karake 1999). Corporations sought for ways of making profits in the shortest time possible.

However, questions still lingered on the exact benefits that companies got from implementing these strategies, whether is provided a business with a competitive advantage, whether it made them more responsive to the needs of their customers or it simply reduced members of the staff and move work to fewer workers. Based on the review of literature used for this research there was a mixed results on the data obtained. This is a critical provision in the context of competitive advantages.

Issues and Challenges of downsizing and restructuring

Restructuring and downsizing is currently widely used by most organisations and companies all over the world. Industries transform at an alarming rate, technology shifts fast, and corporations have learned that endurance means being deft. Companies have to handle the unique prospects and demands of customers.

Some specialists argue that because of downsizing and restructuring strategies, companies were able to raise their overall competitiveness over the past decades (Shiva, 1999). Most companies were able to fruitfully transform themselves from unproductive formalities into active client-driven businesses, which could react to the new market situations. However, other studies also indicate no any substantial developments in productivity during the past decade.

According to the research which was conducted by Wyatt Company in 1993, less than half the number of downsized organisations were able to achieve a decline in their expenses and less than a quarter being able to improve productivity. Only 12 per cent experienced an upsurge in their market share, and only 7% realised a growth in technological innovations (Karake 1999, p. 80).

These data and statistics indicate that the policymakers using downsizing and restructuring strategies never explored deeply into their implications. They never analysed the consequences of these strategies beyond the balance sheet figures.

To the normal employee, these approaches were considered deplorable since they generated mistrust, disrespect and bitterness not only between the everyday workers and employees but also the middle level and top level management. Equally, implementing these strategies become very difficult for middle level management as they were directly involved in the downsizing and restructuring process (Shiva Ramu 1999, Pg. 102).

Particularly, downsizing is quite demanding for all the parties involved. Workers whose duties become terminated may be distressed and experience shock (Gilson & Altman 2010). In addition, those employees preserving their positions will also be influenced negatively. Remaining workers are anticipated to efficiently adapt to new structure of the organisation which is not easy (Shiva Ramu 1999, p. 218).

In the context of restructuring and downsizing business operations, virtual organisations have higher potential to reach considerable number of clients with a wider range of commodities and services compared to conventional organisations. This follows the nature of business and operations. The online connections, geographical distributions, and extensive use of communication technologies have helped them attain this goal.

Concurrently, in the context of restructuring and downsizing business operations, some organisations collaborate with other organisations to attain the desired competitive advantages. Since the organisation is privately held, this paper compares and contrasts options available for the expansion of its operations and makes a recommendation about which strategy will best suit its business interests and prowess in regard to competitive advantages.

Among the compared options include the formation of mergers with other organizations, leasing services and business options, and acquisitions of other organisations. Advisably, it is recommendable that the company should resort to restructuring in case it wants to grow expansively, avoid future wrangles, attain a wider market share, promote its business efficiency, and gain a considerable autonomy.

Restructuring and downsizing are crucial in this case since it will provide the company with ample time to assimilate the acquired firm, restructure its operations, and provide the market with the best. Although downsizing is also considerable, it might emerge with varied logistical issues that hinder the growth of the concerned company.

Conclusion

In conclusion, changing business requirements can result into an organisation considering downsizing and restructuring its business operations. Corporate reorganisation could result into several issues that require a proper address for successful implementation of the proposed restructure. An effective restructure encompasses not only a developing a sound approach, but also the successful implementation of that plan. This necessitates keeping personnel on side in the course of a restructure.

List of References

Alkhafaji, F2001, Corporate transformation and restructuring: a strategic approach, Quorum Books, Westport, CT.

Gilson, C & Altman, I 2010, Creating value through corporate restructuring: case studies for bankruptcies, buyouts, and breakups, Wiley, Hoboken, NJ.

Karake, A 1999, Organizational downsizing, discrimination, and corporate social responsibility, Quorum Books, Westport, CT.

Shiva, S 1999, Restructuring and break-ups: corporate growth through divestitures, spin-offs, split-ups and swaps, Response Books, New Delhi.

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