Restructuring designs

Implications on human resource

Corporate Restructuring
Meaning and definitions CR is a comprehensive process by which a company consolidate its business operations and strengthen its position for achieving the desired objectives viz.. Staying, synergetic, slim, competitive and successful.

Objectives of CR
The

underlying objective of corporate restructuring is to conduct the business in an efficient, effective and competitive manner so as to increase the organizations market share, brand power, and synergies.

Reasons of CR
Growth

Technology
Government policy Exchange Rate fluctuation Economic stability To reduce dependence

Methods of restructuring
Organizational Restructuring

Work restructuring
Process restructuring Competitor and customer restructuring

Organization restructuring
Spaghetti organization

Amoeba shaped organization

Infinitely flat organization Inverted pyramid organization Orchestra styled organization Front end back end model Dome Shaped Organization Cluster organization Virtual Companies

Spaghetti organization
Advantages

All formal job titles were

scrapped. No employee had a desk or office of their own, or a role except one they chose for themselves from a list of projects on a bulletin board. Staff could take on as many different projects as they wanted, and were expected to pick up new skills along the ways Projects were not managed in the traditional way - leaders were mere coordinators, and the team took a project through from start to finish by itself.

In the absence of vertical and horizontal boundaries communication is fast in the organization and also decision making. This kind of organization structure promotes participative decision making which motivates the employees and develops there analytical and creative abilities. This structure provides for job rotation, which leads to the development of the employees in all the functional areas. The reach of the organization spreads, as there are no external boundaries. I n the absence of vertical and horizontal boundaries the relationship between superior and

Disadvantages

Amoeba Organization

It is another form of boundary-less organization which is structured like an 'amoeba', It has a central nucleus and a flexible operating structure enabling it to move into different types of projects and markets while operating as cross functional teams. An amoeba structured company could spin off into smaller independent companies. For example, ENTACT Inc., an environmental services company based in Texas, US divides like amoebae to form new companies. When it has about 40 employees, it spins off another business with the first company retaining a 90 % stake hold in the new business, while the employees of the spin off unit retain 10 %, in this manner, ENTACT Inc., is able to attract new companies. Since it operates without much of a structure and has no middle level management, there is a lot of latitude and freedom in its

Advantages
Flexibility in its operations.

The freedom to take decisions in the organization motivates the employees.

As there is no middle level management the flow of communication from first line employees to the top management may be affected. More number of operating units may drive the organization into confusion due to lack of cooperation and coordination.

Disadvantages

Vertical/tall organization
Vertical/tall

organizations refer to increase in the length of the organization chain of command. The hierarchical chain of command represents the company's authority accountability relationship between superiors and subordinates. Authority and responsibility flows from the top to the bottom through all the levels of hierarchy. Accountability flow from the lowest level to the highest level. 1

Advantages Effective analysis of factors and efficient decision making are possible as a number of managers at different levels supervise and check the activities. These organizations provide better communication of company's mission, goals and objectives to all employees. This structure enhances coordination of functional areas and ensures that each area is working closely with other functions. Disadvantages Too many hierarchical levels may waste time in communication which may in turn lead to delays in decision-making. There is too much centralization in vertical organizations. Tight operational control delays the decision-making process.

Horizontal corporation
Horizontal corporation

in which traditional internal departmental divisions and welldefined layers of authority are blurred or destroyed to allow an organization to respond more quickly and effectively to market changes.

Advantages Quick decision making Low administrative cost Disadvantages Absence of control Proper coordination

Reverse Pyramid
Reversal of the pyramid not only gives the

customers the most important role in driving the business, it also gives the front-line employees a similar ability. As they are closest to the customers, this appears to be a reasonable and long overdue proposition. Thus the inversion of the management pyramid is not only deemed to improve relations with the customers, but also to improve the business itself. The flow of communication from the customers and within the enterprise should vastly improve.

Advantages
In this structure the most

Disadvantages
This kind of structure may be

important people called customers are given the first preference. This way it becomes very easy to understand their preferences and plan the strategies of the organization accordingly.

Front line employees are given more responsibility and authority in the organization than the top management because they are closest to the customers. Decentralization of authority and responsibility place a very important role in prompt and timely decisions. The inverted pyramid structure motivates the employees as they are placed in a berter position than the top management.

dangerous because the role of top management is been shifted to supporting one from that of commanding one which ultimately leads to direction-less organization. In this structure there is absence of clear authority and responsibility levels and as a result of which people become confused and the business veers out of control. Frontline supervisor cannot make strategies regarding organizations even though they have proper understanding of the customer's because they are not equipped to do so.

Orchestra Organization
The

conductor (CEOItop management) and the team (employees/managers) to the same score, though each one operates a different instrument and at different times.

Advantages

operate

There is a lot of cooperation and coordination between the employees and the management. The objectives are clearly defined. The flow of information in the organization is perfect because it is more of information - based management rather than the bureaucratic command - control. A perfect synchrony cannot be expected from the top management and the employees always because there may be some hindrances in communication flow as there is no middle level management. The authority responsibility aspects are not clearly defined. The control of whole organization by the top management alone

Everyone operates as a player

in hislher own right and plays directly to the CEO without an intermediary but with a high level of integrated effort (synchrony). It is an organization of specialists of different kinds directing themselves and doing different, kinds of work (the roles and responsibilities of each is clear in relation to hislher own task and that of others).

Disadvantages

Cluster Organization
An organization may be restructured around certain clusters that are inter- locked or networked representing a cluster organization. Each cluster consists of a group of people drawn from different functional and staff areas working together cm a semi permanent basis to accomplish certain preset goals. A cluster handles its administrative functions, develops the required expertise, relates to customers, and is accountable for its actions. Each individual within the! cluster has responsibility for his particular area of activity and also of the performance of the cluster as a whole. Individual clusters in an organization may differ in size consisting usually of 30 to 50 members to provide for a broad range of functional and staff expertise.

Advantages Well defined responsibilities. This structure empowers the employee by fostering individual and team work. Disadvantages Employees in this structure work on a semi permanent basis. The state of being not employed on a permanent basis by the organization may depress the employees and kill their initiative. A c:luster, which manages all the activities associated with accomplishing their Corporate goals may become lack of all, master of none". There is lack of formal hierarchical structure, which may lead to direction-less of the organization.

Virtual organization
A firm is said to be having a

virtual organizational structure when it contracts out almost all functions. The only function retained by the organization is the name and the coordination among the parties. A virtual organization might not have even have a permanent office.

These structures enable for

doing business with less capital, less human resources and other inputs. These structures provide flexibility of operation. These structures develop ancillary industries. Disadvantages Companies do not have strong foundations or strengths in their operations. Organization must have to heavily depend upon outsourcing. ) Failure in the network results in failure of the organization.

Work Restructuring
Outsourcing

In sourcing
Horizontal integration Vertical integration Organization networking

Process Restructuring
Bench Marking

Value Management
Business Reengineering Knowledge management

Forms of restructuring
Expansions Reverse Merger

Diversifications
Collaborations Spin off/ Demergers
Split Off /split up/ sell

Take over
Friendly takeover Hostile takeover

Joint venture Leverage Buy out Management Buyout Buyback

off
Hive off Mergers
Amalgamations
Absorption

Merger
Merger is combination of two or more companies

which can be done either by way of amalgamation or by way of absorption.

Amalgamation is the process where two or more

companies dissolve their identity to form a new entity. For example, merger of Brooke Bond and Lipton has formed a new entity called Brooke Bond Lipton India Limited. Absorption, the other type of merger, is nothing but dissolution of a companys identity into other companys identity. As the name suggest, in absorption a company absorbs other company to form a new larger entity.

 Demerger is also a type of corporate restructuring which results

in formation of two entities. The entity which undertakes demerger is termed as Demerged Company and the new entity formed is called as Resulting Company. Companies adopt demerging strategy to sell subsidiaries or to get rid of non-profit making division of company. Demerger takes place in the form of spin off, split off, split up, sale off, etc. In spin-off, company distributes its shareholding in subsidiary to its shareholders thereby not changing the ownership pattern. For example, Air India formed Air India Engineering Services Limited by spinning off its engineering department. Split-off is the form of demerger where shareholders of existing company form a new company to takeover specific division of existing company. When existing company is dissolved to form few new companies, it is called as Split-up. Sell-off takes place when company sells its non-profit making division.

 When financially weak company absorbs financially

strong company it is corporate restructuring made in the form of Reverse Merger. Merging of large sized company into small sized company is also form of Reverse Merger. For example ,merger of Corus with Tata. Now-a-days, public companies opt route of reverse merger for merging with private companies to avoid lengthy procedure of merger. When a bidder company takeover the management of target company with permission of its Board, it is termed as Friendly takeover. When a company secretly acquires the control over Target Company against wish of their management, it is termed as Hostile takeover.

 Joint Venture is an entity formed by two or more

companies for a specific period with a specific objective. Joint ventures are useful for a company to enter into new segment of market. Joint venture creates a new entity, however Strategic Alliance allows companies to remain independent while perusing agreed goal. When a group of people buy the controlling stake in a company through leveraged (borrowed) funds, it is Leveraged Buyout. When such buyout is carried out by management, strategy is termed as Management Buyout.

Implication on human resource