Strategies for Organizational Restructuring
Chapter 2 cont....
Various strategies for business restructuring are available. In our study of the subject, we found out that following strategies play an important role in the business restructuring:
1. Smart-sizing: It is the process of reducing the size of a company by laying off employees on the basis of incompetence and inefficiency.
Some Examples
- Acquisitions: HLL took over TOMCO.
- Diversification: Videocon group is diversified into power projects, oil exploration and basic telecom services.
- Merger: Asea and Brown Boveri came together to form ABB.
- Strategic alliances: Siemens India has got a Strategic alliance with Bharati Telecom for marketing of its EPABX.
- Expansion: Siemens is expanding its medical electronics division- a new factory for medical electronics is already come up in Goa.
2. Networking: It refers to the process of breaking companies into smaller independant business units for significant improvement in productivity and flexibility. The phenomenon is predominant in South Korea, where big companies like Samsung, Hyundai and Daewoo are breaking themselves up into smaller units. These firms convert their managers into entrepreneurs.
3. Virtual Corporation: It is a company that has taken steps to turn itself inside out. Rather than having managers and staff sitting INSIDE in their offices moving papers from in basket to out basket, a virtual corporation kicks the employees outside, sending them to work in customer's offices and plants, determining what the customer needs and wants, then reshaping the corporate products and services to the customer's exact needs. This is a futuristic concept wherein companies will be edgeless, adaptable and perpetually changing. The centrepiece of the business revolution is a new kind of product called a "Virtual Product" Some of the these products already exist, camcorders create instant movies, personal computers and laser printers have made instant desktop publishing a reality. And for all these we can obtain cash instantly at ATMs.
4. Verticalization: It refers to regrouping of management functions for particular functions for a particular product range to achieve higher accountability and transparency. Siemens in 1990 moved from a "function-oriented" structure to a vertical "entrepreneur-oriented" structure embracing size business and three support divisions.
5. Delayering- Flat organization: In the post world war period the demand for goods was ever increasing. Main objective of the corporations was production and capacity build up to meet the demand. The classical, pyramidal structure was well suited to this high growth environment. This structure was scalable and the corporations could immediately translate their growth plans into action by adding workers at the bottom layer and filling in the management layers. But the price paid in the whole process was much higher. The overall process became complicated; number of middle managers and functional managers grew making the coordination of various functions complex. Senior/top management was alienated from the front-line people as well as the end users of the product or service. Decision-making became slower. Hence, a need is felt to attack the unproductive, bulky and sluggish network of white-collar staff. A powerful strategy would be to remove the layers of senior and middle management i.e. making the organization structure flat.
6. Business Process Reengineering: The Business Process Reengineering method (BPR) is defined by Hammer and Champy as 'the fundamental reconsideration and radical redesign of organizational processes, in order to achieve drastic improvement of current performance in cost, service and speed'. Value creation for the customer is the leading factor for BPR and information technology often plays an important enabling role. Business process reengineering is also known as BPR, Business Process Redesign, Business Transformation, or Business Process Change Management.
