Organizational Restructuring

Chapter 2 cont....

2.3.3 Organizational Restructuring

Organizational Restructuring hovers around the changes in organizational design. It brings about changes in decision making, information flow and management style.

Though this restructuring, just like all other restructurings, is initiated by the CEO, it requires the participation of all hierarchies of an organization, especially the employees. Organizational restructuring, combined with portfolio restructuring and financial restructuring makes meaningful changes materialize and touches upon the following aspects:

1) Centralization/decentralization of the organization: Functions or units of the organization may be centralized or decentralized to create new linkages to better implement the strategy. Nature of Decision making in the organization may be changed due to the changes in reporting levels and hierarchy.

2) Organizational Culture: The essential fabric of the firm i.e. its culture is affected as a consequence of changes in reporting levels and hierarchical levels.

3) Training and Redeployment: Imparting training to the workforce enables the organization to cope better with the changing environment. At the same time some employees need to be redeployed. However, training and redeployment may be inadequate at times and therefore inducting educated and skilled professionals at different levels becomes necessary.

4) Changes in HR Policies: The current HR policies of the organization need to be changed in accordance with the changing scenario. The HR department needs enable change management.

5) Rationalization of Pay Structure: The present pay structure should be modified and re-evaluated to maintain the internal and external equity among the employees.

Symptoms indicating the need for organizational restructuring

• Parts of the organization are significantly over or under staffed.
• Organizational communications are inconsistent, fragmented, and inefficient.
• Technology and/or innovation are creating changes in workflow and production processes.
• Significant staffing increases or decreases are contemplated.
• New skills and capabilities are needed to meet current or expected operational requirements.
• Accountability for results are not clearly communicated and measurable resulting in subjective and biased performance appraisals.
• Personnel retention and turnover is a significant problem.
• Workforce productivity is stagnant or deteriorating.
• Morale is deteriorating

Benefits of Organizational Restructuring

i. Lower cost
ii. Better formulation and implementation of strategies

Issues in Organizational Restructuring

i. Culture.
ii. Downsizing
iii. Loss of Employee Morale.

The approaches that various companies, large and small, public and private, adopted in their efforts to restructure in terms of DOWNSIZING differed in terms of how they viewed their employees.

• One group viewed employees as costs to be cut. These are the "downsizers".
• The other group viewed employees as assets to be developed. These are the "responsible restructurers."