RESTRUCTURING

Restructuring

Restructuring

Introduction

Another reason is to maintain growth and financial performance improvement. Restructuring activities is often associated with enhancement of profitability using a variety of instruments. In the modern business world where globalization is often mentioned as the most prevalent tool of expansion and growth, to change is considered as the only way to improve. Some changes might be small and gradual in nature but most of them can also be considered as corporate restructuring activities (Bowman & Singh, 1993: 5). Quality enhancement models like Continuous Improvement and Kaizen are also strong supporters of corporate restructuring activities. This is also true because the continuous and gradual changes demanded by the quality models often accumulated into a meaningful change in the firm's business structure. In addition, corporate restructuring can also happened due to a change in corporate management structure.

Effects of Corporate Restructuring

Generally speaking , most studies revealed that all types of the corporate restructuring above result in an improvement in performance In the financial restructuring activities , for example , leveraged buy-outs , companies gain free cash flow , greater focus on company 's core business and improved operational efficiency (Berger & Ofek, 1995: 39). Restructuring activities that improved efficiency of operations and a good control of capital expenditure creates a better financial performance. However, not all financial restructuring have positive effects on financial performance In terms of employee lay-offs, there are mixed signs of how the activity influenced corporate performance.

Examining the U.S. Experience to Discover Successful Corporate Restructuring

Safeway offers a second interesting example of a corporate reorientation. The Oklahoma division of Safeway, called Homeland, is now back on the road to success after being sold twice through LBOs. Homeland has revamped its stores, created new marketing strategies and has experienced rising morale--all of which is attracting new customers. Executives feel free to make and implement decisions now that they no longer are captives of the Safeway corporate bureaucracy (Mitchell & Lehn, 1990: 372). These decisions are creating a whole new look for Safeway; for example, the chain so far has added video rentals, bakeries, fresh fish counters and flower vendors which will give it a new competitive edge. Innovation is fast becoming a major requirement for success at Safeway; it is evolving into the source of the company's competitive advantage. Innovation, in turn, is paying off--in the form of improved customer satisfaction, stronger market position, and enhanced company financial performance.

Effective restructuring requires sound human resource planning and practices -- There are two components to sound human resource planning as an ingredient in successful restructuring: an organization must be formed whose employees have both the motivation and skills needed to develop a firm's competitive advantage; and a corporate culture must be reshaped to reflect the changing values and priorities of the firm. Restructuring creates many opportunities for novel human resource planning and management practices. It may allow companies to revamp existing systems or introduce new procedures to spur commitment to the strategy and to improve productivity (Milgrom & Roberts, 1988: ...