Done properly, the corporation’s vision for the future will be the guiding light for the development of the strategic plan. Before the managers of any organization can determine how to do work better or how to organize to perform work more efficiently, they must first determine what work needs to be done and what processes are critical to perform. Opportunities for increased revenues as well as for reduced costs need to be examined. Choices among those opportunities can only be made on the basis of strategy.
There are several approaches to strategy that may be used to develop the details of the strategy that will most likely achieve the firms vision. A thorough analysis of all holdings and assets, market conditions, the competition, the internal and external social pressures that may arise, as well as the processes used to fabricate the goods must be undertaken. A well kept secret in most organizations is that strategy is seldom formulated, articulated or understood in a way that provides managers with a useful basis for making decisions about restructuring.
Armed with a full understanding of the corporations vision, goals, and the broad level strategic plan, the business unit level manager is then ready to conduct his/her restructuring planning. This information establishes clear strategic priorities for restructuring by identifying the capabilities that do and do not contribute to a firm’s competitive advantage. When restructuring is strategic, it is common for firms to upsize areas in which strategically important work is performed, while downsizing strategically unimportant work. Strategy clarification sets the stage for strategic restructuring by providing a logic for prioritizing organizational work. When the business strategy is clear it is possible to answer the following questions about an organization’s work:
What work should be the object of our most intense improvement efforts?
What work activities need to be improved together and which can be improved separately?
What work should be eliminated?
What work should we outsource?
When is efficiency (i.e., doing things right) and when is effectiveness (i.e., doing the right things) the most useful driver of important efforts?
(Barney, 1991).
The important message here is that although massive layoffs often result in a short-term gain in stock price and sometimes in a moderate gain in productivity, the long-term effects can be disappointing (and perhaps destructive) if the restructuring is not the final step of a business level strategic implementation rather than the first. It is important that strategy be defined and directed from a corporate level, but that the actual strategic plan be developed on the business unit level. Seldom is it the case that the same prescriptive changes directed from the corporate level are effective for each business unit within the company.
With a clearly defined strategic road map, a corporation will often discover the need to fortify or build up one aspect of the business process while trimming or divesting another. By providing the individual business unit with a clear vision of the firm’s goals and plans for the future while allowing them the autonomy to map their own strategic plan, a corporation can insure that the hard decisions and process level reengineering will be accomplished by the expert – those who work within the business process daily. Another benefit to the organization that uses this approach is the opportunity to function as a mentor and a coach to the individual business units while providing a corporate wide network for re-allocation of displaced resources.
There is a storm brewing on the horizon concerning corporate responsibility. The public outcry and political rhetoric witnessed today are but harbingers of the maelstrom of public opinion to come. The evidence is abundant. Presidential candidates noted the early popularity that Buchanan achieved when he began to criticize corporate behavior. Should the economy take a sizable downturn, corporation bashing may become a popular sport. Not that some haven’t deserved it.
A corporation that rewards it’s executives for short term stock valuation while ignoring the company’s real growth in terms of expansion or increased market share will be shortchanging the stakeholders in the company in the long term. This corporation will also face a growing public outcry against perceived disregard for the welfare of its employees and for the communities wherein they reside. These considerations, taken in light of the amassed evidence that huge layoffs most often provide only short-term gain and may do long term damage, should adequately emphasize the need for caution when considering a restructuring.
The seemingly obvious conclusion is that there are times and conditions when a decision to downsize is justified as a means of achieving strategic initiatives. The decision to downsize, although a painful one, is not anathema. If the decision is a part of a larger, broader strategic plan, there is a distinct possibility that displaced individuals may have the option to retrain, relocate, or to integrate into another discipline within the company. Any action that a corporation undertakes; if it is to succeed; if it is to provide material gain; if it is to improve market position, it must be the logical outcome of a strategic plan. Seldom are knee-jerk responses to market pressures the best.
“A Top Economist Switches His View On Productivity” New York Times May 8, 1996
Baker, Dean. “Trends in Corporate Responsibility: Getting More for Less?” Technical Paper.
Economic Policy Institute, Washington, D.C. 1996
Barney, J. “Firm Resources and Sustained Competitive Advantage,” Journal of Management, March 1991, 99-120
Cameron, K. S. “Strategies For Successful Organizational Downsizing,” Human Resource Management, 33, 2, 189-211
Challenger, Grey & Christmas. “People Trends” The New York Times March 3, 1996
Chandler, A. “Strategy and Structure: Chapters in the History of Industrial Enterprise,” Cambridge, Mass. :The MIT Press, 1962
Downs, Alan. Corporate Executions: The Ugly Truth About Layoffs–How Corporate Greed is Shattering Lives, Companies, and Communities. New York: AMACOM, 1995
Hall, Rosenthal, and Wade “How to Make Reengineering Really Work.” Harvard Business Review, 1993 119-131
Hendricks, C. F. The Rightsizing Remedy: How Managers Can Respond to the Downsizing Dilemma. Alexandria, Va.:Society for Human Resource Management, 1992
Perry, L. T. “Least-Cost Alternatives to Layoffs in Declining Industries,” Organizational Dynamics, Spring, 48-61
“Unthinking Shrinking.” The Economist September 9, 1995
“When Layoffs Alone Don’t Turn the Tide” International Business Week December 7, 1992
“Wyatt Survey, The” Wall Street Journal June 6, 1991
Works Cited (continued)
“When Slimming is Not Enough” The Economist September 3, 1994 59-60
Downsizing; Anathema or Panacea?
Joe Rulo
Business Policy, Mon & Wed 5:00 7:00
Rick Powell
June 1, 1996