Restructuring

Restructuring –

Reducing the size of the firm in terms of

number of employees, divisions, or
units, and the number of hierarchical
levels in the firm’s organizational
structure

Ch 7-1
Fred R. David
Prentice Hall
 Restructuring

Also called –

– Downsizing
– Rightsizing
– Delayering

Ch 7-2
Fred R. David
Prentice Hall
 Restructuring

• Employed when ratios out of line with

benchmarked competitors

• Primary benefit sought is cost reduction

Ch 7-3
Fred R. David
Prentice Hall
 Reengineering

Reengineering –

Involves reconfiguring or redesigning work,

jobs, and processes to improve cost,
quality, service and speed.

Ch 7-4
Fred R. David
Prentice Hall
 Reengineering

Also called –

– Process management
– Process innovation
– Process redesign

Ch 7-5
Fred R. David
Prentice Hall
 Reengineering

Reengineering –

Concerned more with employee and

customer well-being than shareholder
well-being

Ch 7-6
Fred R. David
Prentice Hall
 Linking Performance and Pay
to Strategies

Most companies practicing pay-for-

performance

Ch 7-7
Fred R. David
Prentice Hall
 Linking Performance and Pay
to Strategies
• Dual bonus system becoming more common
– Based on both annual objectives and long-term
objectives

• Profit Sharing
– Incentive compensation used by 30% of companies

• Gain Sharing
– Performance targets set for employees or
departments

Ch 7-8
Fred R. David
Prentice Hall
Tests for Performance-Pay Plans

Does the plan capture attention?

Do employees understand the plan?

Is the plan improving communication?

Does the plan pay out when it should?

Is the company or unit performing better?

Ch 7-9
Fred R. David
Prentice Hall
Managing Resistance to Change

Change raises anxiety over fear of:

– Economic loss
– Inconvenience
– Uncertainty
– Break in status-quo

Ch 7-10
Fred R. David
Prentice Hall
Managing Resistance to Change

Resistance to change –

– Single greatest threat to successful strategy

implementation

Ch 7-11
Fred R. David
Prentice Hall
 Change Strategies

• Force Change Strategy

• Educative Change Strategy
• Rational or Self-Interest Change Strategy

Ch 7-12
Fred R. David
Prentice Hall
 Managing the Natural
Environment

• Wide appreciation for firms that conduct

operations that “mend” rather than “harm”
the environment.

Ch 7-13
Fred R. David
Prentice Hall
 Creating a Strategy-Supportive
Culture

Strategists should strive to preserve,

emphasize, and build upon aspects of
existing culture that support new
strategies.

Ch 7-14
Fred R. David
Prentice Hall
 Creating a Strategy-Supportive
Culture
Elements linking culture to strategy:

1. Formal statements of philosophy, charters, etc. used for

recruitment and selection, and socialization
2. Designing of physical spaces, facades, buildings
3. Deliberate role modeling, teaching and coaching
4. Explicit reward and status system, promotion criteria
5. Stories, legends, myths about key people and events
6. What leaders pay attention to, measure and control
7. Leader reactions to critical incidents and crises
8. How the organization is designed and structured
9. Organizational systems and procedures
10. Criteria used for recruitment, selection, promotion, retirement

Ch 7-15
Fred R. David
Prentice Hall