Restructuring/Rightsizing/Reengineering

Restructuring/Rightsizing/Reengineering

The 3 R that have a not so good vibe for any business organization,  Restructuring/Rightsizing/Reengineering.

Any of the 3 concepts have a bitter and hard to swallow impact and effort on the organization that is going to be subject of any of the concepts. r

Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs. Other reasons for restructuring include a change of ownership or ownership structure, demerger, or a response to a crisis or major change in the business such as bankruptcy, repositioning, or buyout. Restructuring may also be described as corporate restructuring, debt restructuring and financial restructuring.

Corporate restructuring entails any fundamental change in a company’s business or financial structure, designed to increase the company’s value to shareholders or creditor. Corporate restructuring is often divided into two parts:  financial restructuring and operational restructuring.

Financial restructuring relates to improvements in the capital structure of the firm. An example of financial restructuring would be to add debt to lower the corporation’s overall cost of capital. For otherwise viable firms under stress it may mean debt rescheduling or equity-for-debt swaps based on the strength of the firm.  If the firm is in bankruptcy, this financial restructuring is laid out in the plan of reorganization.

The second meaning, operational restructuring, is the process of increasing the economic viability of the underlying business model. Examples include mergers, the sale of divisions or abandonment of product lines, or cost-cutting measures such as closing down unprofitable facilities. In most turnarounds and bankruptcy situations, both financial and operational restructuring must occur simultaneously to save the business.

Just because a company needs restructuring — financial or operational — does not mean it will undertake the necessary reforms. Management and controlling shareholders may prevail for an extended period, during which time minority shareholders and/or creditors suffer an erosion of value.

Rightsizing is often used as a synonym for downsizing because of its not so negative aftertaste. In fact the 2 terms are quite different, one is reactive driven by external factors and the other is proactive driven by internal factors.

Rightsizing is proactive and needs to be a constant part of the process of managing an organization. To do rightsizing of an organization, the leaders first look at market needs and trends, technologies, alternative approaches, and new ideas. They focus their attention on the future and where the organization should be headed. Newly clarified or refined strategic direction often gives managers new insights about what skills will be needed within the organization to head in that direction. In rightsizing, organizations are designed to implement strategic direction. Some departments are enlarged while others may be eliminated. Sometimes the proactive, strategic design elements of rightsizing introduces a new layer of management. However, more and more organizations are using rightsizing processes to intentionally eliminate layers of middle management as they establish the most effective shape and size of their organizations.

If “downsizing” is so reactive, depressing, disruptive, nonproductive, and impersonal, and “rightsizing” is so proactive, future-oriented, creative, strategic, exciting, and positive, how could anyone confuse the words?

One of the reasons rightsizing and downsizing become confused in people’s minds is that some passive managers abdicate their responsibilities and wait for a wave of downsizing to force them to act.

In this complex world of ever-changing external forces, even the most practiced reactive managers would not know if they were being prompted to do up sizing or downsizing. In some industries, it is difficult to tell if you are “coming or going.”

Business process re-engineering is a business management strategy, originally pioneered in the early 1990s, focusing on the analysis and design of workflows and business processes within an BPR1organization. BPR aimed to help organizations fundamentally rethink how they do their work in order to dramatically improve customer service, cut operational costs, and become world-class competitors. BPR seeks to help companies radically restructure their organizations by focusing on the ground-up design of their business processes.

Business Process Reengineering is also known as business process redesign, business transformation, or business process change management.

 

Why is it sometimes so difficult to understand the concepts of the 3 R ? Often the difficulties of a business organization do not come isolated so that only on R is needed. Usually a business organization is hit by a mix of factors that are determining a solid and clear RE-SET of the entire business organization. It is true that a business reset comes with a bitter after taste, it is also true that it is hard to do because of all implications. Can you afford not to do a business reset when it is needed ? Imagine that your business is a boat that is leaking , you have 2 options fix the leak by reset and gain speed again or go down with your boat.

Want to know more about Restructuring/Rightsizing/Reengineering ? Do you have a business that is struggling ? If yes we are happy to help.

 

Reference:

  • http://people.stern.nyu.edu/igiddy/restructuring.htm
  • https://en.wikipedia.org/wiki/Restructuring
  • http://ambler.com/article-library/rightsizing-vs-downsizing-big-difference/
  • https://en.wikipedia.org/wiki/Business_process_reengineering

 

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