Organizational Restructuring ppt

ORGANIZATIONAL RESTRUCTURING

•A social unit of people that is structured and managed to meet a need or to pursue collective goals, is called an “Organization”.

•Organizational Structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational goals.

• Organizations are a variant of clustered entities.

• An organization can be structured in many different ways, depending on their objectives.

• The structure of an organization will determine the modes in which it operates and performs.


A visual schematic of Organizational Chart


• A business organization makes changes in personnel and departments and change how workers and departments report to one another to meet market conditions.

• Some companies shift organizational structure to expand to serve growing markets & other companies reorganize downsize or eliminate departments to conserve overhead.


• Organization restructuring happens when the reporting hierarchy of a company changes.

• After organization restructuring certain groups will report to different departments, and some departments may be newly created or disappear altogether.


Causes of Organizational Restructuring

• Changing Strategy

• Changing Structural Types

• Downsizing

• Expanding


Changing Strategy • Companies reorganize structure to

accommodate the market shifts.• Some companies create new divisions to

facilitate new products or product lines.• Some companies trim production staff due to

surplus production• Some companies increases sales staff to drive

sales.


Changing Structural Types• Companies often rearrange business structure to

follow a new business model.• Some companies shift organizational structure to

a regional model to assign local managers.• Some companies create a matrix grid to place

the key managers over various departments and divisions.


Downsizing• Companies commonly downsize to remain

functional during a loss of revenue.• Most companies will close departments, drop

product lines, lay off managers and sell facilities to keep a company afloat.

• Some companies reorganize business structure to meet the needs of the new organization at its smaller size


Expanding• Corporate expansion demands the creation of

new departments to accommodate new products or new facilities.

• For any expansion companies has to rearrange business structure to include the new staff.

• Companies often make changes in the basic organizational structure for any expansion.


Merger and Acquisition

• Merger and Acquisition refers to the process of acquiring a company at a price called the acquisition price or acquisition premium.

• The key principle behind M & A is to create shareholder value over and above that of the sum of the two companies.

• Two companies together are more valuable than two separate companies


Distinction between Mergers and Acquisitions

• When one company takes over another and clearly establish itself as the new owner, the purchase is called an acquisition.

• When two firms, often of the same size, agree to go forward as a single new company rather than remain separately owned and operated, this is referred to as a merger.


Types of Merger

• Horizontal Merger• Vertical Merger• Co-Generic Merger• Conglomerate Merger• Amalgamation


Horizontal Merger

• Merger exists between two companies who compete in the same industry segment.

• The two companies gain strength in terms of improved performance, increased capital, and enhanced profits

• Reduces the number of competitors in the segment and gives a higher edge over competition.


Vertical Merger

• Merger exists between two or more companies in the same industry but in different fields of business.

• The companies in merger decide to combine all the operations and productions under one shelter.


Co-Generic Merger

• Merger exists between two or more companies which are related to the production processes, business markets, or basic required technologies.

• It is the extension of the product line or acquiring components that are required in the daily operations.


Conglomerate Merger

• It is an arrangement where two or more companies consolidate their business to form a new firm, or become a subsidiary of any one of the company.

• Involves dissolving the entities of amalgamating companies and forming a new company having a separate legal entity.


Amalgamation

• Merger or venture exists when two or more companies belonging to different industrial sectors combine their operations.

• Companies are no way related to their kind of business and product line.

• This is just a unification of businesses from different verticals under one flagship enterprise or firm.

Change in Company attitude

• Organizational change occurs when a company makes a transition from its current state to desired future state.

• This is managed so as to minimize employee resistance and maximizing the effectiveness of the change.

• Managing organizational change is the process of planning and implementing change.


Major areas of attitude change.

• Strategy,

• Technology,

• Structure,

• People


• Three basic stages of strategic change.

• Realizing that the current strategy is no longer suitable,

• Establishing a vision for the company's future,

• Setting up new systems to support change.


• Technological changes are often introduced as components of larger strategic changes.

• Technology change is incorporated into the company's overall systems & structure.

• Structural changes can also occur due to strategic changes.

• It also occurs due to operational changes or changes in managerial style.


• People change is a result of other changes.

• Sometimes companies seek to change people attitude to increase their effectiveness.

• Positive change of people that match with company’s goal help for successful merger.

Change in Employee attitude

• Aftermath of mergers and acquisitions impact the employees or the workers the most.

• In a merger or an acquisition, employees are bound to be laid-off or downsized.

• The workers will have to compromise.

• Employees may experience job/career/life dissatisfaction, lower self-esteem, depression, and anxiety


Reaction of employee to a merger:

• Denial: At first employees feel that the merger will not really happen.

• Fear: As plans for the merger begin to unfold, employees begin to fear the unknown and imagine the worst.

• Rumors: Circulate rumors of mass layoffs, terminations & job loss.


• Anger: Employees begin to express anger towards the deal.

• Sadness: Employees begin to grieve the loss of their corporate identity.

• Differentiation: They focus on the differences in the way the two companies operate and are managed


Best practices for positive employee attitude:

• Better understanding of the human implication of a merger.

• Nurture employees through training and coaching.

• Frequent and regular communication during and after the merger.


• Employee assistance programs to reduce stress.

• Counseling to help employees distinguish the real effects of a merger.

• Establish clear, well-defined reporting relationships.

Do’s and Don’ts

Do’s:

• Retain key people.• Communicate opportunities early to high

potential staff.• Insist on honesty and transparency in the

communication.• Expect and plan for ups and downs

Do’s and Don’ts

Don’ts:• Loose control over the situation and access to

information.• Treat the acquired company as “occupied

territory”.• Reduce trust and cooperation between

organizations.• Allow negative impact of the merger on

employees

Thank You

Organizational Restructuring ppt

Business

Transcript of Organizational Restructuring ppt