...How To Make Restructuring Work for Your Company Published: | October 1, 2001 | Author: | Stuart C. Gilson | Executive Summary: A bungled corporate restructuring can turn a good idea into disaster. In an excerpt from his new book, HBS professor Stuart Gilson outlines the keys for a successful corporate makeover. Plus: Gilson Q&A. About Faculty in this Article: Stuart Gilson is the Steven R. Fenster Professor of Business Administration at Harvard Business School. * More Working Knowledge from Stuart C. Gilson * Stuart C. Gilson - Faculty Research Page Editor's Note: The following excerpt is taken from the "Lessons of Restructuring" section of Gilson's introduction to Creating Value through Corporate Restructuring. Although the case studies in this book span a wide range of companies, industries, and contexts, some common issues and themes emerge. Taken together, they suggest there are three critical hurdles or challenges that management faces in any restructuring program: 1. Design. What type of restructuring is appropriate for dealing with the specific challenge, problem, or opportunity that the company faces? 2. Execution. How should the restructuring process be managed and the many barriers to restructuring overcome so that as much value is created as possible? 3. Marketing. How should the restructuring be explained and portrayed to investors so that value created inside the company is fully credited to its stock price? Failure to address any one of...
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...Schumpeter’s says Capitalism as a process of “creative destruction” which is necessarily inherent in business activities in a market economy. The basic nature of restructuring is a zero-sum game. Strategic restructuring reduces financial losses, simultaneously reducing tensions between debt and equity holders to facilitate a prompt resolution of a distressed situation. Corporate debt restructuring is the reorganization of companies' outstanding liabilities.https://en.wikipedia.org/wiki/Restructuring When change is not handled well, additional loss of jobs can occur. In addition, demoralization of the work force; increased worker turnover; decreased cooperation and teamwork; and increased levels of stress, anxiety, absenteeism, illness, and mistakes can follow. For example - Some have been economically dynamic but socially disintegrated; others have been equitable but stagnant; several are both stagnant and unintegrated. Even as the economic outlook appears to brighten, the fact remains that many organisations can no longer operate as they had been. A key feature of this changing landscape is the need for organisations to restructure. Here are seven broad restructuring principles to help make any restructure a successful one. 1. Align structure to strategy All restructures must align to strategy. This may seem self-evident, yet a significant number of organisations fail to do so. For example, if local conditions are a predominant factor, then stress local sales and marketing...
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...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. Executives involved in restructuring often hire financial and legal advisors to assist in the transaction details and negotiation. It may also be done by a new CEO hired specifically to make the difficult and controversial decisions required to save or reposition the company. It generally involves financing debt, selling portions of the company to investors, and reorganizing or reducing operations. The basic nature of restructuring is a zero-sum game. Strategic restructuring reduces financial losses, simultaneously reducing tensions between debt and equity holders to facilitate a prompt resolution of a distressed situation. Corporate debt restructuring is the reorganization of companies’ outstanding liabilities. It is generally a mechanism used by companies which are facing difficulties in repaying their debts. In the process of restructuring, the credit obligations are spread out over longer duration with smaller payments. This allows...
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...A CASE STUDY ON CORPORATE RESTRUCTURING IN L&T SUBMITTED BY: GROUP 1 ANSHU KUMARI (60011) ABHIJEET SINHA (60001) AMBUDHEESH PARASAR (60005) ABHISHEK CHOUDHARY (60002) AMRIT RAJ (60006) HIMANI SINGHAL (60016) IN THE COURSE OF COST ACCOUNTING DURING TRIMESTER 2 IN THE ACADEMIC BATCH OF 2013-15, CIMP UNDER THE GUIDANCE OF DR. ASHISH VARMA ACKNOWLEDGMENT The light of a matchstick can never be a match for sunlight. In the similar fashion, it was not possible for our group to complete the project on our own. First of all, we would like to extend our gratitude to DR. Ashish Varma .we were fortunate that he considered us to be good enough to carry on with this project. It was his valuable suggestion, constant help and incessant monitor which helped us in carrying out this project. We would also like to thank our friends and family for their valuable inputs and help. We would be failing in our duty if we ignore the library resource centre of CIMP as it helped us in gathering information which helped us in carrying out this project. 1. INTRODUCTION After the opening up of the Indian economy there had been an advent of large MNC’s and big global corporate houses in India. As a result there had been a constant pressure on Indian corporate houses not only to survive but to come out as a key player in their respective sectors. Many of the Indian firms which followed a rigid organisational structure felt the need to restructure their businesses. Many of the...
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...Impact on Employee Morale during Company Restructuring The worldwide economic crisis has caused too many companies to restructure their corporate setting in order to survive and meet their financial challenges. If you turn on the TV or browse internet these days, it is almost impossible to avoid the bad news of more and more massive layoffs in United States as well as the rest of the world. As this financial crisis deepens, one can’t help asking “Is downsizing or more job cuts our only way out? What is the long term effect of these massive job cuts to our corporation employees? Will we need even longer time to recover from this emotional and morale crisis if the downsizing wasn’t done right?” In this paper, impacts of corporate restructuring on employees’ morale have been explored by reviewing several research papers. Figures were illustrated, strategies were suggested. It is not the question why companies have to downsize or cut jobs, it is how they should do it strategically right to reach the expected goal of benefit and continue to retain the trust and loyalty of the surviving workers. “Trust is one of the most valuable yet brittle assets in any enterprise. So over the long term, it’s far better for companies to downsize in a humane way.” - Robert Reich (Mishra and Spreizer, 1998) During the economic recession, many companies started to restructure their legal, ownership or operation structure in order to be more profitable, competitive and...
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...Growth with Recovery: Coming Back from Company Restructuring Changes From Recovery When economic times are tough the company has to look at measures to conserve costs. Over the years, a firm’s standard response to finding itself in financial difficulty was to reduce its workforce (Gandolfi, 2008). The effects of the worst recession since the Great Depression, hurt both big and small corporations, new and old, and in many different types of industries. Major industry sector that has been hit hard are corporations that deal with consumer durables. Companies like General Motors, Johnson Controls, Ford, and Harley-Davidson. The effects of layoffs will be felt on at the companies especially General Motors who is still partially owned by the U.S. Government. Recovery is a long road for some companies that are unable to pickup and improve especially when the company cannot relinquish those ties. Responsible downsizing can benefit company in making needed changes to keep up with the economy and upturns and downturns that come with it. Restructuring must be thought out properly, “A downsizing plan should be included in the strategic management plan of all organizations, regardless of whether they plan to downsize or not. By including such a plan, the organization will be better prepared to begin the staff-reduction process should it be forced to do so in response to environmental changes” (Davis, 2003). The short-term affects involves some initial costs like severances...
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...Use an example of your choice to discuss how ‘corporate restructuring’ transformed market, productive and financial performance. Companies quite often have a need to contract and downsize their operations, or redesign one of the aspects, which might be due to different reasons, such as external factors, increase level of competitiveness or to change company’s direction. All the changes that the company might implement are called corporate restructuring. Usually, corporate restructuring is used when a company’s original structure reached the point when it doesn’t generate the profit, and is no longer efficient. The main aim of a corporate restructuring is to raise company’s profitability and internal operations (Froud 2006). I decided to use Caterpillar example to analyse their need of corporate restructuring and its outcomes. Caterpillar Inc. is a $30 billion global company which is known as a manufacturer of large earth-moving equipment and large construction (Neilson & Pasternack 2005). Caterpillar survived from very difficult times in 1980s, mainly because its product reached maturity level, where customers were no longer interested in it and also the CEO of that company did not take into account very important factor – external environment. In 1980s a lot of companies lost their sales because global recession hit the economy and inflation rates grew very quickly. Therefore, Caterpillar’s structure couldn’t handle the pressure and had to be reorganised. Moreover, Caterpillar...
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...formal plan for the restructuring identifying at least: (i) the business or part of a business concerned; (ii) the principal locations affected; (iii) the location, function, and approximate number of employees who will be compensated for terminating their services; (iv) the expenditures that will be undertaken; and (v) when the plan will be implemented; and (b) has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it. “ By making the press release and communicating the termination plan to its employees , Pharma Co raised a valid expectation to those affected by announcement of the plan. Also, Pharma Co set the date when the plan will be implemented, the principle location affected, the part of the business concerned, the number of employees who will be terminated, and the expenditures that will be undertaken. According to IAS 37, paragraph 80, “A restructuring provision shall include only the direct expenditures arising from the restructuring, which are those that are both: (a) necessarily entailed by the restructuring; and > (b) not associated with the ongoing activities of the entity. “ Thus, only direct costs must be accrued in the end of 2010: the lease termination fee $1.3 mln and the exit package for the terminated employees $3 mln. Cost of dismantling the old equipment should not be accrued as a restructuring cost because there...
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...focusing on restructuring and how it relates to cost improvement. This information has been investigated in order to gain a good knowledge on the importance of restructuring. In order to test this theory, I used random sampling of 20 different data reports relate to the issues that the company faces concerning expenditures, labor and necessary spending. Each month every section of the company has a major meeting and part of the meeting is to discuss the financial reports of the company. Many companies may not find this to be important but it is necessary for our company to do this to track spending. Companies typically do not discuss financials with everyone but they do with us because everyone is given a credit card and a budget for their particular section. We are able to access the other part of company’s financial documents if we want to use them as a tool to improve our budgets. What prompted me to do this is I started working for the company in the year of 2011. After working 5 months for the company, the employees received a letter stating that there will be pay cuts due to the government cutting funding for the program that we are in. There were many complaints from employees who have been there for many years. The employees complained stating that they were told the last pay cut they received would be the final pay cut. I was able to speak to some people in the office and found that they didn’t receive any pay cuts. The company should make the necessary restructuring if they...
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...discharge those responsibilities For example: manufacturer has repaired any faulty items free of charge though there is no warranty in the sales agreement 3. Provision is a liability of uncertain timing or amount. It is accrued on the statement of financial position as it is probable it will be settled and a reliable estimate can be made of the amount that will be settled. Application of the recognition and measurement rules Future operating losses Do not meet the definition of liability and no provision should be made. Onerous contracts Where certain rights and obligations make a contract onerous, a provision should be recognized for any unavoidable costs exceed the benefits expected. 2. b) 4. 1 Intermediate Accounting 2 Restructuring plans Week 2 - Answer Recognition of the provision is required because a constructive obligation may arise from the decision to restructure when, and only when, an...
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...Organizational Downsizing Techniques and Handling Layoffs Team 1 Christina Berardi Bridget Quinn-Carey Tung-Yueh, Lee Over the last two decades, organizational downsizing has been a key management strategy favored by many organizations attempting to cope with fundamental and structural changes in the shifting economy. In the mid-1980’s, downsizing was implemented primarily by companies experiencing difficult economic times (Gandolfi, 2006). Companies hoped to cut costs and improve performance. By the late-1980’s, it developed into a proactive restructuring strategy for a multitude of organizations. Furthermore, since then, organizational downsizing has now transformed the corporate landscape and changed the lives of hundreds of millions of individuals around the world (Gandolfi, 2006). There are several definitions that have been developed to effectively define the phenomenon of organizational downsizing. To sum it up in one sentence, organizational downsizing refers to a set of activities, taken on by the core management of an organization, designed to improve organizational efficiency, productivity, and competitiveness. It represents a management strategy that affects three components: (a) the size of the firm’s workforce, (b) the costs, and (c) the work processes. On the surface, downsizing can be interpreted as merely a reduction in organizational size, and the process is a chaotic and uncertain experience...
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...Introduction Since 1908, General Motors (GM) is primarily engaged in automotive production and marketing and financing and insurance operations. GM designs, manufactures, and markets vehicles worldwide, having its largest operating presence in North America. By 2008, GM became vulnerable to the auto industry crisis, which they were not able to meet obligations. Over the years, GM was a dominating force in the auto industry. However, rising labor costs, concessions made to the unions, higher gas prices and a recession, GM was heavily burdened and could not provide the sufficient marketing funds for any one of its product lines. The U.S. government agreed to lend $13 billion in order to buy time to develop a restructuring plan (DePamphilis, 2012, p.648). The restructure plan impacted employees and operations in U.S. and Canada. With mergers and acquisition activities, the intent is to preserve and provide jobs to the community. However, this was not the case with GM. Was it justified to reduce the workforce? Therefore, the review of the bankruptcy steps taken by GM will determine if the restructure was successful. Pension Plan General Motors pension fund obligations and health care obligations appear to threaten the future of the company. Majority of General Motors’ U.S. employees are members of the United Auto Worker (UAW) Union, which ensures health insurance for its members by entering into contractual agreements with employers. In the 1990’s the UAWs’ officers...
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...------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- Task 01: Plan and Present Workplace Communication system Review of case study JKL industries is an Australian owned company selling forklift, small trucks and spare parts to industry. They also have a division which leases forklifts and small trucks on long term leases over three months. The company’s head office is in Sydney and JKL has branches in Brisbane, Melbourne, Perth, Adelaide and the ACT. After 12 years in business focusing on forklifts and small trucks JKL has been offered sales rights to arrange of medium and large trucks from an overseas supplier which will benefit JKL in range over its competitors. The past five years, sale of forklift and truck have averaged 10% increase but the rental market has been in decline. JKL then come up with an idea to restructure company itself by solely focusing on retails sale and exit from rental market. JKL plan to hire the staff from rental department who wish to remain with the company. The organization intends to build and maintain a positive organizational culture, reduce risk and achieve organization goals through this following points: * Developing an effective...
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...Paper for MGMT 541 – Organizational Behavior Objective: Develop an improved knowledge of Organizational Behavior Theory and an improved ability to relate Theory to an Organizational Situation. This improved knowledge and improved ability should emphasize a solutions oriented approach. Assignment: 1. Write an 8 page paper which identifies an Organizational Behavior Theory. Provide a brief explanation of the theory. 2. Identify a situation in an organization to which this Theory can be applied. Find an article in business related publication (e.g. Wall Street Journal, Harvard Business Review, business section of New York Times or Chicago Tribune, etc) to which you can apply the theory. For example, the article might describe an action the organization is taking such as an acquisition, divestiture, employee layoff, market expansion/contraction, etc.). 3. Describe how the theory helps to identify what actions the organization should take to achieve the best outcome(s). Did the organization take these expected actions? Why or why not? 4. If the article did not contain the actions the organization should take with employees, suggest what these actions should be and why. 5. Your paper is to contain at least 4 professional references which support your statements. Identify these references both in the body of the paper and at the end. The text and any readings in the Discussion Board cannot be used as one of the 4 professional references. 6. Your...
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...Bankruptcy filing of Kodak Whenever a big corporation files for bankruptcy, many investors question the move. After the recession, many big corporations like Lehman Brothers etc filed Chapter 11. A chapter 11 case starts when the company voluntarily files for a petition in bankruptcy court. When the company has many outstanding, it prefers to file for the case. It was no big surprise when Eastman Kodak, 131 year old company that was founded by George Eastman filed for bankruptcy protection in 2012 under chapter 11 of US bankruptcy code in Southern District of New York. It was pioneer in introducing first automatic snapshot camera. It was the first company that provided the individuals a solution for taking their own photographs and not depends on professionals. The term ‘Kodak Moment’ became synonymous with taking pictures of precious moments and having pictures of life time of memories. Reasons for Bankruptcy An attempt is made to understand what lead to the financial distress in the company. The top management of Kodak could never innovate. Though they were pioneers in launching the concept of self photography, many competitors developed better products and took the market share from the company. The company thought that its customers would remain loyal to it but when new products and new technology was offered in the market, it lost its market. The company did not pay attention to the improvement in the technology. When digital cameras came into existence, Kodak did...
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