CRITERIA

Concern for
Who?

RESTRUCTURING
Restructuring
is
concerned
primarily with shareholder wellbeing rather than employee wellbeing.

REENGINEERING
Reengineering is concerned mo
with employee and customer we
being than shareholder well-being.

Other Names

Restructuringalso
called
downsizing,
rightsizing,
or
delayering

Reengineeringalso called proce

management, process innovation,
process redesign

Process

Involves reducing the size of the

firm in terms of number of
employees, number of divisions or
units, and number of hierarchical
levels in the firms organizational

structure.

Involves reconfiguring or redesigni

work, jobs, and processes for t
purpose of improving cost, qualit
service, and speed.

This reduction in size is intended

to improve both efficiency and
effectiveness.

Example

Recall that benchmarking simply

involves comparing a firm against
the best firms in the industry on a
wide variety of performance
related criteria.

Some
benchmarking
ratios
commonly used in rationalizing
the need for restructuring are
headcount-to-sales-volume,
or
corporate-staff-to-operatingemployees,
or
span-of-control

figures.

Example

Recessionary economic conditions

have forced many European
companies to downsize, laying off
managers and employees.

This was almost unheard of prior

to
the
mid-1990s
because
European labor unions and laws
required lengthy negotiations or
huge severance checks before

The focus of reengineering

changing the way work is actua
carried out.

Developed by Motorola in 1986 a

made famous by CEO Jack Welch
General Electric and more recen
by Robert Nardelli, former CEO
Home Depot, Six Sigma is a qualit
boosting
process
improveme
technique that entails traini
several key persons in the firm
the techniques to monitor, measur
and
improve
processes
a
eliminate defects.

Six Sigma has been widely appli

across industries from retailing
financial services.

CEO Dave Cote at Honeywell a

CEO Jeff Immelt at General Elect
spurred acceptance of Six Sigm
which aims to improve wo
processes and eliminate waste
training select employees who a
given judo titles such as Mast
Black Belts, Black Belts, and Gre
Belts.

workers could be terminated.

Organizational
structure

Six Sigma was criticized in a 20

Wall Street Journal article that cit
many example firms whose sto
price fell for a number of years aft
adoption of Six Sigma.

The techniques reliance on t

special group of trained employe
is problematic and its use with
retail firms such as Home Depot h
not been as successful as
manufacturing firms.

In contrast to the United States,

labor union executives of large
European firms sit on most boards
of directors.

Job
security
in
European
companies is slowly moving
toward a U.S. scenario, in which
firms lay off almost at will.

From banks in Milan to factories in

Mannheim, European employers
are starting to show people the
door in an effort to streamline
operations, increase efficiency,
and compete against already slim
and trim U.S. firms.

Massive U.S.-style layoffs are still

rare in Europe, but unemployment
rates throughout the continent
are rising quite rapidly.

European firms still prefer to

downsize
by
attrition
and
retirement rather than by blanket
layoffs because of culture, laws,
and unions.
Restructuring is concerned with
eliminating
or
establishing,
shrinking
or
enlarging,
and
moving
organizational
departments and divisions.

Reengineering does not usua

affect the organizational structure
chart, nor does it imply job loss
employee layoffs.

The argument for a firm engaging i

reengineering usually goes as
follows : Many companies historica
have been organized vertically by
business function.

This arrangement has led over time

to managers and employees mind
sets being defined by their particul
functions rather than by overall
customer service, product quality,
corporate performance.

The logic is that all firms tend to

bureaucratize over time.

As routines become entrenched, tu

becomes delineated and defended
and politics takes precedence over
performance.
Walls that exist in the physical
workplace can be reflections of
mental walls.
Reengineering is characterized
many tactical (short-term, busines
function-specific) decisions.

Duration

Restructuring is characterized by
strategic (long-term, affecting all
business functions) decisions.

Implementation

Firms often employ restructuring

when various ratios appear out of
line with competitors as
determined through
benchmarking exercises.

In reengineering, a firm uses

information technology to break
down functional barriers and create
a work system based on business
processes, products, or outputs
rather than on functions or inputs.

Cornerstones of reengineering are

decentralization, reciprocal
interdependence, and information
sharing.

The Wall Street Journal noted that

reengineering today must go beyon
knocking down internal walls that
keep parts of a company from
cooperating effectively.

It must also knock down the extern

walls that prohibit or discourage
cooperation with other firmseven
rival firms.

Example

A firm that exemplifies complete

information sharing is Springfield
Remanufacturing Corporation, whic
provides to all employees a weekly
income statement of the firm, as
well as extensive information on
other companies performances.

Benefits

Downsides

The primary benefit sought from

restructuring is cost reduction. For
some highly bureaucratic firms,
restructuring can actually rescue
the firm from global competition
and demise.

Managers today manage more

people spread over different
locations, travel more, manage
diverse functions, and are change
agents even when they have
nothing to do with the creation of
the plan or disagree with its
approach.

But the downside of restructuring

can be, reduced employee
commitment, creativity, and
innovation that accompanies the
uncertainty and trauma
associated with pending and
actual employee layoffs.

Another downside of restructuring

is that many people today do not
aspire to become managers, and
many present-day managers are
trying to get off the management
track.

Restructuring in many firms has

made a managers job an
invisible, thankless role.

Managing others historically led to

enhanced career mobility,
financial rewards, and executive
perks.

In todays global, more

competitive, restructured arena,
managerial jobs demand more
hours and headaches with fewer
financial rewards.

Example

A benefit of reengineering is that it

offers employees the opportunity t
see more clearly how their particul
jobs affect the final product or
service being marketed by the firm

Reengineering can also raise

manager and employee anxiety,
which, unless calmed, can lead to
corporate trauma.

Sentiment against joining

management ranks is higher
today than ever.

About 80 percent of employees

say they want nothing to do with
management, a major shift from
just a decade ago when 60 to 70
percent hoped to become
managers.

More workers today are selfmanaged, entrepreneurs,

interpreneurs, or team-managed.

Managers today need to be

counselors, motivators, financial
advisors, and psychologists.

They also run the risk of

becoming technologically behind
in their areas of expertise.

Employers today are looking for

people who can do things, not for
people who make other people do
things.
Dilbert cartoons commonly
portray managers as enemies or
as morons.

Imagery

Example From
Textbook

Avon Products restructured in

2011 partly due to corruption
investigation in its Russia and
Brazil operations.
The company reduced its six
commercial business units down
to - (1) Developed Market and (2)
Developing Market in essence
going to a divisional by
geographic region type structure.
Avon has been reporting lower
sales and profits amid missteps in
key markets.
CEO Andrea Jung is installing five

A maker of disposable diapers

echoes this need differently when i
says that to be successful
cooperation at the firm must
stretch from stump to rump.
Hewlett Packard is a good example
of a company that has knocked
down the external barriers to
cooperation and practices modern
reengineering.
The HP of today shares its forecast
with all of its supply-chain partners
Shares other critical information wi
its distributors and other
stakeholders.
HP Does all the buying of resin for
many manufacturers, giving it a
volume discount of up to 5 percent
HP has established many alliances

Example From
Adidas

new regional heads and new

presidents in Avons U.S and
Russia markets.
From Textbook

ADIDAS-Salomon Group (2005)

ADIDAS sell Salomon to
Amer Sports in 2005 but
keeping the Taylor-Made
brand as it is the only
stable part of Salomon.
Decision for this
restructuring as the group
has lacked the scale to
make a big push into the
winter sports market during
a global decline in demand
for ski equipment.
The France-based Salomon
group also been hit by the
rising value of the Euro.
The first-quarter operating
losses widened from 16m
in previous year to 25m.
Adidas CEO, Herbet Hainer
said, Now is the time to
focus even more on our
core strength in the athletic
sportswear and apparel
market as well as the
growing golf category.
The restructuring involves
the loss of 160 French jobs.

Other Sources
Taylor Made-Adidas Golf (2014)
Taylor Made-Adidas Golf s
CEO, Ben Sharpe announced a
restructuring of the companys
product teams (Taylor Made
and Adams brands).
Part of new strategy called
Playbook 3.0
This strategy is focused on
making the company more
efficient.

and cooperative agreement.

Other Source

Example 1
The Adidas product line include
more than 20,000 items, from
soccer and inline skates to
outdoor jackets and snowboard
with thousands of product
variations.
To keep up with market demand
and competition, the company
changes its product range twice
year.
The change in the product rang
depends more often on the
availability of the new
technologies and the also on th
product range and technology o
the competition.
Adidas also designs product for
local, vertical and niche market

Example 2
Over the past 15 years, AdidasSalomon transformed itself from
a manufacturing organization to
a global sports brand manager
with 14,000 employees located
around the world.
Previously, Adidas-Salomon
operated in a decentralized
manner, and each operating un
chose software that suited its
geography and internal
preferences.
The company believed that
implementing and creating
common processes, especially i
its sales organization, would he
it establish global direction,
streamline and automate its
business.
Operations thereby improving

 Move Adams from Plano, TX to

Carlsbad, CA.
Adidas realigned the resources
to ensure innovation was at
the core for all new products.
Sean Toulon, Executive VP of
Product Creation team, will
oversee all product design for
Taylor Made and Adams.
George Talge, VP of Global
Product Strategy, will manage
all strategy and product lines.

flexibility, scalability, and

visibility across the extended
enterprise.