Organizational restructuring involves making changes to the organizational setup. These changes have an impact on the flow of authority, responsibility and information across the organization.
The reasons for restructuring vary from diversification and growth to minimizing losses and cutting down costs. Organizational restructuring may be done because of external factors like merging up with some other company, or because of internal factors such as high employee costs. Let’s take a look at some of the commonly used restructuring strategies.
Downsizing
Call it downsizing, layoff, rightsizing or smart sizing; in essence, it is all one and the same thing. This restructuring strategy is about reducing the manpower to keep employee costs under control. Take the case of auto-giant General Motors, which in 1991 decided to shut down 21 plants and lay off 74,000 employees to counter its losses.
Another example is that of IBM, which had never laid off staff ever since its incorporation, but had to layoff 85,000 employees to stay in business. This type of restructuring is tough to manage and is mostly adopted to overcome adverse situations. Downsizing is not always a result of business losses; it may be needed even in cases of takeovers, acquisitions and mergers, where duplicity of the staff propels this form of organizational restructuring.
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