Corporate Restructuring - Session 1.pdf

Corporate communication is the lifeblood of any organization, seamlessly linking internal and external stakeholders to achieve a unified vision. In an era defined by rapid technological advancements, globalization, and heightened expectations from customers and employees alike, effective corporate communication has never been more critical. It is not merely about disseminating information; it is about fostering a culture of transparency, trust, and collaboration. Corporate communication encompasses a broad range of activities, from internal communications that keep employees informed and engaged, to external communications that shape the company’s public image and manage relationships with investors, customers, and the media.

This text delves into the core principles of corporate communication, exploring both traditional and digital methods. It aims to provide a comprehensive understanding of the strategies and tools necessary for effective communication within a corporate setting. Special attention is given to the challenges and opportunities presented by the digital age, where social media and online platforms have transformed how companies interact with their audiences.

The content is structured to benefit both students and professionals. For students, it offers a foundational understanding of corporate communication principles. For professionals, it serves as a practical guide to enhancing communication strategies within their organizations. By the end of this book, readers will be equipped with the knowledge to craft and execute communication strategies that not only inform but also inspire and influence, driving both corporate success and stakeholder satisfaction.

1. Corporate
Restructuring
Asst. Prof. LAVANYA MANOJ
UGC NET –MANAGEMENT STUDIES

2. Introduction
Organizationsarehumansystemsandtheir
systemstructureincludestheworldview,
beliefs,andmentalmodelsoftheirleaders
andmembers.
Changingorganizationalbehaviorrequires
changingthebeliefsystemofitspersonnel.
Thisprocessofchangingbeliefs,learning,
requiresclear,opencommunications
throughouttheorganization.
Improving performance requires changing behavior.
People, Structure, Technology & External Environment
Asst. Prof. LAVANYA MANOJ
UGC NET –MANAGEMENT STUDIES

3. Introduction
Organizationalperformanceultimatelyrests
onhuman behaviorandimproving
performancerequireschangingbehavior.
Thereforecorporaterestructuringshould
haveasafundamentalgoalthefacilitationof
clear,opencommunicationthatcanenable
organizationalongoinglearningandclarify
accountabilityforresults.
Improving performance requires changing behavior
People, Structure, Technology & External Environment
Asst. Prof. LAVANYA MANOJ
UGC NET –MANAGEMENT STUDIES

4. Introduction
Continuousorganizationallearningisnecessary
tostayuptodate.Organizationsthatcannotor
willnotlearnwillbecomeobsolete.
Leadersmustperiodicallyexaminethestructure
oftheirorganizationtoassurethatitcontinuesto
provideanenvironmentfororganizational
learning.
Thepointsofleverageinorganizationsarethe
beliefsandworldviewoftheirdecisionmakers.
Thesenseofpurpose,visionandcommitmentof
anorganization'sleadershipplayacriticalrolein
theresultsitcanaccomplish.
Improving performance requires changing behavior
People, Structure, Technology & External Environment
Asst. Prof. LAVANYA MANOJ
UGC NET –MANAGEMENT STUDIES

5. What is
Restructuring?
Restructuringistheprocessthroughwhichan
organizationradicallychangesthecontractual
relationshipsthatexistamongitscreditors,
shareholders,employees,andotherstakeholders.
Itisthecorporatemanagementtermfortheactof
reorganizingthelegal,ownership,operational,
financialorotherstructuresofanorganizationforthe
purposeofmakingitmoreprofitableandefficient.
Strategiesofrestructuringincludeportfolio
restructuring,organizationalstructuringandfinancial
restructuring.
Asst. Prof. LAVANYA MANOJ
UGC NET –MANAGEMENT STUDIES

6. What is
Restructuring?
Restructuringisanon-goingprocess.Itisavalue
toolforanorganizationtouseinanattemptto
maintaintheirgoalsandobjectives.Thechoiceof
whichstrategytousewilldependontheareathe
organizationhastoimprove,i.e.profitability,
performance,oroperation.
Thebasicnatureofrestructuringisazero-sum
“game”.Itreducesfinanciallosses,while
reducingtensionsbetweendebtandequity
holderstofacilitateapromptresolutionofa
distressedsituationorasituationthatrequires
change.
Asst. Prof. LAVANYA MANOJ
UGC NET –MANAGEMENT STUDIES

7. Restructuring
Strategies
1.OrganizationalRestructuringStrategy
Inthisstrategythetermsdownsizing,redesignandlayoffsare
oftenused.
Organizationalrestructuringwillnormallychangethelevelsof
managementinthecompany,effectthespanofcontrolorshift
productboundaries.
Thereisalsoachangeinproductionproceduresand
compensationassociatedwiththisstrategy.
Reductionintheworkforceisthemainby-productthat
accompaniesorganizationalrestructuringandisthereasonfor
theleastpositiveimpactonorganizationalperformance.
LBOs can immediately bring free cash
flows andenhance organizational
efficiency.
Asst. Prof. LAVANYA MANOJ
UGC NET –MANAGEMENT STUDIES

8. Restructuring
Strategies
2.FinancialRestructuringStrategy
Thistypeofrestructuringisidentifiedbychangesareinthefirm's
capitalstructure.Changescanincludedebtforequityswaps,
leveragebuyouts(LBOs),orsomeformofrecapitalization.
InafinancialrestructuringthatisintheformofaLBO,thereisan
immediateinfluxoffreecashflows,organizationalefficiencyis
enhancedandthecompanyrefocusesonthecorebusiness.
Additionally,long-termperformanceoftheorganizationis
significantlyimprovedaftertheLBO.NotethatLBOsofdivisions
havegreaterimprovementinefficiencythanwhentheentire
companyisacquired.
LBOs can immediately bring free cash
flows andenhance organizational
efficiency.
Asst. Prof. LAVANYA MANOJ
UGC NET –MANAGEMENT STUDIES

9. Restructuring
Strategies
3.PortfolioRestructuringStrategy
Companiesinvolvedinacquisitions,divestitures,orspin-offsare
mainlyusingaportfoliorestructuringstrategy.
Thistypeofstrategyincludessellingoffthosebusinessunitsthat
aredrawingdownoperationsorspinningoffbusinessunitsto
raisemorecapital.Theorganization'sobjectiveistoregainits
perspectiveonthecorebusiness.
Portfoliorestructuringhasthebestresultswhenthefirmusesthe
spin-offstrategyandcountonsubsequentmergersratherthan
sell-offs.
Portfolio Restructuring hasbest results
when aspin-offis used.
Asst. Prof. LAVANYA MANOJ
UGC NET –MANAGEMENT STUDIES

10. Reasons for
Restructuring
1.Toaddresspoorfinancialperformance.
Decliningorstagnatingsales,
accountinglosses,orafallingstock
priceareusuallythewarnings.In
extremecasessuchpoorperformance
maycausethecompanytodefaulton
itsdebt,resultinginbankruptcy.
2.Tosupportanewcorporatestrategy,ortotakeadvantageofa
businessopportunity.
Inanequityspin-off,forexample,adiversifiedfirm's
businessesaresplitapartintoindependententities,each
withitsowncommonstock.
Inthiscase,asignthatrestructuringmaybenecessary
whenthestockmarketisvaluingtheentirecompanyfor
lessthanwhatitsseparatebusinesseswouldbevaluedfor
iftheywereseparate,independently-tradedcompanies.
Restructuringisrequiredtocorrectalargeerrorinhowthe
companyisvaluedinthecapitalmarket.
3.Tocorrectalargeerrorinhowthecompany
isvaluedinthecapitalmarket.
Inlargediversifiedcompaniesthat
operateinmanydifferentbusinesses
evenifthebusinessesmaybewell-run,
investorsmayplacetoolowavalueon
theoverallportfolio.Restructuringtools
liketrackingstock,stockbuybacks,or
leveragebuyouts,canbeusedtoreduce
thiskindofvaluegap.
Asst. Prof. LAVANYA MANOJ
UGC NET –MANAGEMENT STUDIES

11. Symptoms for
Restructuring
1.Themarket(s)perceptionabouttheorganizationis
deteriorating.
2.Thecompanyhasdifficultiesinpayingorisunabletopay
offitsdebts.
3.Salesaredeclining.
4.Stockpriceisfalling.
5.Newskillsandcapabilitiesarerequiredtomeet
operationalrequirements.
6.Accountabilityforresultsarenotclearly
communicatedandmeasurableresultingin
subjectiveandbiasedperformanceappraisals.
7.Partsoftheorganizationaresignificantlyoverorunder
staffed.
8.Organizationalcommunicationsareinconsistent,
fragmented,andinefficient.
9.Technologyandinnovationarecreatingchangesin
workflowandproductionprocesses.
10.Significantstaffingincreasesordecreasesare
contemplated.
11.Personnelretentionandturnoverisasignificantproblem.
12.Workforceproductivityisstagnantordeteriorating.
13.Moraleisdeteriorating.
Lack
of
new
skills, overstaffing, understaffing,
signal
the
need
for
restructuring.
Asst. Prof. LAVANYA MANOJ
UGC NET –MANAGEMENT STUDIES

12. Obstacles to
Restructuring
1.Denialofacknowledgingproblems:Organizations
havetendedtorestructureonlyreactivelyin
responsetopressureandwhenactionhasbecome
unavoidable.
2.Savingjobs:Observedmostlyingovernmental
organizationscharacterizedbylifetimeemploymentand
seniority-basedpromotionemploymentsecurity,saving
jobsevenattheexpenseofshareholderinterests
continuestoswayexecutivedecision-making.
3.Internalpoliticsandlong-heldtradition:Restructuring
effortscanfailbecausetheinitiativesarenotfollowed
group-wideandarechangedshortlyafterannouncement,
whenpoliticsandtraditionstandintheway.
4.Executives'disregardforshareholdervalue:
Organizationsdivesttheirbusinesses,thosebusinesses
areoftenincurringheavylossesasaresultofseveral
yearsofpoorperformance;executivescanbereluctant
todivestunderperformingbusinesses,evenwhenthey
knowthatthedivestiturewillmaximizethevaluefor
shareholders.
5.Arrogance:Executivemanagementbelievesthatitknows
howtosolvetheproblemswithoutoutsidehelpoften
ignoringchangingmarketdynamics.
The key is to recognize the problem as early as possible.
Asst. Prof. LAVANYA MANOJ
UGC NET –MANAGEMENT STUDIES