Organizational Restructuring

Organizations are human systems and their system structure includes the worldview,
beliefs, and mental models of their leaders and members. Changing organizational
behavior requires changing the belief system of its personnel. This process of changing
beliefs is called learning. Effective learning requires clear, open communications
throughout the organization.
Organizational performance ultimately rests on human behavior and improving
performance requires changing behavior. Therefore organizational restructuring should
have as a fundamental goal the facilitation of clear, open communication that can enable
organizational learning and clarify accountability for results.
Since the world is continually changing, continuous organizational learning is necessary
to stay up to date. Organizations that cannot or will not learn will become obsolete.
Leaders should periodically examine the organizational structure of their enterprise to
assure that it continues to provide an environment for organizational learning. A non
threatening, development focused performance appraisal process can be an effective
organizational learning tool.
The points of leverage in organizations are the beliefs and worldview of their leaders and
decision makers. The sense of purpose, vision and commitment of an organization's
leadership play a critical role in the results it can accomplish.

Symptoms indicating the need for organizational restructuring.

• New skills and capabilities are needed to meet current or expected operational
requirements.
• Accountability for results are not clearly communicated and measurable resulting
in subjective and biased performance appraisals.
• Parts of the organization are significantly over or under staffed.
• Organizational communications are inconsistent, fragmented, and inefficient.
• Technology and/or innovation are creating changes in workflow and production
processes.
• Significant staffing increases or decreases are contemplated.
• Personnel retention and turnover is a significant problem.
• Workforce productivity is stagnant or deteriorating.
• Morale is deteriorating.

Abstract:
In this review, we examine the idea of organizational restructuring as a conceptual tool
and how it has been used to alter societal definitions and interpretations of employment.
Although use of the term restructuring is relatively recent, the broad issue of changing
employment conditions with which it is concerned has a long history, going back to the
industrial revolution. Our main focus is a consideration of the causes and consequences
of restructuring, in its more recent rhetorical and structural versions. In their pursuit of
greater efficiencies, organizations adapt to the demands of increasingly global markets,
and these adaptations are crucial components of what is popularly referred to as the new
economy. Such developments are applauded in most economic theory, but sociologists
examine both sides of their social impact, including the adverse effects and implications
of such externalities as the social disruptions caused by downsizing and other
organizational and corporate changes. These studies provide important contributions to
our knowledge of how much, and when, promises of organizational efficiency are in fact
deliverable and responsive to those affected by them. We argue that the language of
restructuring is regularly used to mask, reframe, and sugarcoat economic slumps as
possessing positive social outcomes. We conclude by positioning restructuring as an
important component of the current American export of managerial ideology to
transnational contexts and suggest further examination of how restructuring affects the
culture of business in these other national contexts.

Organization restructuring strategies help you get the most from people when your business
significantly changes by developing a plan for corporate restructuring, layoffs and mergers.

For organizations to develop, they often must undergo significant changes in their overall
strategies, practices and operational tactics. As companies evolve through various life cycles,
its leaders and employees must be able to successfully align with organizational changes so
that they can evolve as well. That's why the topic of organization restructuring management
analysis has become an important part of today’s workforce.

Organizations are dynamic systems

and, like all other systems, they do not function when their components do not work together
smoothly and efficiently. Any change we introduce to an organization must be aligned with an
ever-changing, dynamic and culturally diverse workplace. Understanding the relationship
between organization restructuring and its employees is the key to improving your
organization’s ability to move through change effectively.

Organization restructuring often means making critical decisions about how to deploy or re-
deploy talent. Organizations need insight into where to best utilize talent and find the best fit
between existing employees and the jobs that await them.

Organization restructuring can help you gain insight about job fit and how best to alight talent
with business needs to deliver the highest level of performance. Knowing the goals and
objectives of each individual in your organization can be difficult. Solutions can provide you
with the means to easily align the goals of your employees to the overall mission of your
company. Analysis will help you develop an effective solution for organization restructuring by
assessing your workforce and their alignment the following organization issues:

- Overall mission, vision and strategy

- Current and future business culture
- Customer strategies
- Employee strategies
- Functional practices and systems
- Senior management
- Performance measurement and management systems

In addition to managing talent, organizations need to be able to handle conflict. Organization

restructuring brings about change that brings about stress and conflict. It’s important for
managers to be able to effectively lead their team through challenging and turbulent times.
Being able to predict how each employee will respond to stress and conflict is the key to
managing change smoothly.

If you aren’t sure about what organizational restructuring management and analysis can do
for your company, consider the following questions:

- Would you like to create a benchmark for measuring progress in organizational development
activities?
- Do your managers and employees have a misaligned interpretation of the vision, mission and
values that are important to the success of your organization?
- Do you have a system to measure/quantify management effectiveness?
- Are your internal management practices in alignment with achievement of organizational
goals or is there a negative correlation?
- Do the skills of your supervisors contribute to a negative impact on performance for your
company?
- Does your organization continually settle for low productivity from some managers that
creates a negative profit impact?

If you've answered yes to any of these questions, organizational restructuring solutions can
help. With an overview of your managers’ strengths and areas for improvement, you can plan
organizational goals with clarity and certainty. You can then take it a step further by verifying
managers’ alignment with the organization’s vision, mission, purpose, and strategic goals.
Measuring organization alignment is one of the most powerful mechanisms for improving
productivity, communication, and efficiency across your entire business.

Abstract:
The case study 'HR Restructuring - The Coca-Cola and Dabur Way' looks at the human
resource restructuring exercises taken up Coca-Cola and Dabur in the late 1990s. The
case essentially brings out the different circumstances that led to the restructuring and the
repercussions of the exercise. The case is designed to make the students appreciate the
diverse circumstances that led to the HR restructuring exercise at Coca-Cola and Dabur.
Besides understanding the necessity of restructuring an organization's human resources,
the students should understand the contrast between the restructuring at the two
companies. At the end of the case-discussion, the students should have grasped the
following issues:

How Coca-Cola's problems led to a massive organizational restructuring exercise, with

HR as the focal point. Dabur's endeavor to become an FMCG major, which necessitated
organizational restructuring with HR changes as the pivotal aspect. The details of the
restructuring exercise. The case is intended for MBA/PGDBM level students for their
Human Resources Elective

Issues:

» HR restructuring exercises by Coca Cola & Dabur, circumstances that led to the
restructuring of HR, results of those exercises

We had grown but we hadn't structured our growth."

- Dabur sources in 1998.

"Three major strands have emerged in Coke's mistakes. It never managed its
infrastructure, it never managed its crate of 10 brands, and it never managed its people."

- Business World in 2000.

The Leader HumbledIt all began with Coca Cola India's (Coca-Cola) realization that
something was surely amiss. Four CEOs within 7 years, arch-rival Pepsi surging ahead,
heavy employee exodus and negative media reports indicated that the leader had gone
wrong big time. The problems eventually led to Coca-Cola reporting a huge loss of US $
52 million in 1999, attributed largely to the heavy investments in India and Japan. Coca-
Cola had spent Rs 1500 crore for acquiring bottlers, who were paid Rs 8 per case as
against the normal Rs 3. The losses were also attributed to management extravagance
such as accommodation in farmhouses for executives and foreign trips for bottlers.

Following the loss, Coca-Cola had to write off its assets in India worth US $ 405 million
in 2000. Apart from the mounting losses, the write-off was necessitated by Coca-Cola's
over-estimation of volumes in the Indian market. This assumption was based on the
expected reduction in excise duties, which eventually did not happen, which further
delayed the company's break-even targets by some more years.

Changes were required to be put in place soon. With a renewed focus and energy, Coca-
Cola took various measures to come out of the mess it had landed itself in.

The Sleeping Giant Awakes

In 1998, the 114 year old ayurvedic and pharmaceutical products major Dabur found
itself at the crossroads.

In the fiscal 1998, 75% of Dabur's turnover had come from fast moving consumer goods
(FMCGs). Buoyed by this, the Burman family (promoters and owners of a majority stake
in Dabur) formulated a new vision in 1999 with an aim to make Dabur India's best
FMCG company by 2004. In the same year, Dabur revealed plans to increase the group
turnover to Rs 20 billion by the year 2003-04. To achieve the goal, Dabur benchmarked
itself against other FMCG majors viz., Nestle, Colgate-Palmolive and P&G. Dabur found
itself significantly lacking in some critical areas.

While Dabur's price-to-earnings (P/E) ratio1 was less than 24, for most of the others it
was more than 40. The net working capital of Dabur was a whopping Rs 2.2 billion
whereas it was less than half of this figure for the others. There were other indicators of
an inherently inefficient organization including Dabur's operating profit margins of 12%
as compared to Colgate's 16% and P&G's 18%. Even the return on net worth was around
24% for Dabur as against HLL's 52% and Colgate's 34%...

Excerpts

Restructuring the MessThe Coca-Cola Way

In 1999, following the merger of Coca-Cola's four bottling operations (Hindustan Coca-
Cola Bottling North West, Hindustan Bottling Coca-Cola Bottling South West, Bharat
Coca-Cola North East, and Bharat Coca-Cola South East), human resources issues gained
significance at the company. Two new companies, Coca-Cola India, the corporate and
marketing office, and Coca-Cola Beverages were the result of the merger. The merger
brought with it over 10,000 employees to Coca-Cola, doubling the number of employees
it had in 1998.

Coca-Cola had to go in for a massive restructuring exercise focusing on the company's

human resources to ensure a smooth acceptance of the merger. The first task was to put in
place a new organizational structure that vested profit and loss accounting at the area
level, by renaming each plant-in-charge as a profit center head.
The country was divided into six regions as against the initial three, based on consumer
preferences. Each region had a separate head (Regional General Manager), who had the
regional functional managers reporting to him. All the Regional General Managers
reported to VP (Operations), Sanjiv Gupta, who reported directly to CEO Alexander Von
Bohr (Bohr)...

The after EffectsBoth Coca-Cola and Dabur had to accept the fact that a major change on
the human resources front was inevitable, although the changes in the two were
necessitated by radically different circumstances. More importantly, the restructuring
seemed to have been extremely beneficial for them. Besides improved morale and
reduced employee turnover figures, the strategic, structural and operational changes on
the HR front led to an overall ‘feel-good' sentiment in the companies.

In 1999, Coca-Cola reported an increase in case-volume by 9% after restructuring.

Volumes increased by 14% and marketshare increased by 1% after the regionalization
drive. The company's improving prospects were further reflected with the 18% rise in
sales in the second quarter of 2000. However, in spite of all the moves, Coca-Cola's
workforce was still large. Given the scale of its investments, the future was far from
‘smooth sailing' for the company. With the new found focus and a streamlined human
resources front, Coca-Cola hoped to break even by the end of fiscal 2001...