What is the “responsible way” to restructure an organization?

Socially  Responsible Enterprise Restructuring (SRER) was the theme of the December meeting of the Geneva chapter of ebbf.

In the current climate the terms “layoffs”, “restructuring” or plain “firing” are all familiar ones. It is a painful situation for all the individuals involved in making the decision, executing it and of course for those who suffer it. That is why ebbf Geneva was fortunate enough to have ebbf co-founder and current president George Starcher available to give new insights and start a “meaningful conversation” around this topic. Below you can find highlights of new responsible approaches in this area.

ebbf pioneered the concept of SRER more than a decade ago with the publication of “Socially  Responsible Enterprise Restructuring:  A Joint Working Paper of the International Labour Office and the European Baha’i Business Forum.”
The study was directed by George Starcher, former senior partner at McKinsey and then Secretary General of ebbf, published by the International Labour Organization (ILO) and then translated into several languages.

The recent Geneva breakfast meeting focused on several major conclusions of that study and endorsed a new  effort to bring this important management practice to the attention of executives, showing clearly the benefits of a responsible approach.

The overriding conclusion of the study was that Restructuring takes many different forms and affects part or all of an enterprise. Furthermore, it balances and consciously takes into consideration the interests and concerns of all stakeholders who are affected by the changes and decisions.

Furthermore, many companies ignore what the authors called “the logical hierarchy of restructuring” which focuses first on the higher payout initiatives. This hierarchy covers, in order of potential impact, eight priorities:
Strategic, ownership, revitalization, organization, production, outsourcing/insourcing, reducing non-personnel costs like purchasing, and finally, downsizing.
This hierarchy reflects a declining impact on stakeholders and a logical sequencing of the corresponding actions.

The third conclusion of the study is that if it is not possible to achieve sufficient profit improvement from the first several initiatives, then downsizing may be necessary and if so it should be carried out in a responsible way.
As Peter Drucker warned us,

“In many, if not most, cases, downsizing has turned out to be something that surgeons for centuries have warned against: amputation before diagnosis. The  result  is always a casualty.”

Responsible downsizing begins with a philosophy that human resources should be managed as an asset, not simply as a cost. A philosophy of continuous improvement avoids crises, as does careful planning of downsizing programs including determined efforts to avoid layoffs by practicing “No employee should be left alone to deal with a job problem.”

Should a company restructure?
Unless immediate survival is in doubt, any restructuring programme should begin by reviewing strategy and, if appropriate, redefine or redirect strategy before moving down the restructuring hierarchy to focus on cost reduction.
Some questions that should be asked in this phase could include:
• Does the basic business of the company need to be redefined?
• Would its competitiveness be considerably enhanced through merger or acquisitions?
• Could competitiveness be enhanced through joint ventures and alliances?
• Is there a need to rebalance the portfolio of businesses?
• Should the company divest certain businesses and activities?

Revitalizing as part of restructuring
In restructuring programmes aimed at reducing the work force, it is important to consider whether there are parallel opportunities to grow or revitalize the enterprise and thus create new jobs to which redundant personnel might be transferred.
Where do companies turn to find growth opportunities? The following are among the more important strategies for growth:
1. Superior responsiveness to the needs of key customers and markets.
2. Creative management of channels for marketing and distributing their products.
3. Effective sales force management to align efforts with potential and to align incentives with strategy.
4. Outstanding new product development and introduction.
5. Alliances and joint ventures.

What can we learn from companies that have downsized successfully?
1. Corporate social responsibility is engrained in the corporate ethic and code of conduct. To a large extent, success is assured or compromized before the issue of downsizing even comes up. Companies which seek to meet the needs of all stakeholders on an ongoing basis usually apply this same philosophy to downsizing. For example, the extent to which human resources are recognized and managed as important assets or simply as costs. The French group, Danone, for example, stated in a past Social Report, “No employee should be left alone to deal with a job problem and jobs must be created wherever they are destroyed.”

2. They adopt a philosophy of continuous improvement.
Whether volume is going up or down, they continuously seek opportunities to streamline processes and to eliminate work. They avoid overstaffing. Two key aspects of continuous downsizing are, first, anticipation of imbalances between skill needs and resources as various businesses grow and decline as well as the necessary reconversion and retraining for employability. The second aspect is the use of temporary personnel to meet peak needs and to perform work that is likely to be eliminated.

3. Their decision to downsize is well prepared.
4. They plan the downsizing process very carefully.
5. Their announcement strategy and communications are well prepared.
6. The implementation is well managed.

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You can read the full text of these and the other points in the 25 page document condensing the findings of this joint ILO-ebbf study and can also purchase the over 30 other ebbf publications that you can find clicking here.  or emailing: publications@ebbf.org

Considering the timeliness of this issue, and the pioneering views on responsible restructuring we feel should be offered, ebbf is also about to launch a wider interactive conversation on this topic of responsible restructuring that you can take part in at the next ebbf international event (11 – 13th of May in London – see here the ebbf events webpage )

 

Tags: corporate social responsibility, csr, ebbf, featured, firing, George Starcher, ilo, laying off staff, McKinsey, responsible restructuring, stakeholder management, strategic restructuring

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