The illeffect of Corporate Restructuring to employees, organization, and the economic.

Introduction

Corporate restructuring has been exercised in corporate companies as early as 1900s and contributed an impactful activity to employees and even stakeholders. Restructuring normally being adopted when the corporation is no longer willing or able to develop or utilizes the capabilities and also its assets which were invested earlier in the past investment decision (Lowell, 2003). Corporate restructuring can take in two forms; Renovative restructuring and redistributive restructuring. The Renovative restructuring mainly contributes to equitable economic growth, while redistributive restructuring benefits certain groups at the expense of others.

The redistributive restructuring involves six forms such as divesture, buyouts, outsourcing, relocation, downsizing and bankruptcy. All this activities of redistributive restructuring initiated with negative approach to certain group of people and vice versa for those who remains or being relocated after restructuring.

Problem Statement

Restructuring approach is a historical revolving process where organization will initially starts with redistributive restructuring and later followed with Renovative restructuring. Downsizing workforce or employees in ensuring to achieve ‘rightsizing’ of the company, or divesting certain departments, even subsidiaries so that the company can invest in a new innovation using remaining work force and assets. Despite of such intention, companies might end up with bankruptcy or total sell-out of the company and some company might stop half way due to lengthy restructuring exercise.

By practice, corporate restructuring entails a divesture of resources in one or more market, activities and locations. On the other hand, companies In can also involve in a substantive downsizing on employment level without having withdrawing its business activities in an area, multiple area or even not abandoning the market and process activity.

The impact of restructuring can contribute a downside economic impact to retrenched labor force, local area, national and global levels. Some big companies such as Peugeot with 198,000 employees, Wal-Mart; 1,300,000 employees or to any 500 fortune companies will only create an enormous negative impact before any Renovative restructuring takes place. In 2002, 13 major corporation in the world had revenues exceeds USD100 billion, of which six are American, three Japanese, two German, one British and one British-Dutch (Fortune 2003). General Motors, General Electric, Ford Motor. Chrysler, ITT, Boeing, IBM Eastman Kodak, Firestone Tire are examples of company distributed in many countries of the world having employment as 2,901,678, will just contributed major negative economic impact to the retrenched work force, national and even global level (Lowell, 2003). An example, in the New Economic boom of late 1990s, Alcatel made number acquisition in North America for Data networking capabilities in voice transmission including optic fiber. However between 2002– 2003, its revenue falls dramatically and cuts its employment from 132,000 to only 60,000; a reduction of 72,000 employees within 2 years and another 18,000 dismissed from their job when they later divest their cable business. Alcatel is a good example of global player involves in many countries in the world with its telecommunication base business including Malaysia.

Research findings

Restructuring might finally ends up with upside impact to remaining employees . However, studies made in Sweden that despite of all the possibilities in having the positive implications, there are negative impact not only to the victims but also to the survivors, on displaced workers. The effect such health, earning for remaining, uncertainty, working environment, even work stress for remaining after redistributive restructuring (Bergstrom, 2005).

 According to Bergstrom, “The intention of restructuring might not always be realized and he suggested that restructuring is insufficient to change the performance and/or cost structure of firms.” (Bergstrom, 2005). He also added that, there are evidence shows that restructuring causes negative effects on survivors. (Bergstrom, 2005).

In Korea, Corporate restructuring contributed a significant effect on workers job insecurity and indirectly significant to their health and health behaviors (Chaekyu, 2003). He added that, the Korean society should revise the strategy of corporate restructuring where the intention is reducing the cost of operation for short term and yet contributing a heavy burden on long-term survival and development of the company. The corporate restructuring has decreases the corporate productivity and weakens the social integration in Korea (Chaekyu, 2003).

Restructuring is a lengthy process which roughly takes one year to complete. According to Audra L. Boone who studied 298 firms in US from 1989-98, found that due to the time period and urgency of resolving critical financial or operational situation, the companies end up with a variety outcomes from being acquired, bankruptcy to taking no observable actions. (Mulherin, 2001).  He added that, from 298 firms propose for corporate restructuring, 70 percent make a definitive proposal to sell either all or part of the company while 30 percent taking a route to be out of play or declaring bankruptcy (Mulherin, 2001). The estimate percent where the corporation able to have full value of the restructuring is only 7.5 percent and the firms that has an average gain from the restructuring is only 5 percent. From the reported percentage, the current methodology of restructuring has not significantly contributing upside impact to the organizations.

According to Dr. Harvey E. Griggs from Central Queensland University, he found out that the corporate downsizing in restructuring has seriously damage the learning capacity of the organizations even with a well-planned ‘brain-drain’ process (Griggs, 2002). This will disturbed the learning curve of the company and a higher cost of operation will be experienced by the organization.

A research being done on Otago Polytechnic, USA; to study the impact of organizational restructuring on the employees commitment.  The research provides a strong evidence to suggest that those survivors demonstrated high potential loss of loyalty and trust in the organization, feeling of insecurity,  confusion over roles and expextations which collectively called ‘survivors syndrome’ (Theissen, 2004).

In Malaysia, restructuring has contributed cases of employees summons employer to the court. There are cases where constructive dismissal became the case where the employees are being transfer to new department and later being dismissed due to incompetency evaluation by employees. The employee claimed that the employer has assigned him to a new task with the ultimate intension to ship him out. This is clear in the case of UMW Engineering Sdn Bhd v Fong Pak Fai (1995) 2 ILR  728 Tuan Tan Kim Song. (Sivagnanam)

Conclusion

From the brief writing above, it is almost certain that Corporate Restructuring has not much contributing towards constructive impact to the organizations, employees national economic due to divestures, retrenchment or bankruptcy action. It has also not  able to induce a positive long term effect to those remaining employees after restructuring.

In most cases the percentage of companies that survived and able to engaged on profitability and sustainability is minimal and yet end up with divesting a portion or all of the company and even proposed for bankruptcy. For that we can conclude research need to be done in developing a new Restructuring Model in ensuring a more justifiable process and effect corporate restructuring for a better corporate sustainability and more equitable economic. It is important to note that any negative impact to employees will induce a back to back impact to a decline in organizational profitability, efficiency, local and regional economic. On the other hand for companies with high number of employees will contribute a more prominent effect even to national and global effects due to divestures, retrenchments and even bankruptcy.

Bibliography

Bergstrom, O. (2005). A Swedish point of view on restructuring. Institute for Management of Innovation and Technology.

Chaekyu, P. (2003). The effect of corporate restructuring on workers health in Korea (Vol. 32). Development and Society.

Griggs, D. H. (2002). Organizational Restructuring - The case of learning organization; contradiction or necessity? Australia.

Lowell, W. L. (2003). Corporate Restructuring. The Oxford Handbook of Work and Organization.

Mulherin, A. L. (2001). Valuing the Process of Corporate restructuring.

Theissen, C. (2004). The Impact Of Organizational Restructuring on Employee Commitment st Otago Ploytechnic. Research for fulfillment of Masters Degree, University of Otago, Dunedin.

ETHICS IN BUSINESS

When business people speak about “business ethics” they usually mean one of three things:

(1) avoid breaking the criminal law in one’s work-related activity;

(2) avoid action that may result in civil law suits against the    company;  and

(3) avoid actions that are bad for the company image.

Businesses are especially concerned with these three things since they involve loss of money and company reputation.

However, it is not likely that philosophers can teach anyone to be ethical. The job of teaching morality rests squarely on the shoulders of parents and one’s early social environment. By the time philosophers enter the picture, it is too late to change the moral predispositions of an adult.

Also, even if philosophers could teach morality, their recommendations are not always the most financially efficient. Although being moral may save a company from some legal and public relations nightmares, morality in business is also costly. A morally responsible company must pay special attention to product safety, environmental impact, truthful advertising, scrupulous marketing, and humane working conditions. This may be more than a tight-budgeted business bargained for

We can also say that, business ethics is a moral obligation in business and are restricted to what the law requires. The most universal aspects of Western morality have already been put into our legal system, such as with laws against killing, stealing, fraud, harassment, or reckless endangerment. Moral principles beyond what the law requires – or supra-legal principles -- appear to be optional since philosophers dispute about their validity and society wavers about its acceptance.

Harm principle: businesses should avoid causing unwarranted harm.

Fairness principle: business should be fair in all of their practices.

Human rights principle: businesses should respect human rights.

Autonomy principle: businesses should not infringe on the rationally  reflective choices of people.

Veracity principle: businesses should not be deceptive in their practices.

A stakeholder is any party affected by a business practice, including employees, suppliers, customers, creditors, competitors, governments, and communities. Accordingly, the stakeholder approach to business ethics emphasizes that we should map out of the various parties affected by a business practice.

Although corporate codes of ethics are often viewed cynically as attempts to foster good public relations or to reduce legal liability, a corporate code of ethics is a reasonable model for understanding how we should articulate moral principles and introduce them into business practice.

To Malaysian, there is a lot more to be done on ethics. Issues crop up on every blue moon and all are involves non ethical values, immorality. Despite of public issues statements on corporates unethical practices, the company's directors or spokesman proceeds with denial and it has become a norm in practice of negligence is not a negligence. The impact are the society.

Questions - please choose one only:

1. NFC issues has long being debated in public and media. Describe in the  perspective of ethics and morality on this issue, how to avoid such an issue occurs.

2. Abortions, disposing at birth babies by irresponsible parents are becoming a norms in Malaysia. Schools/placements for these children are being build in Melaka. Explain why this issue arises. How to overcome and is the special school/placement is a right decision made.

3. Jungle clearing in cities, extensive logging has been practice widely in Malaysia in the name of economic generation and development process. From your perspectives of business ethics, describe in the said activities.

4. Human rights is an important issue to the nation. In perspectives of Malaysia, explain what do you understand on human right values and practices in Malaysia.

NOTE:

Font: 12 - Century Gothic

Spacing: 1.5

Word counts: 2,500 - 3,000 word

Plagiarism/ Cut and paste work shall not be marked.

Reference: Compulsory

Followership

According to Mary Parker, “of the most importance, but which has been far too little considered, and that’s the part followers…” (1949, p.41)

In 1992, Kelly’s Model was developed by Kelly on how followers must be engaged and developed. Further in 1998, Hayes stated that “followers are important to be motivated since they are the organization assets...” (Hayes 1998).

There are many more researcher undertake studies on the importance of follower and followership such as; Bain (1982), Hersey and Blanchard (1982) & (1984), Hensen (1987),Alcom (1992), Strebel (1996), Citrin (2002), Lawrence and Nohria (2002),William and Miller (2002), Cross and Parker (2003), Blackshear (2003), Hower and Shamir (2005) and Robbins (2005).

The management and organization has been dominated towards leaderships, leadership characteristics; which romanticized larger role as a result (Meindi 1987). Many attentions are on leaderships while the importance of followership was rarely discussed. Ironically, the effectiveness of a leader is to a great extent dependent on the willingness and consent of the followers. Without followers there will be no leaders indeed (Hansen 1987).

Figure 1: Hersey and Blanchard’s Situational Leadership Quadrants

(Source: Robbins, 2005)

It is then an ideal leadership model was developed by Hans & Blanchard in 1982 (please refer to figure 1) and then the popular Kelly’s Model in 1992 as in figure 2 below.

Figure 2: Kelley’s different type of followers

(Source: Elizabeth C. Thach, 2006)

However with Robbins research in 2005, explaining the motivational factor and how to manage the organization while taking critical measures on stress, conflict management within followers, a new followership model developed; “The Integrated Model of Followership.” It is an integration of Kelly’s Followership Model and Blanchard leadership Model; which is to be used as the most effective followership style or model to be followed by followers.

Figure 3: Integrated Model of followership and leadership styles

(Source: Elizabeth C. Thach,. etl. 2006)

For reasons above, it is important the organizational leaders NOT to neglect the followers and the followers need to be train, explain and educate how to engage into “followership”

Behaviors within the followers need to be developed for optimum matching to the styles s as in figure 3. This only could be done by training and educating the followers. The impact or outcome is the organization able to achieve its business objectives.

Questions:

1. Followership has becoming an important issues in strategic management and strategic implementation. Describe how could you integrate leadership values and followerships values to ensure your strategic implementation being executed effectively in your own organization.

2. Select a case from your own organization that you are currently attached to, define what are the issues, problems faced. Strategically provide a proposal on how you are going to resolve the issues.

3. Select a company financial statement. Analyse and explain what are the problem faced by the organization. Describe and explain on how you will solve the problems that the organizations is facing.

Words: 2,500 - 3,000 words
Font: 12 - Calibri
Chart and graphs are required - compulsory.
Space: 1.5
Reference: compulsory

NFC Project; an ethical perspective?

I am looking forward on how the issue of NFC (National Feedlot Centre) will be handled by the society or even the person in-charge. There are many parties or components involved, and many questions arises such as

1. Who owns the project?

2. Who has taken it over and why?

3. What has the impact on the nation?

4. Can it be a distributive justice project?

5. Is it ethical to the tax payer to have a loss project?

There are many more questions. However, the biggest question that we could ask as a tax payer, is moral? Is it Ethical in changing the projects into many hands and at last it turn sour.

Most tax payer is not interested anymore on reasons why the directors have taken certain action to ensure the profitability NFC. Many citizens will be asking

a. Is it moral? Is it ethical?

The project was awarded to LTA where the interest of the nation is the main key that is to unsure the supply of beef is sufficient. This could resolve to certain extent on the increase in food price. It cost to a huge amount of RM300 million.

Later the project was much mentioned by PAC (Public Accountant Committee, led by Datuk Seri Azmi Khalid); enlighten the society on what had happen to this particular project.

The A-G’s Report, which was released last month, pointed out that production in 2010 was only 3,289 head of cattle or 41.1% of the target set. The NFC was set up three years ago to transform the cattle and beef industry, aided by satellite farms, to meet 40% of local beef demand by the end of last year.

Some people suggest that, all project which involves the public interest must be able to stand for public scrutinizing and only then it is said to ethical practice has been exercised. According to Kant’s Opinion, an ethical scholar; “Moral is contain one’s doctrine and not dependent what happen accidently.” He also said that, “We must be able to defend a decision.”

Ethic Assignment Question:

1. Taking the case of NFC, in your perspective, explain on the morality and ethical perspective. Provide your justification
(OR)
2. Social Capital in ethical perspectives.


Note:
1. Word counts : 2,500 – 3,000 words
2. Font : Calibri or Arial : 12
3. Spacing: 1.5 space
4. Plagiarism is totally not allowed or the assignment shall not be mark.

Strategic thinking - Is Business Model Important to Organizations?

In most companies the practice before a new year is developing a business plan. In developing the business plan, the organizations would collect all the key management and even to an extent certain additional selected employees to undergo brain storming session. This practice has been a tradition to certain organizations. However a question arises after a certain period of time, “why are we not achieving our goals?” “Why are we still behind target?” and few more other questions.

The questions are:

1. Is it right for them to develop business plan or do they need a business model before developing the business plan?

I have yet to ask another question. “Is the methodology of doing brain storming session is right?” Do they use the Delphi Method or Nominal Method in ensuring there will be getting the expected answer without bias?

However from my research, experience, advisory work, I realize that, it has to start with developing business model. After developing business mode, the organization shall proceed with the development of business plan.

Another critical factor is to look at; how ‘thick’ is the business plan. Actually the thicker the business plan the more useless it will be. It will be a kind of book and kept in a hidden area or open area to collect dust.

Again from my years of research, it is found that, the system of using 4 (four) pieces of A-4 paper would be the most practical and applicable as a business plan, while business model is only 1 piece of A4. Combining all this would only be 5 pieces of A4 paper or 3 pieces of A4 and 1 piece of A3 paper. This would include the monitoring and control system. I have named this system as BMBP5.

These is the most simplified, effective and applicable system to be used proven good record used and applied in organizations.

Assignment Questions for Strategic Students:

1. Select a small business or enterprise that you came across. Analyse what are their current problems and propose for solution and further development of the business.

or

2. Taking your current department that you are working in. Analyse what are the current problems and propose solutions.

Note:

a. Your writting must be in the perspective of Strategic

b. 2500 words to 3000 words

c. Font: Arial or Helvitica. Size 12

d. Spacing of 1.5

e. STRICTLY NO CUT AND PASTE WORK - Plagarism : Resylting with the assignment shall not me marked.

f. Insert all relevant charts, figures, table and even pictures.

ANALYSING AND SOLVING COMPANY PROBLEMS - methodology

In many cases that we meet in our real world or we hear to friends that their company is facing problems and they are not sure what and how to undertake to resolve the problems. They might have taken actions but normally they are in the wrong mode or its right but not accurate.

After certain period of research that I have done, at last I came to a summarized version of this critical framework or methodology in searching, analyzing and resolving the matter.

Steps are:

1. Listen to the problem/story

2. Identify the key problems

3. Undertake internal and external analysis + data collection

4. Look at possible action need to be taken in resolving the problem based on helicopter  view or according to strategic methodology

5.a. Use strategic menu as the methodology for basis of implementation to ensure   competitiveness

5.b.Use the strategic 8 implementation component as a check list. Apply.

6.Implement, monitor and make corrective actions along the way

With this methodology, you are almost able to identify and propose the framework for a solution. However you still need to elaborate on your proposal based on the framework above for convincing to key management.

Note:

For Internal analysis, the we can use the tools:
a. Resource Analysis
b. Value chain analysis

For external analysis we can use the tools:
a. 5 competitive pressure
b.Rival positioning strategic map - to determine the nearest 2 competitors and the weakest 2
c. Competitors analysis

If we want to focus more to improve the effciency of the value chain, make sure to use the analysis of the value chain in detail, then it is good to use FTY & RTY

To improve the value chain, we can use the ER2C- Eliminate, reduce, Raise, and Create. This is for the process in the value chain in ensuring to achieve the cost reduction.

Any questions can e-mail me at: zulkuflizz@gmail.com or my facebook at: mohd zulkufli zakaria

PEOPLE- STRATEGY- OPERATION

Many executives have been asking me questions on why many companies failed to effectively implement their planned or intended strategy. Some complaint that they had done a very thorough analysis, plan and later execute the strategy but still a failure.

After a good discussion I then realized that they missed the linkage of 3 main components which are:

1. People

2. Strategy

3. Operation

While linking all these 3 components, they later must ensure applied the 8 important components of effective strategic implementatiosn such as leadership, building capable organizations, adopting best practices & bench marking, instituting SOP and policies, tie-in-rewards, installing information system, marshaling resources and shaping the work environment & culture.

While implementing all the above 8 components the main principles; people, strategy and operation need to be linked effectively. It might need experience and good leadership capabilities to undertake this exercise of linking the 3 components. A good monitoring, control and performance evaluation must then be implemented periodically to ensure the efficiency of the execution and timely. It is important to remember that the effectiveness of a strategic execution shall only come with low cost of operation and higher customer value. This could again be done with value innovations.

As a conclusion I could say that, strategic implementation is the most important part in strategy and the linkage between people-strategy-operation is crucial.

ASSIGNMENT:
Select a company or business that you would be able to have some data for analysis or observation. Analyse what is the problem of the business (company or enterprise). Propose for correction or improvements. Use the strategic studies that you have learned.

Words: 2,500 - 3000