Restructuring Restructuring is the corporate management term for the act of partially dismantling and reorganizing a company for

the purpose of making it more efficient and therefore more profitable. It generally involves
selling off portions of the company and making severe staff reductions.

bankruptcy or of a takeover by another firm, particularly a leveraged buyout by a private equity firm such as KKR. It may also be done by a new CEO hired
Restructuring is often done as part of a specifically to make the difficult and controversial decisions required to save or reposition the company.

Characteristics
The selling of portions of the company, such as a division that is no longer profitable or which has distracted management from its core business, can greatly improve the company's balance sheet. Staff reductions are often accomplished partly through the selling or closing of unprofitable portions of the company and partly by consolidating or

outsourcing parts of the company that perform redundant

functions (such as payroll, human resources, and training) left over from old acquisitions that were never fully integrated into the parent organization. Other characteristics of restructuring can include:

Changes in corporate management (usually with golden parachutes) Sale of underutilized assets, such as patents or brands Outsourcing of operations such as payroll and technical support to a more efficient third party Moving of operations such as manufacturing to lower-cost locations Reorganization of functions such as sales, marketing, and distribution Renegotiation of labor contracts to reduce overhead Refinancing of corporate debt to reduce interest payments A major public relations campaign to reposition the company with consumers

Results
A company that has been restructured effectively will generally be leaner, more efficient, better organized, and better focused on its core business. If the restructured company was a leverage acquisition, the parent company will likely resell it at a profit when the restructuring has proven successful. Firms often employ restructuring when various ratios appear out of line with competitors as determined through benchmarking exercises. simply involves comparing a firm against the best firms in the industry on a wide variety of performance-related criteria. Some benchmarking ratios commonly used in rationalizing the need for restructuring are headcount-to-sales-volume, or corporate-staff-to-operatingemployees, or span-of-control figures. The primary benefit sought from restructuring is cost reduction. For some highly bureaucratic firms, restructuring can actually rescue the firm from global competition and demise. But the downside of restructuring can be reduced employee commitment, creativity, and innovation that accompany the uncertainty and trauma associated with pending and actual employee layoffs. Another downside of restructuring is that many people today do not aspire to become managers, and many present-day managers are trying to get off the management track. Sentiment against joining management ranks is higher today than ever. About 80 percent of employees say they want nothing to do with management, a major shift from just a decade ago when 60 to 70 percent hoped to become managers. Managing others historically led to enhanced career mobility, financial rewards, and executive perks; but in today's global, more competitive, restructured arena, managerial jobs demand more hours and headaches with fewer financial rewards. Managers today manage more people spread over different locations, travel more, manage diverse functions, and are change agents even when they have nothing to do with the creation of the plan or even disagree with its approach. Employers today are looking for people who can do things, not for people who make other people do things. Restructuring in many firms has made a 122 manager's job an invisible, thankless role. More workers today are self-managed, entrepreneurs, entrepreneurs, or team managed. Managers today need to be counselors, motivators, financial advisors, and psychologists. They also run the risk of becoming technologically behind in their areas of expertise. "Dilbert" cartoons commonly portray managers as enemies or as morons.

Benchmarking

Retrenchment Retrenchment revolves around cutting sales. Retrenchment is a corporate-level strategy that seeks to reduce the size or diversity of an organization's operations. Retrenchment is also a reduction of expenditures in order to become financially stable. Retrenchment is a pullback or a withdrawal from offering some current products or serving some markets. In a military situation a retrenchment provides a second line of defense. Retrenchment is often a strategy employed prior to or as part of a Turnaround strategy. There are five activities that characterize retrenchment:

Captive Company. Essentially, a captive company's destiny is tied to a larger company. For some companies, the only way to stay viable is to act as an exclusive supplier to a giant company. A company may also be taken captive if their competitive position is irreparably weak.

Turnaround. If your company is steadily losing profit or market share, a turnaround strategy may be needed. There are two forms of turnarounds: First, one may choose contractions (cutting labor costs, PP&E and Marketing). Second, they may decide to consolidate

Bankruptcy. This may also be a viable legal protective strategy. Bankruptcy without a customer base is truly a bad place. However, if one declares bankruptcy with loyal customers, there is at least a possibility of a turnaround. Divestment. This is a form of retrenchment strategy used by businesses when they downsize the scope of their business activities. Divestment usually involves eliminating a portion of a business. Firms may elect to sell, close, or spin-off a strategic business unit, major operating division, or product line. This move often is the final decision to eliminate unrelated, unprofitable, or unmanageable operations.

Liquidation. This is very simple. Take the book value of assets, subtract depreciation and sell the business. This may be hard for some companies to do because there may be untapped potential in the assets.