The Impact of Organizational Restructuring on Organization, Employees, and Customers - Research Proposal Example

Abstract

Increasing international competition, the processes of business reengineering and the influences and effects of advances in technology are just some to the requirements and constraints that impel organisations to adjust and restructure their businesses. Huge corporate international organisations have tried to acquire new markets in developing countries, often encountering unprecedented challenges unique to the specific markets, which result in immense losses. For the companies that choose to remain within these markets, a majority have resulted to business restructuring as a method of effectively adjusting to the market conditions. Other companies riding on the old systems of production have been forced to restructure their organisations to remain competitive in the market. Organisational restructuring is thus an inevitable process for any business establishment. These effected changes do nonetheless have an effect on clients, employees and the whole organisation. Clients become apprehensive about the provision of goods and services and the possible disruption of normal running of the business. Employees on the other hand become insecure and more apprehensive about retaining their jobs, which results in low productivity. This eventually affects the organisation. It is therefore of paramount importance that organisations approach this exercise with utmost care. The following is an analysis of the impact of organisational restructuring on the organisation, employees and customers.

1.0 INTRODUCTION

Scholars define restructuring as the process of the reorganisation of the operational, ownership, legal or other structures of an organisation for the intention of transforming it into a more efficient or profitable as well as better structured for its current purposes and needs. Other reasons that influence organisational restructuring include a change in the ownership framework of the organisation, or major business changes, for instance, buyout, organisational repositioning or being declared bankrupt (Jansen & Hofmann 2011). Mergers and demergers are also precursors for an organisational restructuring process.

Researchers such as Benn et al. (2014) assert that an organisation that has been effectively restructured will abstractly be better focused, better organised, more efficient and leaner, promoting and advancing the businesses core objective with a financial and strategic plan. Organisational restructuring has been implemented by business executives in various industries to improve performance, enhance efficiency, increase shareholders wealth, improve employees’ welfare, increase revenues and productivity and streamline costs.

Many research studies such as Vakola (2014) have been initiated, in particular in developed countries on the consequences and effects of organisational restructuring on the clients, employees and the organisation in addition to seeking the best strategies for managing this change. Multiple research results indicate that organisations, groups and individuals tend to identify change as a risk and threat to their existence and wellbeing. Employees relate organisational change with job loss whereas organisations perceive organisational restructuring as carrying risks and costs to them. Clients on the other hand may respond to organisational restructuring in unsuitable and unfavourable ways that might eventually result in loss of revenue.

1.1 Research Problem

What is the impact of organisational restructuring on organisation, employees and customers? The choice of the research subject stems from the desire of identifying the effects of organisational structuring on the three elements: organisation, employees and clients. The above stated position provides the framework for explaining the main problem of the research study.

1.2 Research Objectives

• To explore the impact of organisational restructuring on different entities including clients, employees and the organisation
• To identify and expound on the various organisational restructuring strategies identified by the reviewed literature
• To explain the main elements underlying the process of organisational restructuring
• To contrast the literature and related theories with the restructuring process

1.3 Significance of the Study

As asserted by credible scholars, the increasing need to reengineer business processes as a result of the changing global business topography and the increasing influence of technological advancements on business practices are some of the essentials that impel companies to restructure their business operations. Mergers and acquisitions have emerged as the new business strategy aimed at championing market acquisition in developing countries. It is thus an inevitable process. Business restructuring exercises affect many stakeholders including employees, organisations and the clients served by these organisations.

According to Blackmore and Sachs (2012); Sørensen and Hasle (2009), organisational success in the 21st century is dependent on the success of business leaders in the management of the many changes they encounter including the restructuring process. It is also argued that a majority of organisational business executives are found incapable of effectively managing the highlighted restructuring changes successfully. The results of this research can provide guidance to the formation and development of a suitable strategic system that could help organisations manage the many effects of organisational restructuring processes. The research could additionally give rise to new models for the implementation of organisational restructuring processes, which could be applied to numerous restructuring situations.

2.0 LITERATURE REVIEW

Appelbaum (2013) contend that organisational restructuring methodologies are comprised of three approaches: organisational restructuring, financial restructuring and portfolio restructuring. Organisational restructuring are mostly guided by changes in the human resource management (HRM) policies. The present HRM policies of the company may be required to be amended in line with the changing business landscape. The HRM needs to support changes and organisational restructuring processes. Scholars such as Farokhi and Murty (2014) argue that justification of the present day framework needs to be attained for the purposes of maintaining the external and internal equity among employees.

There are various signs that point to the need for undertaking the organisational restructuring process. Some of these signs include but not limited to morale deterioration; stagnant productivity; high rates of employee turnover; communication breakdown and lack of accountability among employees and managers; identified and prolonged knowledge gap in certain key areas of the organisation (Ribeiro 2012). Others include management contemplation for hiring or firing of a large group of employees; changes in technology that may necessitate departmental expansion or shrinking; inconsistent organisational communication framework and practices; understaffing or overstaffing of certain departments (Gray et al. 2014; Holt & Vardaman 2013).

The decision to have organisational restructuring within an organisation has in the past proved to be a beneficial exercise in numerous ways. In particular, Mano and Rosenberg (2014) assert that organisational restructuring efforts aimed at reduction in operational costs, and incorporation of modern technology with an aim of increasing efficiency have been successful in many organisational settings. Companies engaging in organisational restructuring activities while aiming at changing business strategy has had mixed results, with some companies experiencing good results while others suffering from departing from their tried and tested production methods.

Pahkin et al. (2014) argues that debt restructuring can be categorised as financial restructuring. The debt restructuring process enables a public or private organisation encountering financial distress and cash flow challenges to renegotiate and reduce its burden of debt to restore and eventually improve its liquidity ratios, while at the same time stabilizing its operations. The researcher contends that the investment trend of an organisation that relates to the capability of organisations to acknowledge the different investment opportunities that would result in good performance is part of organisational restructuring process (Kiranmai & Raj 2015). Financial restructuring can be attained with the intention of enhancing liquidity, improving shareholder value, avoidance of loss of control, reducing risk, as well as lowering capital costs.

Ma (2012) postulates that organisational performance is subject to a myriad of competing elements including: degree of centralisation and the level of organisational authority; structure of organisational communication channels; the information and resources available to the company; the type of the tasks performed by the employees; and the severity and type of the predicament under which the employees function. Companies with frameworks that ease the processing of information, as well as accurate decision-making need to demonstrate higher performance levels when encountered with challenges, as well as when placed in other circumstances.

There are different approaches through which a company can attain restructuring. These approaches according to Whitley and Glaeser (2014) include methods such as decentralisation of operations- which comprises the reduction of management layers within the organisation for the purposes of growing individuals at the lower hierarchy career-wise; and downsizing – a process that may involve the retrenchment of persons whose functionality in the organisation has become redundant or where the company feels it has a surplus of manpower in a certain section – to reduce operation costs.

Scholars such as Zwetsloot, Drupsteen and de Vroome (2014) define three interconnected organisational restructuring sources, namely privatisation and downsizing, acquisitions and mergers. These organisational restructuring sources have shared attributes in that all of them are prompted by the adverse effects of economic recessions and company endeavours to progressively remain in existence, as well as enhancing productivity. In addition, they have a significant effect on both organisations clients and employees that may need psychological intervention. Zwetsloot, Drupsteen and de Vroome (2014) assert that attendants and stressors strain symptoms are some of the numerous effects of organisational restructuring on various persons.

There are three different types of mergers namely; conglomerate, vertical and horizontal (Wang et al. 2012). Horizontal mergers involve two companies contending against each other for market share within the same market. Horizontal mergers may at times have no effect on the market, at times minimal effects and other times huge effects. Vertical mergers involve the amalgamation of two companies that produce different services or goods towards the production of one particular finished good or service. Conglomerates on the other hand involve corporate mergers in unrelated or related business establishments for the purposes of achieving three main objectives; market entry into unrelated yet rewarding businesses, new market acquisitions in new geographic areas, as well as product extension.

Ximing (2014) enlightens about the foundations of organisational restructuring processes in his “future shock” concept. He argues that the restricting which brings about change is an outcome of the existence of three correlated trends. They are diversity, novelty and transience. Contemporary life is ever more typified by transience and impermanence because of the widened scope and accelerated pace of transformation. This leads to shorter intervals of individual’s association to other individuals, ideas, organisations, places and things. These changes conversely need new adaptation levels for organisations and persons to continue to exist.

There are about 10 principles for an effective organisational change process namely; evolve mind set, optimize human dynamics, lead as if future is now, balance attending and planning to emerging dynamics, abundance, course correct and continuously learn, continuous process through time, multi-dimensional approach, interconnectedness and wholeness (Senge 2014). The listed elements are the operating principles that restrict the adverse consequences of organisational restructuring on clients, employees and the organisation.

Whereas a majority of the literature is focused on the positive effects of organisational restructuring processes as well as the different methods of how to restructure an organisation, there are many other negative factors in play. Most organisational restructuring activities will involve movement of staff from one department to the other. In worst case scenarios, staff will be relieved off their duties, while being given small send-off tokens, particularly when dealing with older staff. The employees left behind are at times left with guilt, being that they have retained their jobs while majority of their workmates have been relieved. The survivors will most likely resent their new positions and tasks that accompany their new job designations, particularly if the new positions come with an extra work load (Holt & Vardaman 2013).

For a majority of people, their sense of belonging, power and identity is tied up with the team they have worked with and belonged to over time, as well as the functions and roles they play within the team. Organisational restructuring processes often break these teams, effectively changing their roles. For instance, new leaders are brought in while in other cases, team members are transferred to different departments to join other members in forming new teams. This results in identity breakdown whereby some individuals end-up becoming unsure of what their new role is.

As employees and other stakeholders affected by the restructuring process grapple with their identity loss, a majority lose their sense of personal power and identity. In cases where a new sense of identity is developed, a majority stop caring about themselves, the newly formed teams and even about the organisations (Chiu & Tam 2012). This results to apathy. If not controlled in good time, individuals usually enter into a descending helix of lower energy and confidence, irritated leaders and customers, a lack of follow through and fear of taking risks.

3.0 RESEARCH METHODOLOGY

This research study will adopt a causal research design methodology and will seek to establish the impact of organisational restructuring on organisation, employees and customers. The target population will consist of marketing, ICT (information communication technology), human resource and finance departments of the technological communications companies in the United States. The research study will employ the census method and will use both secondary and primary data. The study analysis will additionally employ a non-random sampling methodology and the listed departments were selected on the premise that they are most prone to being affected by organisational restructuring processes.

4.0 ETHICAL ISSUES

This research analysis will be conducted in the most ethical way, ensuring that participants are voluntary as opposed to being coerced. The highest ethical standards will be applied, ensuring the process will be confidential in areas where there is need to do so.

6.0 CONCLUSION

The study is aimed at examining the impact of organisational restructuring on organisation, employees and customers. In particular, the study is aimed at establishing how the different forms of organisational restructuring process will affect the clients, the employees and the organisation. The research also seeks to establish if restructuring of the organisation’s socio-cultural, technological, political, legal and overall objectives will have an effect on the decision to restructure. Many research studies have been initiated, in particular in developed countries on the consequences and effects of organisational restructuring on the clients, employees and the organisation in addition to seeking the best strategies for managing this change. Multiple research results indicate that organisations, groups and individuals tend to identify change as a risk and threat to their existence and wellbeing.

The research additionally seeks to identify and expound on the various organisational restructuring strategies identified by the reviewed literature; to explain the main elements underlying the process of organisational restructuring; and to contrast the literature and related theories with the restructuring process. There are various signs that point to the need for undertaking the organisational restructuring process. Some of these signs include but not limited to morale deterioration; stagnant productivity; high rates of employee turnover; communication breakdown and lack of accountability among employees and managers; identified and prolonged knowledge gap in certain key areas of the organisation. The results of this research can provide guidance to the formation and development of a suitable strategic system that could help organisations manage the many effects of organisational restructuring processes.