Organizational Restructuring: Rightsizing and downsizing

Dr. Mohammed Farid Abdulghany Ahmed Fathalbab

 Rightsizing and downsizing
To maintain and sustain the right shape and size of an organization, proactive managers
realize that they are dealing with a dynamic process. What is right for the organization
today will probably not be right tomorrow. Rightsizing is a creative, continually exciting
process of adjusting ones organization to be the most efficient, effective, competitive, and
profitable it can possibly be.

The process of rightsizing is not protected to outside forces, but unlike downsizing it does
not wait for things to happen to the organization that force reactive changes. Managers
who understand rightsizing drive strategic changes in a positive direction.

Downsizing is so reactive, depressing, disruptive, nonproductive, impersonal, and

blind strategy as it never based on strategic thinking or moves, while rightsizing is
so proactive, future-oriented, creative, strategic, exciting, and positive.

Organizational Restructuring:
Definition:
Restructuring is when a company restructures internally, the operations, processes,
departments, enabling the business to become more efficient, integrated and profitable.

The reasons:
The changing nature of economy may force the business to adopt new strategies or
modify their business portfolio, product mix in more competitive manner.
Similarly, cutthroat competition (penetration marketing strategy) and cost
leadership strategy (pressure on margins from competitors who adopt a low price
strategy) may force the company to adopt lean techniques, just in time inventory
and/or process reengineering or any other measures to cut input costs and achieve
process efficiency.

Rightsizing is one of the most common reasons for restructuring a company.

The expected result

The results may include severe changes:

In overall business portfolio.

In overall product portfolio.
In overall management methodology and business procedures.
Value chain partners and networks.
The deployed computer systems.
Locations and legal issues.
NAVs and jobs may be eliminated and employees laid off.
Restructuring should result in smoother, more economically sound business operations.
After employees adjust to the new environment, the company should be better equipped
for achieving its goals through greater efficiency in production.

Dr. Mohammed Farid Abdulghany Ahmed Fathalbab

 Business plan Scope of work

Dr. Mohammed Farid Abdulghany Ahmed Fathalbab

 Business plan Scope

1) Company Description
A. Inputs
a. Vision, Mission & strategic objective definition
b. Adopted strategies to achieve the strategic objectives of each SBU
c. current Business Portfolio analysis
d. Five forces , PEST & S.W.O.T. Analysis (industry analysis)

B. Expected deliverables

a. Clear definition of the organizational strategic objective & the action plan The
(strategies). deliverables
b. Industry attractiveness and expected growth rate. part of
c. Market type for each SBU financial
d. The proposed pricing strategies planning
inputs
2) Market Analysis
A. Inputs
a. Targeted market Profile for each SBU
b. Total market valuation for each SBU
c. Current & Targeted share for each SBU
d. Market trends for each specified activity
e. Profile of competitors in each sector
f. Competitive advantage for each SBU and the significant added value to the
target customer

B. Expected deliverables

a. Revenue sources & expected Demand level and growth for ever SBU
b. Marketing strategy for every SBU (positioning).
c. Differentiation strategies for every SBU (MP, generic strategies model) that
includes:
o Pricing strategy & SBU's revenues expectations, for every SBU
o Advertising and Promotion strategy and relevant expected added The
deliverables
values & costs.
part of
financial
3) Technical Analysis
planning
inputs
A. Inputs
a. Define the resources needed (5 Ms) to achieve the predefined strategic
objectives.
b. Gap analysis to compare between what the current available business
resources and capabilities and what is needed to achieve the business
strategic objectives, it may include:
o The Current Management Organization Charts analysis and their
relevant cost, and whether it supports the achievement of organizations
strategic objectives.
o Staffing & their sufficiency to support the achievement of organizations
strategic objectives.
o Assets & Revenue unites & their sufficiency to supports the achievement
of organizations strategic objectives.
o Operations & work flow and their relevant direct and indirect costs.

Dr. Mohammed Farid Abdulghany Ahmed Fathalbab

Perform Gap analysis (where we are and where we want to be). The results of Gap
analysis performed and the possible source of variation between the requirements for
the desired performance and the current performance can be summarized as follows:
Where are we Where we want to be
(Current situation) (Desired situation)
Current
5 M's Manpower

Manpower Money

Required 5 M's
Money Machinery

GAP
Machinery Material

Material Methods

Methods

B. Expected deliverables

a. Required updates in management methodologies.

b. business resources rightsizing which may require the layoff of
some resources and/or capital investments to improve the
The
business capacity to achieve the strategic objectives that deliverables
includes: part of
- Employees required changes financial
- Assets and facilities improvements. planning
- Systems improvements. inputs

All the above represents the inputs or the source of information for the financial
forecasting and its level of accuracy

4) Financial Forecasting (planning)

A. Inputs
a. Determine the Business financial goals, needs and Priorities
b. Collect and analyze all quantitative and qualitative information
provided from previous phases supported by any further
recommendations.
c. Analyze the Business current Financial Information provided through
audited & unaudited or any historical financial reports.
d. Determine Business current financial situation, and evaluate to what
extent that the strategic objectives can be met under the current
resources and capabilities.
e. Translate all the available analyses information into values
f. Key Assumptions & Models development
g. Develop and Present the Financial Plan that can achieve Business
strategic objectives

Dr. Mohammed Farid Abdulghany Ahmed Fathalbab

B. Expected deliverables

a. the impact of the business restructuring efforts translated into

value which includes: The
o Five years Performa income statements supported by deliverables
monthly detailed projection. part of
o Five years Performa Balance Sheets. financial
planning
o Five years Cash flow Projections supported by monthly
inputs
details.
o BVR development for controlling purposes.

Dr. Mohammed Farid Abdulghany Ahmed Fathalbab

The road map for the successful rightsizing strategy

Dr. Mohammed Farid Abdulghany Ahmed Fathalbab

 The road map for the successful rightsizing strategy
1. Approach: Being proactive and not reactive:

1.1 Approach rightsizing as strategic and long-term and a way of life rather than as a
single program or target to be completed and then abandoned.
1.2 Approach rightsizing as a selected strategy which resulted from a clear business plan
for efficiency improvement.
1.3 Approach rightsizing as an strategic move and opportunity for improvement and
being more efficient ( ( rather than as merely a reaction to a threat or
crisis.
1.4 Approach the human resources in the organization as assets rather than as liabilities,
and plan to invest in their development and ideas.

2. Involvement: every business partners are involved

2.1 Involve employees (VOE) in identifying what needs to change through rightsizing and
in implementing those changes rather than driving rightsizing from the top down.
2.2 Hold everyone accountable for rightsizing goals rather than treating it as only top
management's responsibility.
2.3 Involve customers (VOC) and suppliers (VOB) in designing and suggesting
improvements in rightsizing strategies rather than focusing entirely internally.

3. Leadership: Strategic thinking

3.1 Ensure that the leader(s) is visible, accessible, and interacting freely with those
affected by the rightsizing instead of surrendering to the temptation to avoid
confrontation, pain, and discomfort associated with managing rightsizing.
3.2 Associate rightsizing with organization strategic thinking (a clearly articulated vision
of a desired future for the organization, not merely as an escape from the past).
3.3 Project positive energy and initiative from the leader(s) in order to motivate the
workforce in a rightsizing organization instead of adopting a defensive or paranoid
perspective.

4. Communication: Clear communication for the business vision, mission and

deployed strategies

4.1 Ensure that everyone is fully informed of the purposes of rightsizing, the strategies
to be pursued, the costs involved, the time frame, and so on, rather than revealing
only "need to know" information and keeping sensitive information at the top.
4.2 Over communicate as the rightsizing process unfolds so that information is provided
frequently, consistently, and honestly to all employees on the progress and
processes in rightsizing rather than reporting only decisions and results or allowing
rumors and ambiguity to flourish.
4.3 Generate on-going analyses and feedback from participants in the rightsizing
process rather than completing the process before an evaluation is done.

5. Preparation:

Dr. Mohammed Farid Abdulghany Ahmed Fathalbab

 5.1 Prepare for the rightsizing before it is mandated or crucial for survival rather than
waiting until time for advanced analysis is gone and a "ready- fire-aim" approach is
required.
5.2 Identify the future mission of the organization, its updated core competencies, and
the required organizational structure that will most effectively accomplish the
mission via the core competencies as the way to develop rightsizing strategies, as
conflicting to formulating strategy based merely on headcount targets.
5.3 Establish targets, deadlines, and objectives for rightsizing for every SBU independent
of the mandated rightsizing goals from parent organizations in order to prepare the
organization to view rightsizing as an improvement strategy rather than as the cause
of a loss of discretion.

6. Support:

6.1 Provide equal attention to and support for those who stay in the organization and
those who leave the organization rather than focusing all benefits on leavers.
6.2 Provide safety nets (adequate lead time, financial benefits, counselling, retraining,
outplacement services, etc.) for those who leave the organization in order to
smooth the transition to another position, rather than letting people go without the
required severance pay and advanced notice.
6.3 Provide training, cross-training, and retraining in advance of rightsizing in order to
help individuals adapt to rightsizing rather than relying merely on job training.

7. Cost Cutting: Process Mapping & reengineering

7.1 Institute a variety of cost-cutting activities (such as restricting overtime, providing

leave without pay, eliminating redundancies) rather than limiting rightsizing to
headcount reductions.
7.2 Focus on attacking sources of fat in the organization that often go unnoticed and
unmeasured, such as data fat (excess information), procedure fat (excess meetings),
time fat (excess response time), and launch fat (excess new programs) rather than
on cutting only the noticeable and measured features of the organization.
7.3 Map and analyze all processes in the organization to eliminate inefficiencies,
redundancies, non-value-added steps and resources, and to redesign work, rather
than assuming that old processes must be maintained.

8. Measurement:

8.1 Measure processes speed and time use in the organization, not only headcount, in
looking for ways to rightsize.
8.2 Develop specific measures (KPIs) of all activities and processes that directly relate
to the key products and services provided by the organization in order to determine
how improvements can be made, rather than measuring only outputs.
8.3 Assess the skills, experience, and relevant attributes of all human resources to help
improve decision making regarding personnel and assignments when rightsizing and
restructuring occur.
9. Implementation: Everyone is involved including the systems

Dr. Mohammed Farid Abdulghany Ahmed Fathalbab

9.1 Implement a broad range of rightsizing strategies, including redesign strategies and
systemic strategies (e.g., culture change), instead of relying narrowly on headcount
reduction strategies.
9.2 Administer rightsizing equitably and fairly by ensuring that unfavorable impacts are
not experienced unevenly by unempowered people (e.g., minorities, certain age
groups) rather than implementing strategies based on power.
9.3 Provide opportunities for personal growth and development for individuals in the
midst of rightsizing rather than ignoring everything except profits and the financial
bottom line.
9.4 Form cross-level and cross-functional teams to plan and implement rightsizing with
no required hand-offs, rather than implementing rightsizing using only a chain of
command.
9.5 Change the appraisal, reward, selection, development, and communication systems
to reflect the new goals and objectives of the rightsized organization rather than
keeping those systems that reflect the old, larger organizational form.
9.6 Implement rightsizing by beginning with small wins--i.e., changing things that can be
changed quickly and easily--that, when celebrated, create inertia toward desired
results rather than attacking rightsizing as a large, complex, indivisible task."

Dr. Mohammed Farid Abdulghany Ahmed Fathalbab