Structural change - Business Environment

Internal change is an important feature of the modern business organization. In order to remain competitive and meet stakeholder needs, a firm may have to find ways to restructure its as the environment in which it operates changes. Solutions can range from a partial or wholesale shift in the organization’s structural form to strategies for reducing the overall size and shape of the company
(e.g.‘downsizing’) or a radical redesign of business processes (e.g.‘re-engineering’).

Whereas business re-engineering normally connotes a root-and-branch reform of the way in which the business operates, downsizing essentially involves shrinking the organization to make it ‘leaner’ and ‘fitter’ and hopefully more ‘flexible’ in its response to the marketplace. For some companies this means little more than reducing the size of the workforce through natural wastage and/or redundancies, as and when opportunities arise; for others it involves ‘delayering’ the organization by removing a tier, or tiers, of management, thus effectively flattening the organization’s hierarchy and helping it to reduce its unit costs of production.

In its most systematic and long-term form, downsizing can be used as a vehicle for cultural change through which an organization’s employees are encouraged to embrace notions of continuous improvement and innovation, and to accept that structural reform is a permanent and natural state of affairs. Under such an approach, retraining and re skilling become vital tools in implementing the chosen strategy and in shaping the organization to meet the demands of its changing environment. The danger is, however, that a firm may become too concerned with restructuring as a cure for all its problems, when the real cause of its difficulties lies in its marketplace. Cutting the number of employees, in such a situation, is unlikely to make unattractive products attractive; nor is it likely to boost morale within the organization.

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