Discussion
Corporate restructuring generally refers to substantial change in a company’s financial structure, organizational form, or both. Financial restructuring includes changes in ownership, management buyouts, and divestitures. Organizational restructuring includes decentralization of authority, development of teams, and downsizing of employment. At times, the financial component can drive the organizational changes; at other times the organizational component drives the financial changes (1997). Authority to succeed and fail is pushed lower in most restructured companies, giving their operating units greater autonomy. Business units acquire more responsibility for setting strategy and other policies, but they are also held more accountable for results. Strategic business units (SBUs), with full profit and loss Responsibilities, are increasingly becoming the dominant form, and these in turn are divided and subdivided on much the same principles. SBUs and their equivalent subunits are typically focused around distinct products or services for internal or external customers. Each of the units and subunits incorporates as many company functions as possible, including planning, production, and marketing ( 1997)
With relationships to customers more clearly established, managers and units acquire stronger incentives to respond; with responsibility for decision making more clearly delegated, they acquire a greater power to act. And with accountability for results more clearly pinpointed, they acquire stronger reason to perform. At the same time, a greater premium is placed on cross boundary management, on massaging relations among the units that are now more autonomous and independent of one another. Since international competitive pressures and domestic investor pressures have been most intense at larger companies, the most extensive restructuring is likely to have been felt there. Company size has been found to be a good predictor of both financial and organizational restructuring (1997). Restructuring actions taken singly, research studies suggest, tend to achieve few enduring gains. In the absence of a broader plan, downsizing the workforce can generate short-term cost savings, but often at the expense of long-term cost increases. Similarly, the introduction of a total quality initiative or a reforming of a company into strategic business units without a host of associated changes may yield little enduring gain. Studies of the introduction of new information technologies, lean manufacturing methods, and employee stock ownership plans, for example, reveal that alterations in each of these areas without parallel changes in the culture, compensation, and reporting structure of the company tend to leave the intended effects largely stillborn (1997). A company that underwent restructuring and downsizing is AT & T. American telephone and telegraph company was initiated so that American Bell Telephone Company’s desire for expansion and growth in market was properly managed. The company increased its status over time and it soon became the parent company of the entire bell system. The company was one of the first organizations to launch a communications satellite. This improvement in the field of communication industry provided customer satisfaction and lowered the barrier of entry for rivals.
Problem Definition
In 1984 the company had a vision. This vision was to pursue a strategy that would integrate all aspects of telecommunications. This led the company to expanding its services into the computer industry. For this endeavor the company hired the best executives from different computer companies. The new endeavor did not fair well with the public, it did not achieve success after some time. But the company did not easily give up; it altered its strategy by acquiring established companies in key industries. After some time AT & T acquired NCR Corporation. This acquisition was a success but it created lay offs to employees. The company after a few years was still keen on acquiring other companies but the results of the acquisition did not satisfy the management, shareholders, and analyst. The continuous failure of the computer division made analysts believe that the division was on the verge of restructuring or sale.
Suggestions
The vision of the company to pursue a strategy that would integrate all aspects of telecommunications was not bad but it lacked proper management and techniques. The new division should have used marketing strategies so that people can know that AT & T is selling computer related products. The company should have merged with established computer companies so that they have an experience of the computer industry and what computer products attract customer. Instead of the strategy of acquiring companies, AT & T should have allied with other companies.
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