Point Summary

Restructuring the firm consists of altering its decision-making, operating divisions, and management culture.  Reengineering entails changing the procedures by which the work is accomplished and products delivered. 

Process restructuring, as championed by Michael Hammer and James Champy in their Reengineering the Corporatio, can deliver costs reductions of 50 percent or more.  Corporate restructuring, as portrayed by John Womack and colleagues in The Machine that Changed the World, also suggest a law of “halves.”  Womack and his colleagues studied the Japanese automobile industry, and their research revealed that Toyota and other makers – by applying the principles of teamwork, quality control, customer focus, minimal buffers and continuous improvement – had cut product defects by half, factory space by half, work‑time by half, and development time by half.  

While diversification had been a hallmark of good management during the 1960s, shedding unrelated business had become the measure during the 1980s and 1990s.  De‑diversification, back to basics, and a return to core competencies emerged as restructuring drivers for good reason.  More focused firms, as Robert Hoskisson and Michael Hitt show in Downscoping, display superior performance. 

Restructuring actions taken in single areas tend to achieve few enduring gains.  Downsizing the workforce generates short‑term cost savings, but in the absence of a broader reorganization, it brings only temporary relief.  Reengineering business process creates immediate gains, but the gains are short-lived without changes in performance measures, compensation incentives, information technologies, employee skills, and organizational structure.  Restructuring and reengineering, then, should be seen as a multi‑faceted revamping of the corporation.  

Company restructuring has both worsened and improved the lot of those who work there.  Lean redesigns, cost reductions, and repeated downsizings have terminated careers and decimated communities.  At the same time, reengineering, flexible work, and streamlined hierarchies have improved employee productivity and product quality.  The process of restructuring frequently brings long work weeks and high stress levels, but the product of restructuring also often results in greater autonomy and more challenging work.  One study of restructuring experience revealed heightened loads, diminished morale, and reduced employee commitment, but it also found enhanced quality, customer service, risk taking, workforce competence, and productivity.  

The dual impact of corporate restructuring on those who experience and manage it accounts for some of the schizophrenia toward restructuring.  Work environments can be filled with high anxiety and low morale.  At the same time, however, the quality of work life often improves, with more variety, responsibility, and teamwork.  Executives experience stress as they manage the transformation, but in doing so they are also laying a framework for improved company performance, richer compensation packages, and enhanced shareholder return. 

Links

Business Process Reengineering:  Resources on reengineering from @Brint.com (the "BizTech Network"). 

Reengineering Resource Center:  Links to publications, conferences, and consultants on process reengineering. 

Books on Reengineering:  Suggested readings on reengineering from BPR Online Learning Center. 

Books and Articles

Eileen Appelbaum and Rosemary Batt. The New American Workplace: Transforming Work Systems in the United States.  Ithaca: ILR Press, 1994.   Assessment of efforts to introduce high-performance, high-productivity work systems.    

Michael Beer, Russell A. Eisenstat, and Bert Spector. The Critical Path to Corporate Renewal. Boston: Harvard Business School Press, 1990.   A study of companies that had successfully revitalized their cultures and operations; found that alignment of work tasks and organization was critical. 

Lance Berger and Martin Sikora, editors. The Change Management Handbook.  New York: Irwin Professional Publishing, 1994.  Three dozen chapters on strategies for managing change, aligning operations, revitalizing cultures, and reinforcing change. 

Edward H. Bowman and Bruce Kogut, Editors. Redesigning the Firm. New York: Oxford University Press, 1995.   Wharton faculty offer research-based suggestions for company strategy, organizational design, and human resource management. 

Peter Cappelli, Laurie Bassi, Harry Katz, David Knoke, Paul Osterman, and Michael Useem. Change at Work. New York: Oxford University Press, 1997.  The impact of restructuring and change on work and labor markets in the U.S. 

Gordon Donaldson, Corporate Restructuring: Managing the Change Process from Within.  Boston: Harvard Business School Press, 1994.   Analysis of recent, internally-driven change at twelve well known companies. 

Donald Hambrick, David A. Nadler, and Michael L. Tushman, editors, Navigating Change: How CEOs, Top Teams, and Boards Steer Transformation. Boston: Harvard Business School Press, 1998.   Articles by academics and managers on managing and leading wholesale organizational change.

Gary Hamel and C. K. Prahalad. Competing for the Future. Boston, Ma.: Harvard Business School Press, 1994.   How to build competitive advantage and an organization around core competencies. 

Michael Hammer and James Champy. Reengineering the Corporation: A Manifesto for Business Revolution. New York: Harper Business, 1993.   A premier on and call for process reengineering in the private sector.   

Robert E. Hoskisson and Michael A. Hitt. Downscoping: How to Tame the Diversified Firm. New York: Oxford University Press, 1994.   Comprehensive survey of the performance advantages of company  de-diversification and product focus.

Rosabeth Moss Kanter. The Change Masters: Innovation for Productivity in the American Corporation. New York: Simon and Schuster, 1983.   Case accounts of organizational and leadership strategies that  unleashed employee energies for innovation and change. 

Rosabeth Moss Kanter, Barry A. Stein, and Todd D. Jick, editors.  The Challenge of Organizational Change: How Companies Experience It and Leaders Guide It.  New York: Free Press, 1992.  Case and articles on restructuring and change.  

Jon R. Katzenbach and Douglas K. Smith. The Wisdom of Teams: Creating the High-Performance Organization. Boston: Harvard Business School Press, 1993.   Drawing on numerous example of effective teams, builds the case for building teams for driving organizational change. 

Edward E. Lawler III. The Ultimate Advantage: Creating the High- Involvement Organization. San Francisco: Jossey-Bass, 1992.   Makes the case for high‑involvement, high‑performance organizations. 

Richard B. McKenzie and Dwight R. Lee.  Managing Through Incentives: How to Develop a More Collaborative, Productive, and Profitable Organization. New York: Oxford University Press, 1998.   Paying for performance without overpaying or distorting performance. 

David A. Nadler and Michael L. Tushman, with Mark B. Nadler. Competing by Design: The Power of Organizational Architecture. New York: Oxford University Press, 1997.   Provides basic tools for making organizational design decisions, including work groups, linkages among groups, and management cultures.  

Jeffrey Pfeffer. Competitive Advantage Through People: Unleashing the Power of the Work Force.  Boston, Ma.: Harvard Business School Press, 1994.   A primer on redesigning jobs, work and the organization to improved performance.  

Jeffrey Pfeffer and Robert I. Sutton. The Knowing-Doing Gap: How Smart Companies Turn Knowledge Into Action.  Boston: Harvard Business School Press, 2000.   Urges managers to break through the "knowledge-doing gap" to  transform awareness of best practice into actual best performance.

Michael Useem, Investor Capitalism: How Money Managers Are Changing the Face of Corporate America. New York: Basic Books/Harper Collins, 1996.  The impact of institutional investors on corporate performance and restructuring.   

Michael Useem, Executive Defense: Shareholder Power and Corporate Reorganization.  Cambridge, Ma.: Harvard University Press, 1993.   How companies pinpointed responsibility to improve the delivery of shareholder value.  

John Womack, Daniel T. Jones, and Daniel Roos. The Machine that Changed the World: The Story of Lean Production.  New York: Harper Collins, 1990.   Worldwide study of the automotive industry, with special attention on the innovative organization of Japanese manufacturing. 

Case Studies

Paul Allaire, "The CEO as Organizational Architect," Harvard Business Review, September, 1992.