Restructuring involves the creative destruction and reinvention of today’s top automotive OEMs and suppliers. A 2003-2005 Europe-wide study conducted by Roland Berger Strategy Consultants confirms that companies that respond quickly to crisis warning signals will manage restructuring better, but most are not reacting quickly enough. Here are five things to help:
- Top leadership involvement. CEOs should have effective crews at their side, but the direction, scope and sense of timing need to come from them. CEOs should be motivated, convey perspectives, fully support changes, keep everyone of track, and act as a moderator. Our research shows the most critcal factor for a successful restructuring program is management’s commitment.
- Reorganize thoroughly. Costs, strategy, financing, and the operating business—the whole enterprise—need to come under scrutiny. Feasible and sustainable plans need to be developed for all of a company’s sectors simultaneously.
- Timing is everything. The earlier restructuring begins, the better. Those who respond quickly to a crisis often have enough time to implement really creative solutions. Within four to 12 weeks, management should have an understanding of the crisis’ origin, and a general idea regarding reorganization and restructuring. Creditors and employees must be convinced that restructuring will result in success. According to the study, only 52% of troubled companies in Europe are able to begin restructuring programs within 12 months; in Germany 64% are able to do so. Also, three-quarters of the companies that required one year or less to act in response to their crisis were satisfied with the subsequent restructuring.
- Fourth, go deep. Employees from all organizational units and levels should participate. Depending on the tasks, the integration of key personnel in interdisciplinary project teams within restructuring makes perfect sense. Two essential factors to consider are strict project management and objective project auditing.
- A company that is solely in defensive mode will not have much of a long-run future. Despite deep cuts into the overall organization, and unwavering focus on reducing costs, management should lay plans early on that identify the sources of future growth and how to best tap that potential—all conveyed in simple, clear easily expressed strategies.
Restructuring is making a global impact on the job market, as well. According to our survey, the companies in most European countries see layoffs as an important tool in restructuring. In short, restructuring is a fact of corporate life today and into the 21st century. It has evolved into a specialized skill that requires a successful recipe of corporate finance, strategy development and operating business. Constant evolution is necessary to keep ahead of the competition and move forward through difficult times.