Restructuring Without Damages to the Company - Research Paper Example

Restructuring Without Damages to the Company Student’s Name Course Professor Date Executive summary The BlueSky Aviation has an overall objective to encourage implementation of actions and plans that has an overall objective to encourage initiatives that cut on costs of operations. The topic of restructuring by reducing the number of managers has arisen as one of the cost cutting issue for which profit enhancement plans have to be developed. The document is a description of decision making process on restructuring performed in cooperation with the existing workforce to avoid causing any damage to the company. The objective of this research is to design the best process of restricting in aviation industry without creating negative situations in the process. The result provides the basis for recommendations to the hypothetical organization. Table of Contents Executive summary 2 1.0 Introduction 4 2.0 Discussion 4 2.1 Management decision 4 2.2 Reasons for making the decision 7 3.0 Participation/ Involvement 8 4.0 Implications for you, the company, and any stakeholders 8 5.1 Problem Identification 10 5.2 Identifying decision criteria and allocating weight to the criteria 11 5.3 Developing Alternatives 13 5.4 Selecting the alternatives 14 5.5 Implement the alternative 14 6.0 Factors/Potential biases leading to wrong choice 15 7.0 Evaluating the decision made 16 7.1 Mitigating Complexity 16 7.2 Maintain flexibility 16 7.3 Steps towards Appropriate Management Loading 16 1.0 Introduction BlueSky has focused on changing its internal structure in response to current economic downturn and of course in preparation to expected slow recovery. Even if the economic outlook may appear to brighten in near future, the fact remain that BlueSky will no longer operate as it had before. Therefore, restructure is pointed as a key feature toward the organization’s changing landscape. However, as any other issue in business, restructure can be carried out well or done poorly and the process must be carried in a way to avoid unnecessary complications. The changes will target managerial personnel and departments, changing how departments and workers report to one another as a way to meet the market conditions. Additional, reorganizing downsize is an attempt for BlueSky to eliminate departments hence conserve overhead. By downsizing, BlueSky will serve an objective or remaining functional in the face of decreasing revenue. The company has to remain afloat and meet its needs at its smaller size. This discussion will focus on management decision to face, participation, implications, the process, negative outcomes and evaluation of the decision made. 2.0 Discussion 2.1 Management decision BlueSky restructure focus on managers in order to change the company’s reporting hierarchy. At the end, certain group of employees will have to report to different departments as some may ultimately disappear. BlueSky understands that this will be a critical management decision that must be implemented with careful considerations. Obviously, there are a number of issues that have to be considered to facilitate the best restructuring process. First, reorganizing the structure must focus on core activity of the organization. Perry (2009) observed that, to remove inefficiency in restructuring process, it is advisable to enhance the core before restricting some roles. That means that the top-level management of BlueSky must know what managers are currently doing a process that can be achieved by obtaining a detailed task or role breakdown. Ultimately, that will avoid throwing out or removing roles that are value-added activities. At the end, the new roles will be designed after removing redundant activities and duplication of roles at the time of restructure. In other words, the decision must align the structure to the strategy and this is self-evident though it is still possible to fail to do it. For example, it would be wrong for BlueSky to focus on local conditions as predominant factor for restructuring. Secondly, the decision and the process must be implemented with clarity noting who will be responsible for what. Confusion is expected in the first few weeks or months after the initial restructure. As Perry (2009) observes, the ultimate aim of any restructuring decision should be to clarify roles and responsibilities by identifying all functions including decisions, tasks and activities from the beginning. Clarity will prepare the remaining managers for effective operation as they will know where to be involved and understand their specific accountability. Thirdly, restructuring decision must seek to maintain flexibility. According to Perry (2009), when restructuring, it is important to avoid cutting resources too fine as an organization may face flexibility challenges in the first few months. So, even as BlueSky strives to operate in a more efficient way, the final decision must be reached by making room for the reaming staffs. Staff members will thus feel flexible according to their capability. Fourthly, restructuring must aim at balancing the top-level managers’ work and middle and lower-level managers’ supervisory load. Perry (2009) further argues that leadership or management loading can become troublesome after restricting. Managers may face inability to deal with leadership tasks with the increased output requirements. For instance, in BlueSky’s case, the time used by managers’ coaching and mentoring their subordinates may drop off which may lead to staff becoming disengaged. In turn, significant problems may arise and noting the nature of aviation roles, staff errors may affect the organization to a greater extent and the organization may end up spending more time and resources to resolve them. Fifthly, the decision reached must create feasible roles so as not to overload roles. According to Perry (2009), restructure generally leave a company with less personnel carrying the same amount of work. In the process of restructuring, it will not only involve reducing headcount but the process must be guided by an understanding of the current workload of the existing employees. In turn, it will be possible to design new roles that will not be too light or too heavily laden altogether. Furthermore, designing roles will account for realistic grouping of skills to avoid having roles with too many skill-sets that may end up reducing the pool of sustainable candidates. Lastly, the decision must aim at reducing complexity and complexity can costs the organization greatly. Noting that BlueSky is operating in aviation industry, the complex operational processes may drag the performance with added cost of complexity. As Perry (2009) observes, organizational redesign that is a compromise between line management preferences and strategic intent may inevitably lead to complexities. It is hard to avoid internal political intrigue after restructuring at BlueSky but with clear design, it is possible to mitigate the implication of intrigues to the performance. 2.2 Reasons for making the decision Restructuring in BlueSky is ignited by reasons and so it is not a haphazard undertaking. Downsizing or laying off managers will promote the company to remain afloat. Aviation industry experience drastic changes especially after economic recession. Without foreseeable improvement of consumer discretion spending, aviation industry is hit by economic shutdown as consumers considers others cheaper means of travel. In turn, BlueSky may not have stead revenue increase and it might take longer for consumer travels rates to rebound. The cost of maintain a manager contribute significantly to increasing recurring costs and keeping them might be unnecessary without any expansion and in the presence of reducing revenues. Secondly the current restructuring acknowledges the need to accommodate the shifts in the market by changing strategy. Most of the current employees in BlueSky have a certain level of experience which is an advantage to the organization as they can work without any supervision. Having staffs that are aware of their roles reduces the supervision levels and the supervision situations are constantly changing with managers being able to supervise a large number of employees. Two or more departments can combine all operations and perform well under one manager with existing or additional basic technologies. Dissolving some department will have little impact on overall performance. For instance, with reducing number of travels, customer services reduces significantly as most customers that remain are used to air travels and thus require less assistance to make their flights. Ultimately, it restructuring will align with the appropriate organizational culture by encouraging employees to be productive and keeping them occupied with more but average responsibilities. 3.0 Participation/ Involvement Top-level management personnel will prepare questionnaires and launch them for completion by inviting the middle- and lower-level management to complete the questionnaires. All the managers at all levels must participate in filling the questionnaires that will focus on distinct restructuring issues like the need for restructuring, possible impacts in each department, and the extent of restructuring. At least 50% of all operational personnel will fill a separate questionnaire to comment on how reduced supervision may impact on their roles and responsibilities. After the analysis of the questionnaires, all the managers will meet with the top-level management to discuss the results and compare the findings. In turn, they will participate in identifying the way forward and identification of any further factor that was not caught in the questionnaire. Ultimately, after discussing the results, managers will be prepared for restructure as real data will help reach the most appropriate decision. 4.0 Implications for you, the company, and any stakeholders According to Malik, Ahmad & Hussain (2010), while restructure affect everyone on an organization, the most significant effect is felt by employees who have to exit the company. Similarly, BlueSky restructuring will affect the stakeholders and the company. From personal point of view, restructuring will affect me to some extent. There are managers that ultimately will be bound to be laid-off and will have to compromise. It is disturbing to imagine their experience of job or career loss, life dissatisfaction. The managers who have spent much of their career life in the organization may exhibit anxiety, depression or lower self-esteem when selected for downsizing. It will be hard to deal with the expected attitude change as some managers may exhibit anger towards the deal. They may grieve loss of corporate identity. From the company point, BlueSky may end up losing a greater sum of money as severance pay. According to MacDonald (2015), employees who lose their jobs after downsize are entitled for severance pay especially if their contract provided for it. Receiving a lump-sum is also positive for employee as that helps them to build up saving or clear debts. As usual, the law requires that employees be informed two months prior to downsizing and BlueSky acknowledges that such managers already have constructed their lifestyles based on regular income. Those with debts and mortgagees due to their ability to make monthly payments and thus, losing a job can be a financial blow if they do not get alternative employment quickly. As Datta, Guthrie, Basuil & Pandey (2010) argues, the company may be affected due to change in managers’ attitude and reaction to restructure. It is expected that most will experience denial feeling that the restructuring may not occur. Fear might be rampant among them as plans for restructure unfold. The fear for unknown and imagining the worst may affect the performance of individual managers. Rumors may circulate so fast due to mass layoffs, job loss and termination. Even after restructuring, the company will have to incur some costs to promote positive employees attitude through nurturing programs to train and coach them with the need for frequent or regular communication during and after restructuring. Additionally, restructure will have little implication on stakeholders as they will accept restructuring as long as it is carried in a way that does not affect the performance of the organization. According to Stavrou, Kassinis and Filotheou (2013), in firms where the relationships with employees are based on financial performance rather than normative commitments, downsize is more likely. Stakeholders are always concerned about the financial performance considerations and so they will welcome the decision to restructure. 5.0 Process/Methodology According to Schmitt, Borzillo & Probst (2012), decision making is always a process and thus in this case, eight steps in decision-making process will be followed as is relevant to corporate decisions. 5.1 Problem Identification Every decision starts with a problem (Malik, Ahmad & Hussain (2010). There is a discrepancy between the existing number of managers in BlueSky and the extent of supervisory work. In turn, the organization requires fewer managers to have sufficient work and to reduce costs arising from recurring salary costs. The company policy allows it to downsize. The current problem is a disparity between so many managers (existing condition) and a need to have sufficient managerial positions (desired condition). The problem has been noted since the economic crisis hit and revenues reduced as a result of lowered air travels. International travels have reduced with few families going for vacation abroad. Another significant source of revenues for BlueSky was travels within the country involving individuals, families and corporate travels that have reduced greatly. Prior to economic recession, work breakdown in BlueSky was designed in a manner to promote efficiency and fast services. However, the number of flights has reduced and in turn managerial roles in almost all departments have reduced. According to Iverson & Zatzick (2011), there are various alternatives to downsizing that mitigates a number of disadvantages that arises with restructuring. In turn, it is advisable to consider the other alternatives first by bringing management at all levels to share and participate in pains and sacrifices their departments have to bear. If the alternatives do not work, restructuring will obviously become the last resort. For almost a year, BlueSky undertook to redesign compensation or benefits as an alternative to restructuring and align the organization with economic realities. The compensation alternatives were a cost reduction mechanism that would eliminate the need for ugly restructuring. However, the continued reduction of air travels has increased inefficiency in most departments with most managers spending a lot of time in the day without work. It is without any doubt that BlueSky will benefit with reduced headcount. 5.2 Identifying decision criteria and allocating weight to the criteria Decision criteria are important to resolve the problem (Malik, M. I., Ahmad, A., & Hussain, S. (2010)). BlueSky top-level managers have criteria to follow to reach the decision. In turn, restructuring is considered according to the structure of the airline and as illustrated below and from Avjobs, Inc. (2015) observations: Line managers: the three significant divisions in BlueSky are engineering and maintenance, sales and marketing and flight operations. The department s comprise of over 85% of all employees at BlueSky who serve passengers, maintain the planes and performing various safety functions. Most of these roles are dwindling and will see most responsibilities phased out in the restructure. Over 60% of the total restructuring will occur amongst line personnel. Operations: the department deals with airline’s fleet operations for safe and efficient aircraft management. Most managers are involved with scheduling the crews and aircrafts, developing policies and procedures to maintain safety as well as meeting the operating requirements. Most of the roles carried by the managers involve crew training; initial and recurrent, dispatchers and reviewing the factors that affect flights like weather, route to follow, fuel requirements, distribution of weight and so forth. The department will comprise of 20% of overall restructuring. Maintenance: the team comprise of about 11% of airline’s employees but account for 10-15% of operating costs. The department is very important as they ensure the aircrafts are safe, working in order, passenger comfort and preserving valuable assets of the airline, the aircrafts. Airplane costs BlueSky costs everyday but only makes money when flying cargo or passengers on board. With reducing travels, maintenance schedules will be revised to ensure routine maintenance but also avoid having too many personnel to do minimal maintenance work. However, the department will have to outsource part-time employees during extensive operations to work on aircrafts that will not be in operation for sometimes. Another 10% of personnel will be meeting by restructuring. Sales and marketing: the department carries pricing, advertising, pricing, ticketing and cargo sales. They also carry out food services, reservations and customer services. While most of these are important to the current state of the airline, particular areas will be met with significant restructure including customer service, food service, scheduling and ticketing. The department is worst hit and their roles change frequently in response to actual demand and supply. BlueSky is considering using computer reservations systems and so, another 5% of the personnel will be affected by the restructuring. Staff personnel and subcontractors: these are specialists in law, finance, public relations, employee relations and accounting. BlueSky does not carry out all its work and entrust some tasks to other companies. Tasks like aircraft cleaning, security and fueling will decrease with a greater portion and it is the aim of the company to key the in house jobs adequate for key stations and average in line with the performance of the airline. Since these departments comprise of the lowest number of personnel, they will see another 5% of personnel affected by restructure. 5.3 Developing Alternatives The viable alternative noted to solve the BlueSky’s problem includes: Eliminate overtime, temporary employees and reduce hours/work week Delay raises/merit Increases, eliminate bonuses and salary reductions Volunteer retirements and retirement incentives to buy employees out Employee incentives for identifying cost savings Eliminate high salary positions not generating income Cut hours for non-revenue generating employees and in turn hire contractors to avoid regular employees Martin & Davis (2013). 5.4 Selecting the alternatives BlueSky’s situation has led to consideration of eliminating high salary positions not generating income. This scores the highest for every listed criterion and is the top choice for the company at this time and for its profitable future operations. 5.5 Implement the alternative The decision reached has to be put into action. As noted earlier, BlueSky will involve the managers from the beginning by engaging them through questionnaires, analysis and discussion and concluding on the findings. By involving them managers, BlueSky will ensure that they readily participate in the decision and be ready to accept the outcomes of the process without feeling threatened or victimized. After reaching out the conclusion, the top management will make it explicit to all managers of the department and the extent to which each department will be affected by restructuring process. The managers to be laid off will receive formal letters sixty days earlier. The letter will also allow for two days off for the eight weeks to allow them seek employment elsewhere or come together to start their own business. The new design will be communicated by formal memos and circulated two months earlier. Managers who will assume the new roles will be required to turn up for an interview to respond on how they will deal with the new roles. BlueSky will organize a seminar to prepare all the managers so that they can anticipate problems that will arise after restructuring and deal with managing attitude in respective departments. The departing managers will also be engaged to help make the restructuring efficient by helping the remaining managers in mentoring and motivating employees. 6.0 Factors/Potential biases leading to wrong choice The first bias is poor change management - managers and subordinate employees will need to adjust and shift in the way of supervision and reporting and it can take some time adjust. Learning resources may be limited to mentor and motivate. Time factor is still factor to consider as despite the best intentions, the quick process may lead to blow out of expected feasible process. Poorly communicated expectations- managers must meet expectations and failure to communicate may lead to confusion of what is exactly needed increasing negative outcomes or viewed as additional work. Poor monitoring can lead to sporadic acceptance and carrying out of roles and performance may deteriorate over time. 7.0 Evaluating the decision made 7.1 Mitigating Complexity Remaining manager must confirm that the designed structure for the strategy is clear and match BlueSky’s strategy; The restructure will be evaluated fortnightly for three consecutive months to note and resolve too complex leadership roles It will also minimize the use of matrices as they lack a clear direction to restructuring and introduce measurement overhead. 7.2 Maintain flexibility Leave some room for managers to respond to capability gaps after new structure is achieved by weekly meetings and reporting Where possible, we will make use of staged transition to ensure fewer capability gaps for managing at each point in time Ensure temporary use of contracts until the remaining staffs are familiar with the new roles. 7.3 Steps towards Appropriate Management Loading Balance the number of staff supervised or directly managed Ensure that staffs are able to perform work with minimal or without supervision Balance the workload that managers have to do on top of their leadership roles. 8.0 Conclusion So far, BlueSky has set up a decision and a process that will ultimately lead to restructuring. The decision is backed by realistic problem. The company has engaged some alternatives in the past but the problem still exist leading to reaching out for the best solution, eliminating high salary positions not generating income. The implementation process seek to involve both the departing and remaining managers in reaching for the decision and helping mentor and prepare the employees in the course of two months to seek the best for the company. 9.0 Recommendations The leaders should engage the remaining managers on time to prepare them for the transition process and avoid the incidences of developing fear and bad attitude. Involve all managers from decision making point; plan to implement together allowing them to inherit the roles ensuring they possess adequate understanding to deal with the problems and future responsibilities. The organization must set a clear channel of communication to help the remaining managers reporting and asking for support when necessary. The management must work harder to be informed of progress and offer support by dealing with residual tasks. References Avjobs, Inc. (2015). Structure of the Airline Industry. Accessed August 13, 2015 from http://www.avjobs.com/history/structure-of-the-airline-industry.asp. Datta, D. K., Guthrie, J. P., Basuil, D., & Pandey, A. (2010). Causes and effects of employee downsizing: A review and synthesis. Journal of Management, 36(1), 281-348. Iverson, R. D., & Zatzick, C. D. (2011). The effects of downsizing on labor productivity: The value of showing consideration for employees' morale and welfare in high‐performance work systems. Human Resource Management,50(1), 29-44. MacDonald, L. (2015). The Positive and Negative Effects of Downsizing on Departing Employees. Demand Media. Accessed August 13, 2015 from http://smallbusiness.chron.com/positive-negative-effects-downsizing-departing-employees-34813.html. Malik, M. I., Ahmad, A., & Hussain, S. (2010). How downsizing affects the job satisfaction and life satisfaction of layoff survivors. African Journal of Business Management, 4(16), 3564-3570. Martin, W. M., & Davis, A. C. (2013). Alternatives to Downsizing: An Organizational Innovation Approach. International Journal of Business and Social Research, 3(7), 19-27. Perry, R. (2009). The 7 principles of a successful restructure. Australian Antihill. http://anthillonline.com/the-7-principles-of-a-successful-restructure/. Schmitt, A., Borzillo, S., & Probst, G. (2012). Don’t let knowledge walk away: Knowledge retention during employee downsizing. Management Learning, 43(1), 53-74. Stavrou, E., Kassinis, G., & Filotheou, A. (2007). Downsizing and stakeholder orientation among the Fortune 500: Does family ownership matter?. Journal of Business Ethics, 72(2), 149-162. Read More