2. ORGANIZATIONALRESTRUCTURING
PROLOGUE
This management research paper presents a broad overview of organizational restructuring and its
implications in the business market. The purpose of this paper is to understand why certain
organizations undergo structural changes and how they revive themselves in the competitive
world. To explain this concept, the paper provides a comprehensive study of organizational
revamping performed at Eastman Kodak Co. and Fujifilm Holding Corp. Both these companies
were once competitive rivalries and leaders in their photographic film based product line. Paper
highlights company’s situational analysis and approach adopted to overcome the pressure of
dynamic world. This comparison prepares us to better understand the strategic techniques behind
the organizational restructuring and explains the undying need for it to be leaders in today’s world.
3. ORGANIZATIONALRESTRUCTURING
ISSUES FACED BY AN ORGANIZATION AND ITS ADVERSE IMPACT
Organizational Restructuring is defined as a corporate process involving significant modification
in existing operations or structure of a company. An organization often restructures its operations
by cutting costs, payroll, reducing its size through the sale of assets, facilities and layoffs. This is
seen as absolute necessary when the company’s current situation is one that may lead to its ultimate
collapse. It usually happens when there are significant problems, which are causing unrecoverable
financial harm and putting the overall business in jeopardy.
By restructuring, a company can eliminate financial harm and improve its business. It improves
its efficiency, effectiveness, keep technology up to date and align its strategic operations with the
new changes in tax, embargo and trade laws implemented by the government. For instance, debt
restructuring makes the payments on debt more manageable for the company and the likelihood of
payment to bondholders increases.
Any organizational restructuring is basically a part of change initiative taken by the management
but worked together by the employee workforce. Some of the common issues faced by an
organization which forces them to undergo restructuring in order to remain in business are listed
as below
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Changed Nature of Business and Customer Demands
Companies that refuse to change with time, face the risk of their product line becoming obsolete.
This is the main reason for the businesses to learn to innovate and experiment with new products,
explore new sectors of the markets and reach out to new customer groups on a continuous basis.
This helps the businesses to diversify into new areas to increase sales, optimize their capacity and
conversely shed off divisions that do not add much value. All such initiatives requires thought
process and strong urge to compete. This is achievable by restructuring.
Technological changes and Quality Management
Technological innovations, advancements, new work processes, better materials and various
factors influencing the business productivity may require restructuring to keep up with the pace.
Failure to adapt and change, results in the systems and procedures turning obsolete and discordant
with the changing times. Due to competitive environment, companies struggle to improvise on
quality of their products by adopting new techniques such as Six Sigma and Total Quality
Management (TQM). Implementing new, improved, high quality standards may require changes
in the organization and hence attribute to organizational restructuring.
Mergers, Acquisitions and Buy Outs
Merger/acquisition is often accompanied by organizational restructuring exercise. It helps to
reconcile the systems and procedures of the merged organizations to ensure integrity and evenness
around the joint venture. This also provides the new entity a consistency of approach in its
operations. Joint ventures require formation of matrix teams and new task forces to sustain the
pressure in the restructured environment. In case of buy outs, restructuring exercise allows the new
5. ORGANIZATIONALRESTRUCTURING
owner to reshuffle key personnel and provide power to trusted employees under his leadership. It
provides a fresh start, with a clean state to exert greater control and power.
New working methodology with and change in management style
New innovative working methodologies like outsourcing, telecommuting and flex time require
advanced systems, policies and structures in place which trigger organizational restructuring. This
places greater emphasis on the results rather than the methods, flexible reporting relationships with
strong communication policy.
Traditional management style recommends highly centralized operations and the top management
adopting a command and control style. The new behavioral approach to management focuses on
empowering the workforce by providing considerate authority to Supervisors in conducting day-
to-day operations.
Bankruptcy/Financial Debt
Bankruptcy forces businesses to shed excessive overhead expenditure such as workforce, out of
order manufacturing facilities or sell some business product lines to raise money and become lean
and mean. They undertake organizational restructuring exercise to improve its efficiency,
effectiveness and unlock hidden potential, thereby attract fresh investors and shareholders. It helps
them to avoid high costs of a formal bankruptcy.
Downsizing
Tough competition and overwhelming pressure from competitors, especially who advertise and
work on low price strategy, forces the company to adopt more lean techniques such as just in time
inventory and other measures to reduce input costs and achieve process efficiency. Downsizing-
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induced restructuring leads to flatter organizational structure which is more effective and
transparent. It also enhances the job descriptions and duties.
Legal compliance and new TAX laws
Restructuring is enforced to adhere some legal or statutory requirements. New trade laws and
embargo changes often requires company to undergo restructuring to maximize profits and
minimize the impact of the legal compliance on its operations.
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SITUATIONAL ANALYSIS
Fujifilm Holdings Corp. (App A) with a regional presence in Japan, started global expansion in early
1960’s and became a competitive rivalry for photographic-film leader Eastman Kodak Co. (App B).
Over next three decades, the market changed dynamically due to new technological advancements
and creative innovation. The demand for photographic film subsequently reduced and was
overpowered by the digital world, ultimately shaking up the company’s existence. Both Fujifilm
and Kodak knew the digital age was surging and were finding ways to cope up immense pressure
risen from technological advancement and innovations.
Kodak acted like a stereotypical change-resistant firm. They filed a lawsuit against Fujifilm
alleging patent infringement and monetize its R&D in its one and only core business of
photography. They seemed to believe that its core strength lay in brand and marketing, it could
simply partner or buy its way into new industries, such as drugs or chemicals. The problem with
this approach was that without in-house expertise, they lacked some key skills like the ability to
adapt and integrate the companies it had purchased. They also failed to negotiate profitable
partnerships. Kodak’s over confidence about their marketing capability, their brand and shortcut
methods ultimately lead to its BIG failure. They failed to keep pace and filed for Chapter 11
bankruptcy protection in 2013.
On the other hand, Fujifilm seriously worked on reviving the company and they funded their R&D
department to find effective ways to deal with the change. They were flexible and prepared to
accept the change. Apart from working on innovation moving to digital photography from analog
versions, Fujifilm tapped its chemical potential for broader usage such as drugs, liquid-crystal
8. ORGANIZATIONALRESTRUCTURING
display panels and cleaning supplies. They ventured into cosmetics as well, on the thought process
for stopping photos from fading, would well suit for human skin too. Company's post digital
transformation was marked by sacrificing thousands of jobs and manufacturing facilities across
the world to restructure themselves and survive. In 2005 and 2006, the company worked on
downsizing the overhead by chopping approx. $2.5 billion in costs mainly in its photographic- film
business with a return back of huge profits and backing up good investment trust. Fujifilm then,
reorganized its operating structure after the global financial crisis of 2008-09, forcing the company
to shed a further $1.5 billion in cost and expenditure.
For this fiscal year, the company is aiming for 32% growth in operating profit to $2.0 billion from
its forecast for this year. It has targeted a 9.2% rise in revenue to $2.0 trillion. With time Fujifilm
still holds its initial business of photographic film and they make around 1% of its revenue from
it, down from nearly 20% a decade ago. Its health-care operation such as medical equipment, drugs
and cosmetics, accounts for about 12% of revenue. Materials for flat-panel displays generate 10%.
The fact shows that when company lost its core business, they were able to well adapt and
overcome the situation by diversifying and carefully planned organizational restructuring. For
more details on the stock analysis for Fujifilm and Kodak, please refer to Appendix (App A, App B)
section of the paper.
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RECOMMENDATIONS
Organizational restructuring is successful only if it is carefully planned and executed. To cope up
with the changing market and to be on a competitive edge requires an effective strategic execution.
In the above described scenario, in situational analysis section of the paper, restructuring would
have proven effective for Kodak if it was carefully planned and executed. Kodak would have
revived from the situation if they have accepted the change and were willing to adapt and learn
from their mistakes. Some of the recommendations, Kodak may act upon are listed below.
Innovation
Kodak should willingly allocate more resources to R&D to encourage innovation at company.
They should encourage employees to contribute ideas and methods to improvise products and
processes. This in turn will help reduce some excessive operational costs. New products will pave
the path for more revenues to the company. They can file fresh patents for their innovative ideas
and leverage this additional income. This will help them to improve upon their in house skillset
and will provide an overall competitive edge
Diversification
Kodak relied only on their core business of photographic films and miserably failed with changing
market demands. New products like printers, cleaners, cosmetic etc. will help them diversify in
global market and will be able to provide a strong hold on shareholder’s trust and confidence.
Go Thinner
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Shedding of excessive layers of management will prove efficient to reduce cost and become more
effective, providing more opportunity to the first line managers to contribute. Additional benefit
of clear transparent communication will improve the work culture and working environment.
Shutting down its non-profitable units to divert the spared resources to run the company’s
operations will be a temporary solution to this problem.
Clear Communication and Trainings
Clear communications from the Top management will help retain trust of the employees. Kodak
should set a clear path for the company to follow in next 1-5 year and forecast its projections. This
will help the stockholders to reinforce their confidence in the company and employees will also
have clear set of guidelines to follow to achieve the desirable results.
Trainings will help the employees, better cope up with the change and will facilitate in the
restructuring process. It provides an opportunity for the management to help their employees
understand the need for the change and encourage them to work together in this difficult times.
Trainings help to improve understanding of the new process in place and improve the productivity
and quality standards.
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IMPLEMENTATION
Organizational Restructuring can be successfully implemented in a company by the follow
approach.
Dry run in one department unit
This process includes identifying the least involved unit in the organization in order to minimize
the impact of the change. Set clear instructions for the change to undergo for the unit. Maintain an
open door policy for the employees to ask questions about the change, so that they can mentally
prepare for the new structure or process. Implement the change and let the employees experience
the aftermath of the change, discuss with them about the new process, their comfortness and
analyze their resentment. Encourage them to undergo trainings to cope with the new changes and
allow sufficient time for them to transition from traditional to the new system. Once the impact
analysis is done in one unit, the same process can be replicated throughout the organization.
Increasing Transparency
The communication from top management about the restructuring will be imparted to the
employees on various media like emails, discussion boards and conferences. They will be
encouraged to participate and contribute ideas to the management. Also will suggest ways to cut
cost and improvise products.
Frequent meetings with the first line managers to get feedback
During the change implementation, frequent meetings with the supervisors ensures everything is
in place and will also highlight the areas of concerns and conflict. This will help to curb the issue
in time and will give authority to the Supervisor to help complete the change.
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SUMMARY
Change is inevitable. Organizations which learns to adapt to the changing world survive and thrive.
Organizational restructuring is a collaborative tool which helps the company to cope up with the
change. It is absolutely clear that restructuring is effective only when both employer and
employees participate. Being innovative and creative will always provide a competitive edge to a
company and will help shield its integrity from the dynamic market forces.
Organizational change is often accompanied by comprehensive study of the market forces which
impact business, demographics, target customer and estimated sales. Restructuring effort aims to
improvise business and generate more sources of revenue without compromising the quality.
Restructuring has become a higher priority for companies scrambling to change, survive and thrive
in a tough economic climate. Careful planning and strategic execution will ensure its success. This
helps the company to revive and grow. It also enhances the effectiveness of the organization by
improving productivity and quality of the product offerings. So organizations which are ready to
accept their failure and learn from their mistakes will have better chances of survival in near future.
13. ORGANIZATIONALRESTRUCTURING
REFERENCES
Bree Fowler |”Kodak CEO talks company's restructuring after bankruptcy”
http://www.semissourian.com/story/2001667.html Retrieved Feb 17, 2015
“Defining Restructuring”
http://www.investopedia.com/terms/r/restructuring.asp Retrieved Feb 05, 2015
“FUJIFILM NORTH AMERICA CORPORATION ANNOUNCESRESTRUCTURINGTO SUPPORTSALES EFFORT“
http://www.fujifilmusa.com/press/news/display_news?newsID=880011 Retrieved Feb 03, 2015
Gilson, Stuart C. “How To Make Restructuring Work for Your Company”
http://hbswk.hbs.edu/item/2476.html Retrieved Jan 22, 2015
N Nayab, Finn Wendy | “10 Reasons Why You Should Consider Restructuring”
http://www.brighthub.com/office/human-resources/articles/122660.aspx Retrieved Feb 11, 2015
Principles of Supervision and Management Vol.2 “Forces for change”
Chapter-19 Pg.560. Retrieved Feb 07, 2015
“Shift to a New Structure”
http://www.fujifilmholdings.com/en/rd/structure/shift.html Retrieved Jan 17, 2015
“Sharper focus” Retrieved Feb 11, 2015
http://www.economist.com/blogs/schumpeter/2012/01/how-fujifilm-survived
14. ORGANIZATIONALRESTRUCTURING
APPENDIX A
Fujifilm Holdings Corporation, commonly known as Fujifilm is a Japanese multinational
photography and imaging company headquartered in Tokyo, Japan was founded in 1934.
Shigetaka Komori is the current president and CEO of the company. It has an employee
strength of 35, 000 and net worth of $1.8 trillion (FY2010)
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APPENDIX B
Eastman Kodak Company, commonly known as Kodak, is an American company focused on
imaging solutions and services for businesses with headquarters in Rochester, New York, United
States. It was founded by George Eastman in 1888. Jeff Clarke is the current CEO of the company
and company’s net worth is $4.11 billion (FY2012). It has about 9000 employees as of 2014.
