 In this session we are going to look at downsizing and re-engineering as OD intervention. What is the meaning of downsizing? Downsizing refers to the interventions aimed at reducing the size of the organization. So, there are multiple mechanisms are used in downsizing. They can be individual focused mechanisms like layoffs, attrition, redeployment of the manpower from in the one function to another function or one part of the organization to the another part of organization, early retirement and these mechanisms of downsizing can be at the organizational level and organization focused like reducing the number of organizational units or reducing the managerial levels and that can be done through divestiture, outsourcing, reorganization or de-layering. When downsizing is appropriate, if it is a OD intervention we must understand when the downsizing is appropriate. It is appropriate in a situation of the mergers and acquisitions. Generally mergers and acquisitions are done with the hope and intention of building the synergy in the two organizations, but that synergy cannot be built without removing the waste. So, in generally the mergers and acquisition situation organization redesign is done, streamlining of the processes is done, repetition or duplication of the processes and replication of the resource deployment is reduced or it is tried to be eliminated. In these kind of processes with these objectives downsizing is generally required. So, this is one situation where downsizing is appropriate. When there is a drastic decline in the market share or the market access because of the external factors. In the very first session of this course we talked about the transient nature of the competitive advantage. Things, services, processes which are the source of competitive advantage at one point of time may not remain competitive advantage at another point of time. In this kind of a dynamic environment organizations at times lose out on the market share or the customer preferences change and they need to shift to the new kind of services products or the ways of delivery. In that situation sometime downsizing becomes inevitable. Due to great advances in technology particularly related to the IT, robotics, automation, machine learning many business operations can be changed. Many business processes can be redesigned and redefined because of these possibilities competition is increasing. If one organization do not use the benefit of these new emerging technology another organization may anyway use it and as a result this organization which do not up a skill itself or do not adapt the new technological advancement may lose out at the marketplace. So, they at times have to create new organization structure because of the change in technology, because of the change in regulation or the regulatory environment. In that situation as well sometime downsizing is necessary. If we look at downsizing it is of the different types. There are different tactics and associated characteristics and examples of downsizing. This is again drawn from the Cummins and Verley s book and this model is was proposed by Cameron Mishra and one more author in a reputed journal. So, workforce reduction is first tactic of downsizing. In the workforce reduction the simple reduction of the head count is done workforce reduction in absence of other tactics is a short term and but it is quick to give results if you are aiming at cost reduction. In a quickest possible time I think workforce reduction is the first mechanism people try. The example of the workforce reduction is attrition meaning asking people to leave the organization in a legal way. There are some regulatory requirements to be fulfilled before you ask any permanent employee of the organization or even a temporary employee of the organization to leave. So, by fulfilling those requirements people can be asked to leave that is attrition. People can be asked to take the early retirement or buy out or simply asking people to leave and stopping the work that is layoff. Another type of downsizing strategy tactics is organization redesign. Organization redesign is generally done with the medium term focus. When you not only look at how many people how many head counts can be reduced, but you also look at possibility of changing the organization and fostering the transition and transformation by not just asking people to leave, but rearranging the work and redesigning the organization. In the redesign of the organization where you aim at transition and transformation generally the organizations eliminate the functions sometime clubbed of two functions or sometime reduced the process complexities related to different functions. They eliminate the hierarchical levels or sometime even the product lines which are not core of their work. Organizations also aim at and try to merge the different units in the organization redesign process. Redesigning the task also is one of the ways of organization redesign. So, you can see that organization redesign look at the organization design in a overall way and first try to implement the changes at the level of design and the processes not straight away asking people to leave. Third process is systemic tactic or systemic approach where its characteristic is that organizations when they are facing the challenges like the one we I explained in the previous slide systematic changes are aimed at changing the culture. If market requirements have changed, if the customer taste has changed, if the technology is transforming the way of doing business and if you want people to respond to the need of the customers or the dynamic environment then culture needs to be changed and through that process organization can respond to the emerging challenges that is one way that is the characteristic of a systematic design. Systemic design is generally long term focused and it fosters not only transition but fosters the transformation. So, the focus of the system systemic downsizing technique is more on the capability building. It is more on preparing people to take on to the challenges of the emerging reality or the dynamic market situation. In this kind of systemic approach generally organization change the responsibility of the people. They change the role of the people and train them to deliver that new role. In this situation with this approach organizations also foster the continuous improvement. They look at the different avenues of upgrading their services, upgrading their processes, creating the better customer experience and that is the continuous improvement process which is aimed at through changing the culture. And third example is downsizing. In this process of systematic change but that downsizing is not a knee jerk reaction but it is result of a long term perspective not a immediate response to the market challenge. And in this process that downsizing is also done with a very in a very responsible way towards people who are subjected to this change. What is the appropriate process for downsizing? First and foremost thing is clarifying the organizations strategy. What is the organization strategy? Organization strategy is the pathway to achieve long term objective that must be clarified. What we want to achieve must be understood, recognized and articulated. And in that context downsizing process must be started. Second step is assess the downsizing options and make relevant choices like workforce reduction, organization redesign or systemic redesign. If strategy is clarified organization need to look at the different options available for downsizing. If it is not a knee jerk reaction they need to look at the design, organization design and system and culture as the first point of change instead of ask directly asking people to leave the organization. So, that is the generally the next step in a proper downsizing process. Third is implementing the changes with the top down approach. If you want people to behave differently, if you want people to be more value adding to the system and process and the customers then that must be communicated from the top of the organization. So, that is why it should be a top down approach. Downsizing should be viewed as a process which is affecting the top management and middle management as well along with the frontline management. If in the downsizing specific areas of inefficiency or the high cost are not identified that will not be considered as a conscious downsizing process or an appropriate downsizing process. Employees of the organization will feel those who are asked to leave those who are subjected to the layoffs or the retrenchment. If they see that some of the areas of the high inefficiency are even not being touched then they will lose they will lose trust in the process of the downsizing even people who are left in the organization who are not being asked to leave and if they also see that some of the specific areas of inefficiency are not being tackled before downsizing in the other areas which were less inefficient or more value adding that will put people down and that will reduce the trust of the employees in the management and in the organization. So, no specific area of inefficiency in the high cost should be left before asking people to leave or before the downsizing process. The process as it is emanating from the very first step that it must be linked with the organizational strategy. So, at each stage it must be clarified how the downsizing process or the step is important or inevitable to implement the organization strategy. Next step is addressing the need of survivors and those who leave. Shareholders invest some part of their wealth in the organization, but employees invest a large portion of their competency and the time to the organization. When we ask them to leave it is a much more shocking experience for them in comparison to the shareholder who might hold some percentage of share and that might lose little value in the market fluctuation. So, we organizations need to and have to take care of the employees of the organization and we need to take care of not only the employees who had to leave the organization, also the need of the employees who are left in the organization. Here one concept is very important. This concept is called survivor syndrome. It is this survivor syndrome is observed among the survivors of the downsizing and this syndrome involves a narrow set of self-absorbed and risk-averse behavior that can threaten the organization's survival. That simply means those who are left in the organization after the downsizing they are more concerned about who are going to be asked to leave the organization next. They are more concerned about which is the next part of the organization which is subjected to the downsizing and they think less about the requirement of the organization. They think less about the organizational objectives and fulfilling those objectives and they are more self-centered and care more about the next step of downsizing. So, because of this lack of focus on the organization performance and strategy and more focus on the set of the self-absorbed behavior and the risk-averse behavior, the outcome of the downsizing is not met. The purpose like cost saving or more better is team lining of the process cannot be achieved by the people who are with the organization but suffering from the what is being defined as survivor syndrome. So, the survivor syndrome must be dealt with how it can be dealt with. There are different ways of dealing with the survivor syndrome. First is organizational communication about where the company is going. Talking about the vision, strategy and goal of the company with the survivor's action. They need to be communicated that now their actions are going to be the source of the organization's capability to implement the strategy and to achieve the goals. So, that is the kind of communication must be established by the top management with the survivors in the organization. Second is connecting employees performance and strategic success. The survivors need to focus on their performance and not on their defense mechanism, not on their insecurity. RI arose out of the situation where they looked at many of their colleagues being asked to leave the organization. To deal with that, they must be communicated and their performance must be formally linked with their strategic success and they must be trained and developed for the new roles and responsibilities. Generally, after downsizing, the role gets enriched of the survivors. But if that role is enriched, people will not be able to enact properly in that role. People will not be able to hold that role without proper training and development. So, for downsizing to be successful, the survivors of the in the process must be trained and developed properly for the new roles and responsibilities. And last but not the least, senior management of the organization need to involve the survivors in the decision making process. That is one way of enhancing their engagement and shift their focus from the defense and the self-absorbed and risk-averse behavior to more organization strategy and goal focused behavior. Follow through with the growth plans is the next step of the downsizing, which is the last step of organization. Many a time, organization reap the benefit of quickly reducing the headcounts and saving the cost in that process, but they are not able to follow through the growth plans. So, growth plans must be followed through with the proper communication with the survivors, proper communication with the employees from the middle to the lowest level, lowest rung of the organization. And that ensures that downsizing process yields the expected results. There are lot of research studies which suggests that more than 70 percent of the downsizing OD interventions do not give desired result. In fact, about half of them are outright failure. That means, they are just not proved to be effective to either sustain the organization, enhance the organization performance or even survival in the in the marketplace. So, when we look at that such a high failure rate of the downsizing as a OD intervention, we find that downsizing is done, but that all the steps are not followed. And in absence of the of these steps and these precautions downsizing cannot give the desired business result. Here I would like to give one example of Tata Steel's. In the 80s, Tata Steel found that they are one of the very inefficient Steel producer. And in the early 90s and the late 80s, the top management of the Tata Steel and the Tata group travelled across the world and observed that most some of the most efficient Steel producing plants in the world. They came back, they communicated this to their union members, employees and managers in that Tata Steel that if we continue to be as inefficient as we are, we cannot survive in the marketplace and we cannot retain our market share. That was the time of start of the liberalization and globalization and Indian market was getting opened up. The urgency of transformation was communicated across the organization. Many facilities which were available to the Tata Steel employees were taken back. For example, in Tata Steel employees, their family members were also supposed to get employment once they have requisite qualification. That facility was rolled back. Likewise, many other things were rolled back. Many employees were asked to leave as well, but this whole process was done so systematically in so fair and honest way with proper communication from the top management that in spite of more than 1000 people being retrenched or asked to leave that Tata Steel, there was not a single lawsuit or a industrial unrest in that organization. So, it is not impossible for downsizing to carry out in a humane way for the business strategic purposes, but we need to take care of some of the things which we discussed in the downsizing process. Next orientation related to the organization design is called re-engineering. Re-engineering is the fundamental rethinking and radical redesign of the business processes to achieve the dramatic improvement in the performance. So, re-engineering generally involves breaking specialized work units into integrated cross functional work processes for streamlining the work processes and making them faster and more flexible and competitive. Re-engineering in nutshell is about re-viewing and redesigning the processes as if you are starting the processes afresh today. So, re-engineering process starts with preparing the organization by assessment of the organizational context and setting the strategic direction, communicating it clearly to the stakeholders and communicating about the necessity of re-engineering. Then comes the next step which is the heart of re-engineering. That is fundamentally rethinking the way work gets done. In order to fundamentally rethink the way work gets done, first organization has to identify and analyze the core business process. Apart from the core business processes, other processes can be outsourced or can be just shelved off. After identifying the core business process, the next step is defining the performance objective. What we want to achieve? Generally re-engineering is not done to achieve the 10 percent, 15 percent, 18 percent, 20 percent improvement in the performance. Generally re-engineering aim at 50 percent, 100 percent and even more improvement in the performance. And those kind of performance goals and objectives must be well defined in the beginning of the process. Then comes the third and very critical step. In the context of the core business processes, in order to achieve the performance objectives we have identified for ourselves, if we were starting the company today, what is the best way to deliver the product and services? In order to achieve that kind of performance criteria, which is drastically better and greater comparing to what we have been doing till now, how my system and processes will look like. So, that is the core question of the re-engineering process. Then comes the restructuring the organization to achieve that objective. The restructuring of the organization around the new business processes and most likely these outcomes of this step are like process teams emerge as the work units. Jobs become more multi-dimensional in nature. Measurement becomes more outcome focused and we get flatter organization structure at the end of the re-engineering process. There are many examples of the successful re-engineering process. Two examples can be looked at. One is Bank of India, another is Bank of Baroda. Bank of India and Bank of Baroda are the examples of the organization which have gone through the re-engineering process between 2003 and 4 to 2008 and 10. For example, Bank of Baroda in one of the ranking was beyond 20 out of 25 public sector banks in terms of the customer satisfaction and the financial performances. But these banks have implemented the core banking solution which is based on the IT solutions. Based on the core banking solution which is information technology based, they redefine their processes and systems. They redefine their reward and recognition mechanism. They train the leadership and as a result of that the number of branches increased very significantly. For example, in the Bank of India case from about 3000 branches within 3 years the number of branches increased to 5000. The number of services being offered by these banks increased many fold. In fact, in the home loan in one year Bank of Baroda surpassed the pioneer player of the home loan in India HDFC. So, in one year they performed so well on the home loan. So, in that way they increase the product and services, they streamlined their operations, they made the IT enabled services as the integral part of the banking experience for their customers and all that happened in 5 to 8 years. These are the great examples of re-engineering process. There are many other examples you can study after this session like that transformation took place in Mahindra and Mahindra in their agribusiness sector, in their emergence of Mahindra and Mahindra as a car manufacturer. These are the examples of very successful re-engineering. What are the characteristic of the re-engineered organization? That is what we look at, but I encourage the participant to look at the stories which are available, widely available on the internet about re-engineering stories of the enforces of the ICICI bank of the Bank of Baroda of Mahindra and Mahindra Group etc. The characteristic of the re-engineered organization is that work unit change from the functional department to the process teams. They have more and more process teams emerge at the end of the re-engineering process. Jobs change from the simple tasks to the multidimensional work. You have people left in the organization who are not very specialized and they are capable of doing multiple tasks in the organization in order to satisfy the customer's expectation. People's role change from controlled to empowered. Since the decision making generally becomes more democratic in the re-engineered organization, people are empowered. They are trained to make better decisions and to make decisions. The focus of performance measures and compensation shift from activities to result. You not only look at the initiative, you not only look at the behavior and activities, but organization also look at the results as a performance measure. Organization structure changes from hierarchical to the flat organization. The number of layers generally reduce after the re-engineering. The strength of bureaucracy also decreases and more flexibility emerges in the re-engineered organization. Managers change from supervisors to coaches. They no longer hope to operate in a command and control manner. They need to work as executives and executives change from score keepers to the leaders for their team. So, you can see re-engineered organization and the re-engineering as an OD intervention is not only a technical intervention. This is a lot related to the human process interventions. We cannot hope that we will change the technology and the people will start behaving differently. We can change the technology, we have to change the process in the re-engineering OD intervention, but people have to be trained to not only operate on new technology, but to behave differently. In order to make people and organizational members, leaders and employees to behave differently, they need to be given training not only on the behavior, but about changing their attitude towards themselves, towards their role, towards their organization, towards their customer and towards their co-workers and team members. So, re-engineering is not only a technical intervention, it is a socio-technical intervention where social aspect and personal aspect of the OD is equally important as the technical aspect is important. The best practice in the organization re-structuring starts by very clear understanding about the long-term strategic aspirations of the organization. They take time to survey the scene, the exteriority, the context as well as the internal capabilities and the internal design both have to be surveyed for the organization to re-structure or to start any re-structuring process. Be structured about selecting the right blueprint. The blueprint must be prepared in taking into account of the strategy and the context of the organization before actually starting the re-engineering or the downsizing process. Organization must need to recognize, they need to go beyond lines and boxes. Organization design is not only about the lines and boxes, it is also about the relationship, it is also about the shared values and beliefs, it is about the shared perception and relationship amongst the informal relationship amongst the members of the organization that is called organization culture. We will talk about the organization culture in the next session, but we need to recognize that organization design is not only about the formal one represented through the box, lines and the circles on the pages. There is lot of, there are lot of informal processes involved in the organization design and that must be taken care of in the downsizing in the end re-engineering process. There is a need to be rigorous about drafting the talent, what are the kind of people, what are the competencies required in order to achieve this strategy and the competency required amongst the survivors, the people who are left, who will be left in the organization after the downsizing. That clarity must be brought out and articulated before the re-structuring process. There is a need to identify the necessary mindset shift. You may change the technology, but if you do not change the mindset of the people, if they keep operating with the previous mindset, organizations cannot achieve the benefits, espoused benefits of the downsizing and re-engineering. So, as I mentioned, as it is important to change the technological or the operational processes of the organization, there has to be a clear articulation and shift in the mindset of the people as well. There is a importance of establishing the metrics that measure the short-term as well as the long-term success. It is not only about the organizational restructuring metrics, it is also about the people metrics. For the organization restructuring as well, we need to identify the right metrics, what we want to achieve, how we want to achieve and organization need to keep tracking itself, whether they have achieved what they thought about as a result of the downsizing process. And along with that, they need to re-define their metrics for their talent and direct their talent to achieve those metrics because and those metrics have to be well connected to the strategic success of the organization. Organization have to make sure that business leaders keep communicating and walk the talk. If as I said re-engineering or downsizing requires organizational members to behave differently and the best way for organization members to behave differently is when they see their business leaders start behaving differently. So, business leaders have to be role model and they need to be excellent communicator about strategy in the process of the downsizing and the re-engineering work. At each step, they need to not only be fair, but they need to communicate how they are fair and the conscious of the process and what they want to achieve through that process for the organization. And managing the transitional risk is also equally important in the organization restructuring. The transitional risk is about how the newly designed or new structure will be capable of fulfilling its espoused roles and the goals. And that transitional risk must be taken care of. It is particularly relevant in the merger and acquisition case. We will be having a session on the merger and acquisition where we will talk about that like the financial due diligence, cultural and the organizational due diligence and the process due diligence is also important for any merger and acquisition to be successful. And that is about the transitional risk. We need to know that what are the transitional requirements. We need to also know what may go wrong that means the failure mode analysis and need to make the adjustment and provisions about the culture process along with the financials in the restructuring process. So, these are some of the best practices in the organizational restructuring process. Here we end our session about the organizational restructuring. In this session, we looked at the appropriate processes with some examples about downsizing and re-engineering. These two pert interventions are about redesigning the organization structure. In the next session, we will look at the change in the organizational culture. So, organization design has two components, organizational structure and organizational culture. Till now, we looked at how the design can be changed. In the next session, we will look at what is the nature of organizational culture and can organizational culture be changed and if yes, how the organizational culture can be changed. Thank you.