Archived — Working Paper Number 23: Restructuring in Canadian Industries: A Micro Analysis

by Sunder Magun, Applied International Economics, June 1998


Summary

Over the last 15 years, many Canadian companies have improved their profitability, productivity and international competitiveness by restructuring their core business processes and functions, and their organizational structures. Restructuring, which is directly linked to a company's strategy and business goals, provides a focussed vision for all improvement initiatives at the micro or company level. It is a part of the radical global changes in the management of business firms under way in many industrialized countries. At the moment, we do not understand how and to what extent restructuring has affected company performance in Canada. The general purpose of this study is to fill this knowledge gap. In particular, it will answer the following four research questions:

  • What are the general and specific factors that have fuelled restructuring in Canadian firms?
  • What is the general pattern of restructuring practices in Canadian companies? What are the various forms of restructuring in Canadian industries?
  • Why has restructuring been successful in some companies? Can Canadian firms learn some lessons from this experience?
  • What are the effects of restructuring on company profitability, productivity and employment?

This is a micro, company-based study. The basic data for the research have been compiled from an interview survey of individual Canadian companies. Restructuring includes several corporate improvement programs such as downsizing or rightsizing, total quality management (TQM), re-engineering and outsourcing. It seeks substantial improvements in performance goals, which may include improved product quality, higher profitability and productivity, lower production costs, as well as greater flexibility, speed, accuracy and customer satisfaction. These goals are often pursued concurrently. In many cases, restructuring takes a holistic approach to business improvements, covering both the technical aspects of processes and products (technology, standards, procedures, systems and controls) and the social aspects (organization, staffing, company policy, jobs, career paths and incentives).

The study is divided into four sections. "The Setting" describes the conceptual framework used in the paper, and the sources of statistical data. "Restructuring in Canadian Companies" outlines the various modes of restructuring and the frequency of their use in Canadian corporate restructuring. In addition, this section analyses why companies may initiate restructuring and the goals they may set for their restructuring plans. The following section discusses the effects of restructuring on company performance and organizational structure. It also describes the form of benefit services provided to workers who are laid off as a result of restructuring. The concluding section answers the question of whether corporate restructuring is successful, and why. It also shows what role government programs have played in corporate restructuring in Canada.

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