Restructuring is more than just cost-cutting
Restructuring is making a comeback in the wake of the economic crisis that has developed out of the financial crisis. For despite the prevailing mood of uncertainty, one thing is clear to most corporate executives: unlike Germany's 2003 recession, this time round the Austrian economy will also be hit just as hard, despite – or rather because of – the country's close ties with Central and Eastern Europe.
By and large we are therefore seeing a relatively swift reaction from Austrian executives. They seem to be neither paralyzed with fear nor in denial of reality. The key question they are asking is: "What's the best way for me to react?" The initial reflex tends to be to cut costs and, in the same context, to cut jobs.
This is too short-sighted in our view, however. In the following, we make six recommendations on how companies should react in a economic crisis.
1. Check the management model
During growth phases companies tend to decentralize their decision-making structures – a typical development when market proximity and entrepreneurial freedoms are decisive factors. In a sudden economic downturn, however, should use the advantages of more centralized decision-making structures.
2. Secure the home market
A stable home market is one of the most important success factors of fast-expanding, international or even global corporations. The management should now focus on that.
But "home market" for Austrian companies is no longer limited to Austria, but increasingly extends to CEE.
3. Organize key account management
In an economic crisis companies try to optimize their purchasing – but so do the customers. Therefore, a meaningful structure for effective key account management has to be found in times of economic slowdown. It can prevent the customer portfolio from fragmenting.
4. Optimize decentralized value structures
Over the last few years, many companies have expanded not only organically, but also by taking over entire production and sales structures. However, many corporations have postponed restructuring the value chain. Now it's time to leverage earnings and thus value by coordinating tasks between national companies: for example, setting up regional shared service centers.
5. Strategically optimize central functions
Lean and efficient headquarters are standard in well managed companies. That's why we warn against overly hasty cuts in central tasks and functions. The argument against this step is that certain central functions make the advantages of a group structure possible in the first place.
6. Use growth opportunities
In the current stock market environment, well-capitalized companies have many opportunities for takeovers at comparatively favorable multiples that would have been unthinkable eight months ago.
Conclusion
The imminent situation of a sudden economic slump will create special challenges for Austrian companies. Our recommendation is to resist the direct reflex of simply cutting costs and to start by thinking about the strategic ideas mentioned here. Our experience from countless projects shows that a restructuring plan based on these six pillars contributes much more effectively and sustainably to securing the company's competitiveness and ability to survive.
By and large we are therefore seeing a relatively swift reaction from Austrian executives. They seem to be neither paralyzed with fear nor in denial of reality. The key question they are asking is: "What's the best way for me to react?" The initial reflex tends to be to cut costs and, in the same context, to cut jobs.
This is too short-sighted in our view, however. In the following, we make six recommendations on how companies should react in a economic crisis.
1. Check the management model
During growth phases companies tend to decentralize their decision-making structures – a typical development when market proximity and entrepreneurial freedoms are decisive factors. In a sudden economic downturn, however, should use the advantages of more centralized decision-making structures.
2. Secure the home market
A stable home market is one of the most important success factors of fast-expanding, international or even global corporations. The management should now focus on that.
But "home market" for Austrian companies is no longer limited to Austria, but increasingly extends to CEE.
3. Organize key account management
In an economic crisis companies try to optimize their purchasing – but so do the customers. Therefore, a meaningful structure for effective key account management has to be found in times of economic slowdown. It can prevent the customer portfolio from fragmenting.
4. Optimize decentralized value structures
Over the last few years, many companies have expanded not only organically, but also by taking over entire production and sales structures. However, many corporations have postponed restructuring the value chain. Now it's time to leverage earnings and thus value by coordinating tasks between national companies: for example, setting up regional shared service centers.
5. Strategically optimize central functions
Lean and efficient headquarters are standard in well managed companies. That's why we warn against overly hasty cuts in central tasks and functions. The argument against this step is that certain central functions make the advantages of a group structure possible in the first place.
6. Use growth opportunities
In the current stock market environment, well-capitalized companies have many opportunities for takeovers at comparatively favorable multiples that would have been unthinkable eight months ago.
Conclusion
The imminent situation of a sudden economic slump will create special challenges for Austrian companies. Our recommendation is to resist the direct reflex of simply cutting costs and to start by thinking about the strategic ideas mentioned here. Our experience from countless projects shows that a restructuring plan based on these six pillars contributes much more effectively and sustainably to securing the company's competitiveness and ability to survive.
