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European businesses to lead restructuring fad

Western Europe companies will lead a trend towards undertaking major restructuring processes of their business due to the current economic outlook for the region, but many will not start this process until as late as autumn 2009.

Eighty-one per cent of 2,000 large and medium-size western European companies
examined in the study by
Roland
Berger Strategy Consultants
said they were currently planning a
major operational and structural change programme in direct response to
declining fortunes for western European countries, some of which are facing
recession.

But 57% of those companies also said it would take them more than 12 months
to begin this process and a further 41% said it could take them more than two
years to “consider their response” ­ which Roland Berger said indicated a lack
of agility among these companies and added that this put them at greater danger
of being adversely affected by macroeconomic conditions.

“Our research shows that 71% of companies do not take action before a
strategic crisis has turned into a profit or liquidity crisis. Speed of response
is critical if firms are to avoid the worst,” said Roland Berger’s restructuring
principal, Klaus Kremers.

Board buy-in to business-wide restructures was identified as key to their
success by the study, finding that two-thirds of change programmes take more
than 12 months to complete and 41% need more than 18 months to roll out. “Our
research demonstrates that commitment from the board is the single biggest
determinant of successful restructuring,” Kremers’ restructuring colleague Steve
Francis said.

The study found that 60% of western European companies are currently focusing
their restructuring plans on “the need to realign their organisation and
processes”, while 53% put strategic repositioning at the top of the list. A
further 51% saw it as a way to address an uncompetitive cost base and 41%
thought it would improve below-target profits.

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