retrenchment

• What is retrenchment?


  a term used to describe when a business decides to significantly cut or scale-back its activities.
• Examples of retrenchment


  • Reduce output & capacity

  • Job losses / redundancy programmes

  • Product / market withdrawal

  • Disposal of business unit

  • Scaling back planned capital investment
• What Are the Causes of Retrenchment?

  • New leadership (usually a new CEO)

  • Excessively-high costs and low profitability

  • Low ROCE

  • High gearing

  • Loss of market share

  • A failed takeover or merger

  • Economic downturn

  • Change of ownership
• Implications for changed organisation structures

  Changed management responsibilities

  Greater workloads / higher stress (possibly)

  New teams and colleagues

  Different reporting structures
• Implications for new leadership/ownership

  Different leadership style

  Uncertainty (particularly amongst management)

  New priorities, aims and objectives

  A threat to the prevailing corporate culture

  Previous projects often abandoned (e.g. investment)

  A new / renewed sense of urgency
• Implications for fewer people

  Loss of morale and increased de-motivation

  Bad news for some external stakeholders (e.g. local community, local suppliers)