The Hindu Business Line : Corporate restructuring in Europe

These changes are creating challenges and opportunities. Sectors such as steel, car manufacturing, and electrical and electronic components are in a process of fast transformation and internationalisation. In the field of financial services, mergers have taken place or are in the process. On the other hand, Europe also seems to be slowly moving away from manufacturing into the services sectors, where new jobs are being created and the skill requirements are quite different. A look at the changes occurring in Europe and the emerging opportunities and lessons for India.

Consolidation

Mergers and acquisitions is a growing trend that is emerging in Europe. At the same time, there is a tendency for larger companies to spin off or, de-merge, parts of their operations, to concentrate on their `core' activities. There are enormous strategic acquisition opportunities for Indian companies.

Restructuring by outsourcing

European companies are also restructuring by `off-shoring' and `outsourcing' production. In European multinational companies, such relocation is increasingly occurring across borders, with a tendency for companies in some sectors to shift production/service provision especially into the new EU States where manufacturing costs are substantially lower. Indian companies need to take vantage positions in Eastern Europe, quickly.

BPO opportunities

A further widespread trend is that companies, public sector bodies and even city administration, and State governments are outsourcing or sub-contracting to external parties, activities, processes and functions, formerly performed internally. The progressive States of Kerala, Karnataka, Andhra Pradesh and Maharashtra need to set up investments and BPO promotional offices in Europe.

EFFECTs of restructuring

European employees are facing new flexibility requirements. This is affecting:

Employment: Companies are moving away from relying on workers on open-ended, full-time contracts and, increasingly, use part-time, temporary, `contingent' and contract workers;

Jobs: The content of jobs is being expanded to encompass a greater variety of tasks;

Skills: New work practices are raising skill levels and requirements, and workers thus are required to continuously upgrade their skills so as to be able to cope;

Workplace: Home- and tele-working is growing, thanks to new information and communication technologies.

Working time: Increases in demand are met by overtime work or by "a more flexible approach as to when and how to work", so as to extend operating hours without having to pay overtime rates;

Remuneration: Profit-sharing and various types of bonuses are becoming more and more common;

Management: Europeans are beginning to understand that a more flexible world is demanding a different kind of management philosophy; and

Organisation: There is a trend towards flatter organisational structures. It is clear that corporate restructuring is a deep and pervasive phenomenon across Europe. The increasing trend of mergers and acquisitions is one of the clearest and most readily measurable manifestations of restructuring.

Patterns of employment

Employment trends have changed radically over the last decade in most of Europe. This has led to changes in employment patterns — increasing in services and falling in manufacturing industry. These broad changes are discernible in most countries:

Norway seems to be adapting to the challenges of change, perfectly. In France, employees made redundant due to restructuring are often covered by various state retraining and redeployment schemes.

In Greece, as a result of the replacement of labour by machinery and the restructuring of unprofitable companies, employment in industry is down, while that in agriculture has also been fallen following restructuring in the 1990s. However, increases in service sector employment have more than made up for these falls;

Portugal has seen a major decrease in employment in manufacturing (particularly textiles, chemicals and metalworking) and increased employment in services (notably retail, hotels and restaurants, and finance); and

The UK has experienced a continuing decline in manufacturing employment. Business and miscellaneous services are the main growth areas. Employment reduction is taking place in the areas of mining and utilities, clothing and textiles, engineering and wholesale.

Privatisation and liberalisation, along with public expenditure cuts, have led to job losses in the public sector in most of Europe.

Employee participation in restructuring

There are major differences among the countries over the extent to which legislation or widespread collective agreements provide employee representatives with rights or impose duties on company management as regards employee participation in restructuring.

In a number of countries, employees are entitled to some form of representation on company boards in certain types of enterprise, which may allow them some influence on or input into decision-making on certain aspects of restructuring. Such board-level representation applies to companies in Austria, Denmark, Finland, France, Germany, Luxembourg, the Netherlands, Norway and Sweden.

In most of Europe, employee representatives (works councils and/or trade union representatives) receive regular and routine information on a range of business and employment issues, which may be implicitly or explicitly relevant for continuing restructuring.

In a significant number of countries, wider company restructuring issues are also subject to such information — closures and cutbacks in operations and activities; mergers and/or acquisitions and/or divestments; and changes in structure.

However, beyond giving their opinion, employee representatives have no right to negotiate on the employer's restructuring plans or to have any form of veto over them in the great majority of countries.

(The author is former Europe Director, CII, and lives in Cologne, Germany. Feedback may be sent to mohan.murti@t-online.de)

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