Global Strategic Management
Competition has gone global and the market and industry dynamics have necessitated the need for CEOs to make concerted efforts streamlined towards ensuring that high-quality goods and services are offered in the market at competitive prices. This has resulted in the adoption and implementation of several tools and strategies geared towards the attainment of the aforementioned goals. One of the strategies that have been soundly embraced by a multitude of companies to remain competitive in harsh economic environments is the retrenchment strategy.
According to Power (2004) “Retrenchment is a corporate-level strategy that seeks to reduce the size or diversity of an organization’s operations. Retrenchment is also a reduction of expenditures in order to become financially stable”. Chief Executive Officers face many challenges that arise due to the streamlining of operations in pursuing retrenchment strategy. The reductions in costs and assets in most instances demand the closure of some plants and the reduction in the organizational work force. These demand the initiation of new processes and systems within the operational culture of an organization. CEOs must be adequately prepared to entrench the new systems and processes to achieve the goals and objectives of an organization.
In addition to the above, skilled human resource is lost during retrenchment and such balancing the demands of the organization in regards to available skilled man power remains a management headache. According to Casco (1986), “The major problem is the decrease of human resource that results from cost-cutting measures which brings loss of skills, energy, morale, commitment, physical and mental health degradation that results from employees withdrawing physically and emotionally.” Lastly, while the aim of retrenchment is to cut down on costs, some related costs such as severance package, out-of-placement benefit, pension and administrative processing costs may increase (Behn, 1980). Achieving the goals and objectives of an organization in regards to the above challenges constitute major organizational problems in pursuing this strategy.