The process of retrenchment strategies in strategic management can be broken into 3 levels of strategy or 3 divisible components.
These are the turnaround strategy, divestment strategy and last but not the least, liquidation. The first ever elementary step taken in terms of retrenchment is the turnaround.
This looks into the problems from a lens favorable to both the company and its employees. This process primarily involves dissolving of redundant branches of the organization.
This strategy is in part to check the fiscal backdrops without harming the interest of the employees to a great degree.
2. Divestment strategy:
When the business turnaround plan does not take expected turns employers have to vouch for a higher level of treatment.
This fresh level of retrenchment is called the divestment strategy. The divestment policy focuses on restructuring and rightsizing rather than just eliminating posts.
Divestment entails re engineering of every possible nook and cranny of the work culture at the company.
However, this strategy runs the risk of eliminating posts including permanent suspension of a large number of employees.
The worst side of retrenchment strategy is liquidation. Playing this card means collateral damage to both parties.
In no uncertain terms it means the end of an organization or the closing down of a company. This is the last step of this whole process and only comes to play when everything else fails.
A company would never decide to deliver on this under normal and reparable circumstances. This is for when the damage has gone beyond repair and nothing can be done to restore the old face of the company.
Advantages and Disadvantages of Retrenchment Strategy:
1. Cost effective strategy:
Despite many things that can be said against retrenchment, it does handle the immediate problems very effectively.
A retrenchment procedure is carried out when the company has squandered a vast amount of money into something irretrievable.
Nevertheless, retrenchment is the first aid to the damages sustained before thinking of better ways to recover from the trauma.
This is why the retrenchment strategy in business is so positively cost effective without taking a larger toll on the organization or the company. The is one of the best retrenchment benefit.
2. Improves performance:
Evidently the employees are going to be on their best behavior once the retrenchment has been placed. Nobody can be too safe from the clutches of retrenchment regardless of how devoted an employee is.
Any lack in performance can be used against them. The employees therefore are on their toes at all times lest they should be targeted for their lack of trying.
Automatically this calls upon their best performance the company must have seen in ages.
3. Loss of good employees:
Despite being strict and fair, screening is not always up to the mark. In spite of all the efforts made to save the best of employees it is impossible to see through person to person after all.
And in all the riffraff the company loses one or two of its most hardworking employees. Once the list is made there is not much the company heads can do to keep the employees they favor on the team.
Doing that will appear unjust to all those who have cleared the screening.
4. Critical response:
And on top of everything the company will have to withstand the wave of hatred and criticism coming from all those who were told off so unceremoniously.
This is one sphere of public reaction that every field of work has. But honestly one cannot blame the other since it is just as imperative to impose retrenchment when necessary, as finding a better solution to pan out to your employees rather than extricate them so irreverently.
Nonetheless, it is to be noted that retrenchment is not a one way lane and mostly thinks along the lines of RIFs and mass layoffs. Therefore placing a retrenchment is definitely going to weigh in both advantages and disadvantages for you to choose from.