26.04.2015 Feature Article

What Rationalisation Actually Mean

What Rationalisation Actually Mean
26.04.2015 LISTEN

According to IMF, as part of the conditions for GHANA to go through to actually help bring its economy back to track is RATIONALISATION but the question is what does RATIONALISATION ACTUALLY mean;

A) Rationalization
Corporate: Selling off or closing down some plants or units to reorganize a firm's operations to be more in line with its core competencies, in the interest of efficiency, or as a cost cutting measure. Often used as a euphemism for firing employees. See also downsizing.

Psychological: Attribution of reasonableness or socially acceptable motives to an action, behavior, or decision with plausible explanations, while hiding (or being unconscious of) the true motives. See also defense mechanism.

B) DEFINITION of 'Rationalization'
A reorganization of a company in order to increase its efficiency. This reorganization may lead to an expansion or reduction in company size, a change of policy, or an alteration of strategy pertaining to particular products.

Similar to a reorganization, a rationalization is more widespread, encompassing strategy as well as structural changes.

C) Staff Rationalisation in Challenging Times
You would have to be living under one very large rock not to be aware of the current economic stresses faced by many organisations, public as well as private. Some organisations are looking to cut staff costs by in excess of 20%. As noted in the Economist, as a general rule cutting 10% of your workforce can lead to a leaner more efficient organisation, more than 10% can detract from an organisation’s ability to operate as its remaining customers expect.

You can call it restructuring, rightsizing, realigning, organisational rationalisation or any of the other catch phrases that organisations use to make staff retrenchments sound more palatable. What ever name you use there are three key and sequential steps to staff reduction; firstly what’s your business strategy, secondly where to reduce resources and finally which resources to reduce.

The sole purposes of the second and third steps, is to drive the first step. It is therefore crucial that this first step is done effectively and done first. The second step involves looking for the fat spots in relation to your strategy. The third and most painful step is to decide which individuals you want on your bus and conversely, who you do not.

There is a high degree of emotion in these decisions. At the top of the organisation a decision needs to be made as to what sort of leadership you need to drive your strategy. This is a difficult task, particularly for those who are close to the outcome. Outside consultants who are experts in interpreting and quantifying leadership needs and individual abilities can provide significant value. Not only do they help make a difference to the quality of decisions but they also add a level of transparency and objectivity that makes the outcome easier to justify and implement.

Organisations who have the right leaders remaining will be able to identify opportunities in the market place. They will have the ability in their staff to leverage those opportunities far more quickly and effectively than their competitors. Therefore firms need to understand the capacity they need from their human capital, the capacity they have and how to close the gaps through staff rationalisation and development. Making the wrong decisions, or no decision at all, will simply widen the gap.
D)What is the difference between rationalisation and retrenchment? (Business Studies)?

I know rationalisation is a type of retrenchment but in what main ways do they differ?

Best Answer: 1. By definition, Rationalization is a process of reorganizing and overhauling a company's operations, policies, and anything else needed to make the company more efficient. Rationalization is thought to be more widespread than a reorganization; it may involve closing some operations while expanding others. It usually involves a shift in investment or other policy. Rationalization is intended to improve a company's profitability.

2. But, since generally Rationalization results in retrenchment of staff, in public perception it has become synonymous with retrenchment.

From the above definitions and explainations, you can easily say with this RATIONALISATION condition by IMF for GHANA, there is definitely going to be a SACK/LAY OFF OF WORKERS.

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