Restructuring in SMEs: Italy

Transcription

1 Restructurig i SMEs: Italy Click for cotets Wyattville Road, Loughlistow, Dubli 18, Irelad. - Tel: (+353 1) Fax: / iformatio@eurofoud.europa.eu - website:

2 Cotets Itroductio Relevace of differet types of restructurig for SMEs Drivers of restructurig Distictive characteristics of restructurig i SMEs Mai challeges ad costraits facig SMEs i restructurig Busiess support from public ad private sources Outcome of restructurig Coclusios ad policy issues Bibliography

3 Itroductio Small ad medium-sized eterprises are differet from larger eterprises i that they ted to attract less fudig ad therefore ecouter more difficulties i ivestig i techology ad i implemetig iovative techological processes. They also ted to have limited maagerial capacities due to their orgaisatioal ad goverace structure, ad they are characterised by lower productivity. Noetheless, their size also meas that they have greater flexibility compared with their larger couterparts: this implies that SMEs are more able to respod to markets ad customers demads. For these reasos, restructurig i SMEs ca be substatially differet from restructurig i larger compaies. Furthermore, SMEs are, typically, family-ru; i may cases, owership ad maagemet are cocetrated i the same perso. Ofte there is great friedship ad trust betwee the ower ad the employees, as the eterprise is ofte see as a big family. This makes decisios ivolvig job cuts durig restructurig, or eve short-time workig schemes, very hard to make, especially as the etrepreeur ofte views the busiess as a lifetime project where all their time, moey ad life have bee ivested. There is a substatial body of literature o compay restructurig, especially regardig crisis turaroud ad iteratioalisatio. However, there is limited research o restructurig i SMEs, ad most literature about this seems to focus o SMEs iteratioalisatio. Furthermore, i the Italia literature, the defiitio of SMEs does ot always reflect the Europea Commissio s defiitio (eterprises employig fewer tha 250 employees). A umber of studies, for example, refer to medium-sized eterprises as those employig betwee 49 ad 499 people (for example, Mediobaca Uiocamere, 2011). At the same time, much of the Italia Labour Law provisios use 15 employees as a threshold, with medium-sized ad large eterprises beig defied as those employig more tha 15 employees. This implies that observig the effects of support measures by firm size ca be difficult for those eterprises employig fewer tha 15 employees. For these reasos, while SMEs are the backboe of the Italia ecoomy, ad restructurig is a topic of public debate, there is ot ofte explicit referece to SMEs. I particular, ad eve more so i times of recessio, there is quite a aimated debate o what measures ca be used to help firms restructure that have the least effect o employees. Ideed, while there has always bee a public debate o SMEs restructurig ad support i terms of busiess expasio ad iteratioalisatio, the public debate o the kid of restructurig that might egatively affect employmet has bee more promiet sice the ecoomic recessio. This has resulted i the extesio of support measures to SMEs that eable restructurig without impactig o employmet levels. Italia SMEs The Italia ecoomic structure is based almost etirely o micro, small ad medium-sized eterprises (Istat, 2009). I 2009, Italy had over four millio eterprises i idustry 1, services ad costructio, employig almost 17 millio employees, ad with a average size per firm of oly 3.9 employees. I fact, 99.9% of Italia eterprises are micro, medium ad small eterprises employig less tha 250 employees. Micro eterprises (fewer tha te employees) represet 94.8% of all Italia eterprises ad they aloe employ almost half of the total active Italia workforce (47.5%). Micro eterprises have a turover of over 675 millio ad they produce almost oe third of the added value produced by all Italia eterprises. I fact, i order to stress the importace ad icidece of micro eterprises withi the Italia productive system, a umber of studies started to refer to Italia SMEs as micro, small ad medium-sized eterprises, (MSMEs). I Italy there are also 200,000 small eterprises (10 49 employees) employig 3.5 millio employees, producig 617,919 millio i turover ad 141,535 millio i added value. Medium-sized eterprises ( employees) employ over two millio employees, i a total of 21,962 eterprises. They produce a turover of 538,593 millio ad a added value of 102,915 millio. 1 The Italia atioal istitute of statistics ISTAT classifies idustry as ecoomic activities uder miig ad quarryig, maufacturig, utilities. Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

4 Restructurig i SMEs: Italy Table 1: Italia eterprises i idustry, services ad costructio, 2009 Number of employees Source: Istat, 2011b. Number of eterprises Employees Average dimesio Turover ( millio) Added value ( millio) 0 9 4,156,913 8,060, , , ,957 1,899, ,690 69, ,210 1,672, ,229 72, ,962 2,124, , , ,502 3,202, , ,414 Total 4,383,544 16,960, ,648, ,153 Almost all service sector eterprises i Italy are SMEs (there are 3,305,187), employig over 8.5 millio people. Service sector SMEs also employ more people tha SMEs i ay other sector ad produce the largest total turover ( 1,088,257 millio) ad the largest added value ( 249,440 millio). Although the majority of SMEs i costructio are micro eterprises (94.8%), the majority of employees are employed i small eterprises (1,344,635). Large eterprises (250 or more employees) produce the highest turover ( 417,629 millio) ad added value ( 81,014 millio) (Istat, 2011b). Table 2: Italia eterprises per sector of ecoomic activity, 2009 Sector Idustry Costructio Services Number of employees Number of eterprises Employees Turover ( millio) Added value ( millio) ,168 1,046, ,971 26, , ,125 91,691 23, , , ,928 31, , , ,815 53, ,495 1,109, ,629 81,014 Total 453,080 4,468, , , ,475 1,222,707 74,707 28, , ,002 32,244 10, , ,507 28,222 8, , ,012 27,291 7, ,129 27,291 4,261 Total 623,355 1,911, ,150 59, ,195,270 5,791, , , , , ,755 34, , , ,079 33, ,514 1,025, ,487 42, ,922 2,035, , ,139 Total 3,307,109 10,580,824 1,468, ,579 Source: Istat, 2011b. 2 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

5 Restructurig i SMEs: Italy A study o Italia maufacturig SMEs carried out by the Istituto Tagliacare (2011) shows that: 18% of Italia SMEs are ivolved i metal maufacturig; 12.5% are ivolved i food maufacturig; 8.2% are ivolved i clothig maufacturig; 7.9% are ivolved i wood ad woode products maufacturig. Furthermore, SMEs are also domiat i sectors characterised by ecoomy of scale. SMEs represet: 89.3% of the etire pharmaceutical maufacturig; 95.4% of the etire auto-maufacturig; 95.7% of the etire coke productio ad oil refiig; 98.5% of the chemical idustry. I terms of geographical distributio, maufacturig SMEs ted to be more cocetrated i a few regios i the cetre ad orth of Italy, tha i the south. Noetheless, lookig at the specific sizes of SMEs, it ca be observed that, i the south there is a tedecy to establish micro eterprises. For example, i Calabria micro eterprises comprise 93.6% of the total umber of eterprises i the regio, while i Sicily ad i Sardiia these figures are 91.8% ad 91.4%, respectively. However, i orth wester regios, there is a tedecy to establish medium-sized eterprises: while 2.1% of total maufacturig eterprises i Italy are medium-sized eterprises, i orth west regios medium-sized eterprises are 3% or more. I orth easter Italy there is a cocetratio of SMEs ivolved i mechaical maufacturig (37% of the total) ad furiture maufacturig (33.2%). I the south there is a high cocetratio of SMEs ivolved i miig ad quarryig (54%), i food (44.9%) ad beverage maufacturig (45.8%), while i cetral regios there is a high icidece of SMEs ivolved i the maufacture of leather goods (55%) (Miistero dello Sviluppo Ecoomico, 2011). I terms of employmet levels i maufacturig SMEs: the metal products sector employs the most people (17.9%); mechaics (10.5%); food maufacturig (9.7%); clothig (6.7%); o-metallic mierals (5.7%). I terms of geographical distributio, orther regios employ the vast majority of the total workforce employed i maufacturig SMEs. For example, Lombardy employs 25% of the total SME workforce i the coutry. However, it must be uderlied here that souther regios have specialised i activities other tha maufacturig, such as costructio ad particularly services (geerally traditioal). Amog the souther regios, 4.9% of the total maufacturig SME workforce is employed i Calabria ad 4% i Puglia. Noetheless, it is importat to highlight how i souther regios the majority of the regioal workforce is employed i maufacturig SMEs. For example, i Calabria, 97.7% of the total regioal workforce is employed i SMEs. I the orther ad cetral regios, SMEs employ, Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

6 Restructurig i SMEs: Italy i geeral, betwee 60% ad 70% of the total workforce i the regio. This implies that large eterprises have a more importat role i terms of employmet levels i orther ad cetral regios, tha i the souther regios. (Istituto Tagliacare, 2011) Fially, i terms of goverace, a survey coordiated by the Cofidustria s research cetre Cetro Studi (CSC) ad carried out by Demos ad Pi o a sample of 508 maufacturig SMEs associated to the employers orgaisatio Cofidustria shows that: over half the sample (55.1%) are family-ru; owership ad cotrol ted to be cocetrated; decisio makig is more cetralised; goverace teds to stay withi the family eve whe ext geeratios become ivolved i the firm. This survey also showed that: 37.7% of eterprises had fewer tha 20 employees; 32.7% had betwee 21 ad 50 employees; the remaiig 29.6% had more tha 50 employees; over 33% declared a turover of less tha 5 millio i 2010; 14.4% declared less tha 1 millio i turover; 19.9% of SMEs declared a turover of 5 to 10 millio; 27% of SMEs i the sample declared more tha 10 millio i turover (Corò ad Gurisatti, 2011). 4 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

7 Relevace of differet types of restructurig for SMEs Overview Iteral restructurig ca be see as the primary type of restructurig for SMEs as, by doig this, firms ca: reduce costs; apply processes of ratioalisatio; temporarily safeguard employmet levels with the support of the wage guaratee fud (CIG). Durig the crisis, the relevace of iteral restructurig icreased dramatically ad i may cases, whe the procedure did ot reach the set aims, there were mergers ad acquisitios, as well as a rise i bakruptcy ad closures. Not much literature is available o relocatio, as this has always bee see as stadard practice for a firm that wats to reduce costs, although durig the crisis it was observed that a umber of eterprises decided to relocate i order to flee from creditors. Most of the literature o SME restructurig focuses o iteratioalisatio, especially i terms of export ad commercial ad trade agreemets with foreig parters, as strategies aimig at busiess expasio. Also, iteratioal outsourcig is ofte used as a tool for iteratioalisatio either with the aim of expasio i foreig markets or of reducig costs. I order to reduce productio costs, Italia SMEs have also bee quite active i delocalisatio ad offshorig. Fially, a substatial part of the literature available o restructurig i SMEs focuses o eterprise growth, i terms of size ad output via iovatio, access to credit ad growth o foreig markets. Relocatio As briefly discussed above, there is ot a great deal of literature o relocatio, as this strategy has bee ofte regarded as the result of a evet such as a merger or a fusio or a divisio of a eterprise, or simply as ecessary for reducig costs. I the last five years, though, data from the Cerved Group (2010) show that over 70,000 Italia eterprises, of all class sizes, relocated, ad of these the majority were limited liability compaies (58%), followed by idividual compaies/sole traders (24%) ad geeral partership (13%). Furthermore, the data showed that, i the last few years, relocatio has also bee used as a way of escapig creditors. I fact, Cerved s ecoometrical model shows how those eterprises that relocated have a 24% greater chace of goig bakrupt withi a year, tha those that did ot relocate. Moreover, those eterprises that relocated more tha oce withi a year have a 85% greater chace of goig bakrupt tha their couterparts that did ot relocate. Outsourcig Traditioally, outsourcig i Italia SMEs has bee explaied as a strategy to overcome the iheret limits of SMEs size i order to exploit ecoomies of scale. However, this does ot properly represet a restructurig tool. Moreover, there is ot much literature o outsourcig. Results from Cofidustria s Focus Group study carried out by the Cetro Studi Cofidustria CSC (Arrighetti et al, 2011) recorded the experiece of 450 Italia maufacturig SMEs that have implemeted challegig, but successful strategies, highlight that oly 11.1% of SMEs with fewer tha 50 employees, ad 10.6% of SMEs with employees have outsourced activities previously doe by the SME. However, it is iterestig to ote that these data show higher figures tha those for larger eterprises i the sample (10.2%). This implies that, i geeral, outsourcig might ot be see as a commo strategy i Italia firms. Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

8 Restructurig i SMEs: Italy However, i the cotext of restructurig, outsourcig seems to be quite relevat to Italia SMEs as a tool for iteratioalisatio. Data from the Istituto Tagliacare (2011) o a sample of 602 maufacturig SMEs ivolved i some sort of iteratioalisatio process show that, at the begiig of 2011, almost 30% of Italia maufacturig SMEs said they had implemeted some sort of iteratioal outsourcig process. I this cotext, outsourcig agreemets ca be horizotal (56.7%) whe the SME outsources to its parter compay the distributio of fial goods destied to the ed cosumer. Obviously, these kids of agreemets ca go i the opposite directio (21.3%), whe the foreig eterprise outsources to a Italia parter the distributio of fial goods destied to the ed cosumer. Outsource agreemets are istead called vertical (19.1%) whe the parter compay supplies itermediate goods to be used i the productive chai. I terms of sectors, Meccatroica (Mechaics, Electroics, Trasport) is the oe to have the most outsourcig agreemets (33.2%), compared with 29.8% of SMEs i chemicals ad 25.7% i the Made i Italy sector (clothig, leather goods, textiles, wood ad furiture maufacturig, ad prit). Offshorig/delocalisatio Processes of delocalisatio have bee takig place sice the 1930s, whe FIAT offshored productio of some of its models to Polad ad to the former USSR (the so called Togliattigrad). Piaggio did the same ad still, today, produces its Vespa motor scooters i Idia. Noetheless, these are cases of large multiatioal compaies while the majority of the Italia eterprises are micro, small ad medium-sized. For SMEs, the process of globalisatio has bee implemeted i terms of the iteratioalisatio of their products. This type of strategy rus couter to the traditioal model of placig the factory ext to the cosumer. Istead it looks at efficiecy i logistics ad trasport, fiscal regimes, relevace ad pressure of trade uios, ad the cost of labour. For these reasos, the delocalisatio of Italia firms is low-cost seekig ad cocetrated i those sectors without high added value, ad it is especially used i the textile ad clothig sector. I the 1930s Tusca SMEs started to offshore part of their textile ad leather productio, while i the late 1940s SMEs i the Veeto regio started to offshore productio to Romaia, give they had already experieced iteratioalisatio with its abudat use of Sloveia labour. I both cases, the mai reaso for delocalisatio was to reduce costs. Ideed, SMEs started icreasigly to offshore the simplest ad more labour-itesive phases of their productio to foreig coutries, while the desig, quality cotrol ad trade mark were kept i the Italia uits i order ot to damage the label s public image. I fact, SMEs i Marche ad Tuscay off-shored part of their low ad medium-level productio, while maitaiig their elite productio i Italy. However, SMEs i Veeto off-shored all their productio phases to Romaia. Noetheless, i geeral, it ca be said that 90% of SMEs delocalisatio ivolve labour-itesive, low-ed productive phases (Giusti, 2007). Ayway, due to their small size ad cosequet difficulty i attractig fiacig ad i fidig the ecessary iformatio o legislatio ad bureaucratic processes, Italia SMEs have difficulties i implemetig processes of delocalisatio ad offshorig, ad therefore do ot use these strategies much. This emerges also from the results of the CSC-Demos ad Pi survey (Corò ad Gurisatti, 2011) as 70% of eterprises declared that their trade relatios with foreig markets were limited to the sale of goods, with 25% sayig they buy itermediate goods ad raw materials from foreig markets. Oly 11.8% of the eterprises i the sample said they had created commercial uits abroad, while oly 7.2% said they had created productio uits. I fact oly oe quarter of eterprises i the sample (with more tha 50 employees) said they had a commercial uit abroad, while oly oe sixth had productio uits abroad. Moreover, fewer tha 10% of eterprises said they had implemeted delocalisatio processes ad 70% said they would ot cosider it. Bakruptcy/closure Whe profits start to fall ad eterprises are i difficulty, compaies might be left with o other optio but to close dow or, if uable to repay creditors, to declare bakruptcy. 6 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

9 Restructurig i SMEs: Italy Data i the Cerved Group archives (Cerved, 2012) show that, after a declie i the rate of bakruptcies i 2006 ad 2007, due to a reform of the bakruptcy procedures that excluded a sigificat umber of micro eterprises from the provisios of the procedure, the ecoomic crisis resulted i a cotiued ad prologed icrease i the umber of bakruptcies. Betwee 2009 ad 2011 almost 33,000 eterprises, of all class sizes, were declared bakrupt. These eterprises employed over 300,000 workers. Betwee October ad December 2011, there were 3,500 ew applicatios for bakruptcy; 1.9% more tha those recorded i the fourth quarter of This represets the fifteeth cotiuous quarter i which bakruptcies icreased. I total, i 2011, there were over 12,000 bakruptcies, a icrease of 7.4% compared with the 11,000 bakruptcies recorded i 2010 (that i tur was 19.8% higher tha those bakruptcies recorded i 2009). I 2011 compared with the previous year, bakruptcies have icreased amog all limited liability SMEs. Bakruptcies have icreased by 2.5% i micro eterprises, by 3.5% i small eterprises ad by 6.6% i medium-sized eterprises. Data for 2011 show that the use of Cocordato Prevetivo, a agreemet betwee the etrepreeur ad creditors aimed at avoidig bakruptcy, decreased for all SMEs apart for those small eterprises with a turover of 2 millio to 10 millio, where it remaied stable (0.3%). I particular, the use of this istrumet amog micro eterprises decreased by 22.4% (Cerved group, 2012). I Jauary 2012 a ew law established a ew istrumet to support those micro eterprises ot regulated by the provisio of the bakruptcy law. These micro eterprises i difficulty are ow able to reach a similar agreemet with their creditors (PMI.it, 2012a). I terms of closures, data from the Movimprese database collected from the Chambers of Commerce Uiocamere (Miistero dello Sviluppo Ecoomico, 2011) show that i the first semester of 2011 there have bee almost 232,000 ew eterprises startig up, almost 30,000 more tha the 202,559 eterprises that ceased to exist. It is also iterestig to ote that the umber of those eterprises that closed, although showig a marked icreased betwee 2006 ad 2007, remaied stable ad actually decreased slightly betwee 2007 ad 2010, although it icreased slightly oce more i Table 3: Growth ad mortality of Italia eterprises, by year Year Registered eterprises* New eterprises Ceased to exist Net ,125, , ,171 40, ,123, , ,665 26, ,104, , ,124 15, ,085, , ,948-2, ,109, , ,360 31, ** 6,119, , ,559 29,321 * It must be uderlied that the defiitio of eterprise adopted by Uiocamere is differet from the defiitio adopted by ISTAT ad for this reaso Uiocamere records about six millio eterprises i 2011 agaist 4.3 millio eterprises recorded by ISTAT i the same year. ** data at 30 Jue,2011 Source: Miistero dello Sviluppo Ecoomico, 2011 However, there are sigs of difficulties for artisa SMEs, as i the first semester of 2011, there were 4,000 fewer ew eterprises tha the umber of those that closed. Nevertheless, it is importat to otice that while, oce agai, the umber of eterprises that ceased to exist remaied quite stable at the peak of the crisis ( ), the umber of closures has decreased dramatically sice 2010 ad resumed pre-crisis values by O the other had, sice the oset of the recessio i 2007, the umber of ew artisa eterprises decreased dramatically, implyig that the difficulties are due to a decreasig umber of artisa start-ups rather tha to the mortality of existig eterprises. Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

10 Restructurig i SMEs: Italy Table 4: Growth ad mortality of Italia artisa eterprises, by year Year Registered eterprises* New eterprises Ceased to exist Net ,483,957 67,831 68, ,494,517 78,019 74,017 4, ,496,645 71,365 74,095-2, ,478,224 61,160 75,692-14, ,470,942 62,316 70,331-8, ** 1,464,322 64,292 68,493-4,201 * It must be uderlied that the defiitio of eterprise adopted by Uiocamere is differet from the defiitio adopted by ISTAT ad for this reaso Uiocamere records about 6 millio eterprises i 2011 agaist 4.3 millio eterprises recorded by ISTAT i the same year. ** data at 30 Jue, 2011 Source: Miistero dello Sviluppo Ecoomico, 2011 It is also importat to uderlie that the Movimprese database, compiled ad maaged by Uiocamere, collects the details of registered ad closed eterprises by sector ad geographical distributio, regardless of their size. However, give the high promiece of micro, small ad medium-sized eterprises i the Italia system, these data ca be a good idicator for micro eterprise ad SME developmets. Mergers ad acquisitios Merger ad acquisitios are ways of restructurig, both for expasio, as they eable eterprises to grow, eve with a lack of liquidity, ad for compaies i crisis, as they allow a more ratioal use of facilities ad as a result a better distributio of fixed costs. There is ot much literature o the relevace of mergers ad acquisitios for SMEs as they seem to be used more by larger eterprises, especially the acquisitio of foreig compaies. Results from Cofidustria s focus group study (Arrighetti et al, 2011) show several iterestig comparisos. Oly 6.2 % of SMEs with fewer tha 50 employees ad 14.8% of SMEs with employees have acquired foreig compaies operatig i the same or similar sector (compared with 46% of larger eterprises). Oly 11.1% of SMEs with fewer tha 50 employees ad 19% of SMEs with employees have acquired a Italia compay operatig i the same or similar sector, compared with 27% of larger eterprises. Oly 14.8% of SMEs with fewer tha 50 employees ad 10.6% of SMEs with employees have established a partership with other Italia compaies, compared with 15% of larger eterprises. Oly 12.3% of SMEs with fewer tha 50 employees ad 14.8% of SMEs employig employees have established parterships with foreig compaies, compared with 28% of larger eterprises. Most of the literature o the topic seems focused o joit vetures ad aggregatios of activities or projects, especially as a growig strategy i iteratioalisatio, rather tha o firms mergers/acquisitios. 8 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

11 Restructurig i SMEs: Italy Iteral restructurig As already discussed, give the promiece of the Italia system of social shock absorbers i the maagemet of the restructurig process, iteral restructurig appears to be the first strategy i cases of restructurig ot characterised by busiess growth. I fact, by iterally restructurig, eterprises ca try to reduce productio ad workforce costs, while maitaiig their workforce. The curret ecoomic crisis has hit Italia SMEs hard. Betwee 2007 ad 2009 their turover decreased by 12%, ad despite a improvemet i 2010 (+4.4% for medium-sized eterprises), their turover is still at 2007 levels. Micro ad small eterprises were the hardest hit. As a result, i order to compesate for the loss of reveue, SMEs implemeted restructurig processes aimed at reducig costs icludig labour costs via iteral restructurig (Romao ad Schivardi, 2011). I order to facilitate eterprises eed to restructure, the Italia system provides for social shock absorbers based o a wage guaratee fud (Cassa Itegrazioe Guadagi, CIG), which allows eterprises facig difficulties to reduce temporarily the umber of worked hours, while preservig employmet umbers. Employees i CIG receive a wage supplemet for the o-worked hours. CIG, the mai istrumet available, is maaged by the Natioal Social Security Istitute (INPS) ad maily used by eterprises with more tha 15 employees i the maufacturig ad costructio sectors. The system operates two differet schemes: the ordiary wage supplemet (Cassa Itegrazioe Guadagi Ordiaria, CIGO) ad the extraordiary wage supplemet (CIGS), the latter specifically aimed at eterprise restructurig, with the alterative of the solidarity cotract (Cotratto di Solidarietà). A secod system aims at maitaiig jobs i the small busiesses ad craft sectors, which do ot have access to the CIG system. These bilateral bodies (eti bilaterali), joitly maaged by social parters, pay specific subsidies, as a itegratio to the uemploymet beefit, to workers i the evet of workig hours reductio or suspesio, with the cotributio of the Employmet Fud maaged by the Italia Miistry of Labour ad Social Policies (Salvatore, 2010). The CIG proved to be a very effective tool i terms of meetig the eeds of compaies facig difficulties, as it eables compaies to udertake restructurig while retaiig jobs, at least i the short ru. Data from ISTAT show that the use of CIG has differed quite otably for firm size, ad hours of CIG have icreased more rapidly i larger eterprises (500+ employees) tha i smaller eterprises ( employees). I particular, large idustrial eterprises reached a peak of 116 hours of CIG for 1,000 hours worked i the secod trimester of 2009, while i the secod trimester of 2010 the value wet dow to 80 hours of CIG for 1,000 worked hours. Smaller idustrial eterprises implemeted a more gradual use of the CIG up util ed of 2009 (facilitated also from the extesio of applicability of the CIG, especially of CIG i derogatio, CIGD), reachig a level of 80 hours of CIG for 1,000 hours worked by the last quarter of By the ed of 2009, the use of CIG started to decrease ad by the ed of 2010 it stabilised at a level of 50 hours of CIG for 1,000 worked hours. CIG is geerally less used i the service sector ad, up to the third quarter of 2008, o average oly two hours of CIG for every 1,000 hours worked were used. However, by ed of 2008, the use of CIG i the service sector started to icrease, although this stabilised i The icidece of CIG icreased firstly i large eterprises: from a average of two hours of CIG for 1,000 worked hours, by the third quarter of 2008, to eight hours of CIG i 2009 ad Smaller eterprises resorted to CIG more gradually but, due to the extesio of CIGD, implemeted i the secod half of 2009, smaller eterprises resorted i 2010 to usig more hours of CIG tha their larger couterparts (Istat, 2011a). Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

12 Restructurig i SMEs: Italy Busiess expasio Although restructurig processes have bee traditioally associated with job losses, restructurig, as uderstood i this project, ca also have a positive aspects ad result i busiess expasio. Results from Cofidustria s focus group study (Arrighetti et al, 2011) outlie that the large majority of SMEs have a strog desire for growth as they believe it is crucial for: obtaiig more resources for research ad developmet ad iovatio; acquirig a stroger presece i foreig markets. Growth ad chage are particularly ecessary for micro ad small eterprises with 32.1% of them statig that it was ecessary for their survival, ad 18.5% of them statig that it was ecessary i the log-term i order to guaratee their competitiveess. Moreover, 26.1% of medium-sized eterprises ( employees) declared that growth was ecessary for their survival, while 31.7% said it was ecessary i the log term i order to guaratee competitiveess. These results are cosistet with those draw from the CSC-Demos ad Pi survey (Nardozzi ad Paolazzi, 2011). Here, it clearly emerged that all eterprises uderstood the added value of growig. This was to: icrease productivity (53.9%); reach ecoomies of scale to be able to ivest cosistetly i research ad developmet (65.8%); to have greater presece i foreig markets (62.2%); to cotrol ad maage the markets i a more efficiet way through commercial etworks (67.5%). Moreover, oly 13.5% of the SMEs i the sample said they were happy with their size. A study by Mediobaca Uiocamere (2011) showed that there is a very high umber of medium-sized eterprises 2 that icrease or decrease their size. Some 20% of eterprises i Italy are dyamic (the umber of those expadig betwee 2001 ad 2008). Eve if there are fewer of these eterprises tha stable eterprises (50% of the sample) or those that dowsize, they still cotribute to the creatio of added value ad ew employmet, which compesate for the losses of static ad dimiishig eterprises. Furthermore, there is a greater proportio of dyamic eterprises amog small eterprises. Accordig to the Mediobaca Uiocamere study, the factors cotributig to a icrease i size are: iovatio i terms of products ad processes; stregtheig ad moderisatio of the goverace system (separatig the shareholders ad the maagemet); presece i iteratioal markets. Furthermore, it seems that dyamic eterprises are youger: they have, o average, bee operatig for fewer tha seve years, ad they have a CEO who is youger tha As already metioed here it is importat to uderlie that cotrary to the EU defiitio of SMEs, i the Mediobaca Uiocamere study medium-sized eterprises are those eterprises employig betwee 50 ad 499 employees. 10 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

13 Restructurig i SMEs: Italy These results are cosistet with those reported i Barba Navaretti et al (2011). The employers orgaisatio Cofidustria, usig iformatio from Bureau va Dijk, a publisher of compay iformatio ad busiess itelligece (which had collated a sample of 14,911 Europea maufacturig eterprises i seve Europea coutries 3, from the Efige ad Amadeus datasets) estimated the tred of these eterprises i terms of size variatio for the years Eterprises were thus grouped ito six size classes: employees; employees; employees; employees; employees; 250 employees or more. As a result, those eterprises which wet ito the ext size class are called upsizers, those which stayed i the same class were called persistet ad those which fell ito a lower class were called dowsizers. Results of these estimates outlie that, i Italy betwee 2001 ad 2008, 44% of eterprises employig betwee 16 ad 249 employees were dowsizers, compared with a average of 25% i the UK, Spai ad Frace. This is observed for all Italia eterprises i the sample, apart from those eterprises employig betwee 10 ad15 employees, which maily seem to be persistet (70%), although 30% of them were upsizers. Almost 50% of those eterprises with employees were dowsizers i the years cosidered, ad oly 10% of them were recorded as upsizers. Furthermore, 20% of eterprises with employees were upsizers, while those eterprises with ad employees seem to be maily persistet (over 50% i both cases), ad the percetage of those eterprises icreasig i size is less tha 10% for both. These results are iterestig sice, i literature, it is ofte argued that growth is associated with ivestmets i activities with high fixed costs, which is difficult for small eterprises to implemet, while data here show that the highest percetage of upsizig eterprises i the years cosidered was reported for SMEs with employees, which traditioally are regarded as havig fewer resources to attract fiace. Cosiderig employmet levels, a total of 17,000 ew jobs were created amog all Europea eterprises betwee 2001 ad 2008; of these 4,100 ew jobs were created by Italia eterprises. Eve though it might be obvious that busiess expasio creates ew jobs, oe must cosider that eve those eterprises remaiig i the same size category ca still cotribute to the aggregated umber of ew jobs created. 4 Moreover, it ca be iterestig to aalyse if, ad to what extet, the creatio of ew jobs ca offset the destructio of jobs due to dowsizig eterprises. Cosiderig those eterprises with employees, oce agai the highest cotributio to employmet growth comes from upsizig eterprises (10%), while dowsizers ad, to a lesser extet, persistet eterprises destroy jobs by 15% ad 2.5% respectively. Cosiderig also large eterprises (250+ employees) it ca be observed that while the highest cotributio to employmet growth is still give by upsizig eterprises (11%), persistet eterprises also cotribute substatially to the creatio of ew jobs (by about 7.5%). This implies that ew jobs 3 4 Italy, Frace, Spai, UK, Germay, Hugary, Austria. Here it must be stressed that also the opposite ca hold true. Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

14 Restructurig i SMEs: Italy are created i persistet eterprises oly whe these are large (250+ employees). Ideed, i amog Italia SMEs ew jobs were created oly by upsizig eterprises ad those ew jobs were ot eough to offset the egative impact o employmet levels of persistet ad dowsizer eterprises. From a ecoometrical aalysis the authors were able to show that dyamic eterprises were substatially differet from the other types of eterprises as they: are youger by about 30%; have a higher labour productivity (20%); pay o average higher wages (10%); have a more complex goverace; their CEOs are youger; have implemeted iovatio i products ad processes; are preset o several foreig markets. The CSC-Demos ad Pi survey (Corò ad Gurisatti, 2011) furthermore highlights how may efforts i busiess expasio have bee chaelled through iteratioalisatio processes. Amog the sample of 508 maufacturig SMEs associated with Cofidustria: 32.6% of the total value of productio seems to be geerated from sales o iteratioal markets; 18% is gaied from sales o regioal markets withi Italy; almost 50% of the turover seems to be geerated from atioal sales. Noetheless, iteratioalisatio does ot deped oly o firm size. Ideed it is iterestig to ote that the latest geeratio of etrepreeurs (those aged uder 30) is more likely to ope a commercial uit abroad (15.3%) ad to outsource productio to foreig suppliers (29.4%) tha the average. I terms of turover by sector, 50.6% of turover i 2011 for Meccatroica was achieved abroad, while for made i Italy ad chemical sectors it was at about 37%. I particular, SMEs argued that the improvemet i the turover origiatig from iteratioal activities was maily due to: a icrease i the demad (64.8%); better quality ad wider rage of products (30.4%); access to ew markets (22%); more competitive prices (17.6%); better kowledge of market opportuities (11%). The majority of SMEs with iteratioal activities maitaied stable employmet levels (also helped by the Italia social shock absorbers), while 21.6% of those SMEs decreased their employmet ad 16.1% icreased their employmet levels (Istituto Tagliacare, 2011). 12 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

15 Drivers of restructurig The mai drivers for restructurig seem to be ot oly the survival of the firm but also a desire for growth, especially i terms of icreased turover. I terms of their specific objectives, the results of Cofidustria s focus group study (Arrighetti et al, 2011) outlied that the mai itermediate objectives of the sampled SMEs that had successfully restructured were: productio diversificatio (42% micro ad small eterprises ad 55.6% medium-sized eterprises); expasio o foreig markets (22.2% micro ad small eterprises ad 33.1% medium-sized eterprises); improve the quality of their products (32.1% micro ad small eterprises ad 32.4% medium-sized eterprises); marketig ad emphasis o the trademark (24.7% micro ad small, eterprises ad 28.7% medium-sized eterprises); upgrade i productio upgradig (25.9% micro ad small eterprises ad 33.8% medium-sized eterprises). However, i terms of fial objectives: 49.4% of small eterprises ad 49.3% of medium-sized eterprises said they were drive by the desire to expad their turover; 14.8% of small eterprises ad 23.9% of medium-sized eterprises aimed at icreasig their added value ad productivity; 18.5% of small eterprises ad 14.1% of medium-sized eterprises were lookig to improve their profitability; 3.7% of small eterprises ad 8.5% of medium-sized eterprises were lookig to acquire a larger market share. It is also importat to uderlie the poit made i the busiess expasio sectio that, whe asked to outlie the mai reasos leadig to growth: 32.1% of micro ad small eterprises ad 26.1% of medium-sized eterprises i the sample declared that chage was deemed ecessary for the survival of the eterprise; 18.5% of micro ad small eterprises ad 31.7% medium-sized eterprises declared that eve if chage was ot ecessary i the short term, it would have bee ecessary i the log term; 24.7% of micro ad small eterprises ad 28.2% of medium-sized eterprises said that chage resulted from their desire for growth (Arrighetti et al, 2011). As regards those SMEs egaged i activities i foreig markets, SMEs ivolved i iteratioalisatio seem to be maily drive by the desire to: access strategic markets (35%); reach efficiecy i market distributio (27.6%); obtai raw materials more cheaply (17.6%); cut costs ad bureaucracy (15.1%). Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

16 Restructurig i SMEs: Italy While 27.9% of SMEs said the reaso for their delocalisatio was lower costs, 22.1% of offshorig SMEs said they were seekig ot oly lower productio costs, but also lower costs due to bureaucracy. I fact, 23.3% of the maufacturig SMEs i the sample declared that apart from those coutries offerig competitive costs, they chose to delocalise to solid ad structured markets where there is a high quality supply, such as North ad Cetral America (Istituto Tagliacare, 2011). 14 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

17 Distictive characteristics of restructurig i SMEs Aticipatio, plaig ad preparatio of restructurig evet Restructurig processes ca happe at various phases of a eterprise s life. They sigal the eed for chage ad if this chage is aticipated, plaed ad properly maaged, they ca also result i the stregtheig of the eterprise. A well-plaed ad maaged restructurig evet may result i a improvemet of the skills of the members of the orgaisatio ad i the itroductio of iovative processes ad outputs. However, there is limited research o aticipatio of restructurig i SMEs, ad literature suggests that restructurig is ofte implemeted i a uplaed ad uaticipated maer. I particular, literature suggests that i restructurig, which egatively affects employmet levels, etrepreeurs ofte do ot uderstad the symptoms of chagig situatios, ofte oly ackowledgig them whe it is too late. This is also due to the lack of diagostic tools; crises are ofte sigalled by phases of declie ad, if diagosed i time, the degeerative process ca be stopped ad restructurig ca ideed represet a opportuity for iovatio, progress ad growth. However, too ofte crises happe, ot because they are ievitable, but because eterprises do ot heed the warig sigs. This is the reaso why much crisis maagemet literature suggests developig, withi firms, a culture of chage aimed at facig crisis, ot as a extraordiary evet but rather as a key elemet of strategic plaig (Arcari, 2004). Ways of aticipatig restructurig are also closely liked with moitorig ad idetifyig structural shifts, particularly with the developmet of ew competeces ad skills, but also iovatio i terms of techology, as well as orgaisatioal iovatio. However, give the relatively small size of SMEs ad the extremely high icidece i Italy of micro eterprises (1 9 employees) it must be highlighted that SMEs ot oly struggle i fidig available resources to implemet iovative processes ad techologies, but are also less likely to have a proper Huma Resources departmet, a writte HR strategy or a clear strategy for staff developmet. However, these results should ot be misiterpreted. Ideed from Cofidustria s focus group study it emerges that SMEs recogise the importace of skills developmet. The survey shows that some competeces ad skills seem to have a favourable effect o restructurig. I particular, accordig to the respodets, these were: techological competeces (24.7% of micro ad small eterprises ad 24.6% of medium-sized eterprises); huma capital skills ad competeces (12.3% of micro ad small eterprises, ad 13.4% of medium-sized eterprises); orgaisatio of productio (8.6% of micro ad small eterprises ad 9.9% of medium-sized eterprises) (Arrighetti et al, 2011). Table 5 clearly shows that the amout of firms offerig traiig to their staff icreases with their size. I geeral, 84.9% of large firms (500+ employees) offered traiig courses, either iteral or exteral, to their staff i 2010, compared with oly 29.4% of micro eterprises, ad 45.2% of small eterprises. The fact that 70% of medium-sized eterprises offered traiig should ot be surprisig as, i Italia terms, they are already cosidered as big eterprises, ad they ted to operate i much the same way. It is iterestig to highlight, however, that the share of traiig offered by the public utilities sector is also cosiderably high for micro busiesses (42%) ad small oes (62.1%). Notably high shares are also idetified i the costructio sector (35.1% of micro busiesses ad 53.8% of small oes) (Isfol, 2012). Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

18 Restructurig i SMEs: Italy Table 5: Eterprises offerig traiig courses to staff i 2010 (%) Eterprise size Sector Total Idustry Strict idustry Public utilities Costructio Services Total Sources: Uiocamere-Miistero del Lavoro, Sistema Iformativo Excelsior, 2011, ISFOL, From Table 6 we ca see that the majority of traiig is aimed at improvig ad updatig skills o curret tasks ad resposibilities (84.3%), rather tha o the acquisitio of skills for ew tasks ad resposibilities (10.1%). This is particularly relevat for SMEs, as Table 7 shows over that 80% of all SMEs that offered some sort of traiig to their staff i 2010, have offered traiig aimed at improvig ad updatig competeces ad skills o curret tasks ad resposibilities. Table 6: Objectives of the traiig by sector of the eterprise i 2010 (%) Sector No. of firms offerig traiig (% of total) Trai ew recruits Aims (%) Traiig o curret tasks or resposibilities Sources: Uiocamere Miistero del Lavoro, Sistema Iformativo Excelsior, 2011, ISFOL, Traiig for ew tasks or resposibilities Idustry Strict idustry Public utilities Costructio Services Total Table 7: Objectives of the traiig by size of the eterprise i 2010 (%) Size No. of firms offerig traiig (% of total) Trai ew recruits Aims (%) Traiig o curret tasks or resposibilities Sources: Uiocamere Miistero del Lavoro, Sistema Iformativo Excelsior, 2011, ISFOL, Traiig for ew tasks or resposibilities Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

19 Restructurig i SMEs: Italy Furthermore, the report GreeItaly (Uiocamere-Symbola, 2011) says that as a respose to the ecoomic crisis, more ad more Italia firms, ad particularly SMEs, have bee tryig to improve their competitiveess by ivestig i iovatio. I Italy, i 2010, 30% of SMEs ivested i gree products ad gree techologies, with 57.5% of SMEs doig this i (ISFOL, 2012). This tred is also cofirmed i the Demos ad Pi study by Corò ad Gurisatti (2011) where 72.3% of surveyed SMEs declared that evirometal issues were a opportuity for busiess expasio ad iovatio, rather tha a costrait to growth. I particular, as Figure 1 shows, the share of SMEs with employees that ivested i gree products ad techologies icreased sharply betwee 2010 ad 2011, from about 30% i 2010 to over 55% i Figure 1: Share of maufacturig SMEs ivestig i gree techologies (%) employees employees Total SMEs Source: Uiocamere-Symbola, Maagig restructurig The majority of restructurig processes i Italy are maaged through the use of social shock absorbers, the collective dismissals legislatio ad the mobility procedure. The mai istrumet available is a system based o a wage supplemet, the wage guaratee fud (Cassa Itegrazioe Guadagi, CIG) maaged by the Natioal Social Security Istitute (INPS) ad maily used by medium-sized ad large busiesses (i Italia terms, those with more tha 15 employees) i the maufacturig ad costructio sectors. Withi the system there are two differet schemes: the ordiary wage supplemet (CIGO) ad the extraordiary wage supplemet (CIGS), with the alterative of solidarity cotract (Cotratto di Solidarietà, CS). A secod system aims at maitaiig jobs i the small busiesses ad craft sectors, which do ot have access to the CIG system. These bilateral bodies joitly maaged by social parters, pay specific subsidies, as part of uemploymet beefit, to workers if their hours are reduced or suspeded, with the cotributio of the Employmet Fud maaged by the Italia Miistry of Labour ad Social Policies. The CIG is the primary itervetio desiged to support workers affected by reduced workig time ad temporary suspesio of work. Established i 1947, the CIG plays a key role i the Italia social shock absorber system. It was created after the Secod World War to protect the icome of idustrial workers whose jobs had bee destroyed durig the war. Its origi, therefore, lies i the safeguardig of workers icome from evets that are ot the employer s fault. Later, the measure was used to help durig temporary market shrikages ad was iteded as a meas of temporary 5 These data refer to the study carried out by Uiocamere-Symbola, 2011 ad it must be highlighted that for the purpose of this study, SMEs are cosidered as those eterprises employig betwee 20 ad 499 employees. Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

20 Restructurig i SMEs: Italy icome protectio for employees, i the expectatio that the compay ad its employees would soo resume ormal activity; this is owadays kow as CIG ordiaria (ordiary wage guaratee fud, CIGO). Ideed, CIGO is used whe a eterprise reduces or suspeds the activity of its etire workforce (or parts of it) due to temporary evets which are beyod its cotrol, such as temporary market difficulties, or seasoal weather coditios. CIGO ca be used for blue ad white collar workers (full-time ad part-time) i the idustrial sector regardless of the umber of employees the firms employs (the crafts sector is excluded), as well as i the costructio ad buildig supply sectors (subject to seasoal workig time reductio due to the weather) ad for workers o fixed-term cotract. It does ot cover, however, seior executives, temporary agecy workers, home workers ad appretices. CIGO pays a wage supplemet for o-worked hours equal to 80% of the salary the worker would have eared for full-time employmet. Workig time may be reduced by a maximum of 40 hours per week ad the wage supplemet caot be higher tha a mothly ceilig established aually by the Italia Statistics Istitute (ISTAT) based o the Cosumer Price Idex (CPI). The measure ca last for a maximum of 13 cosecutive weeks, with a possible ad exceptioal extesio to 12 moths (52 weeks ot ecessarily cosecutive); i the costructio ad buildig supply sectors the beefit ca be exceptioally exteded to 12 moths (52 weeks) oly i the evet of reductio of the workig time, but ot if workig time is reduced to zero hours worked per week (CIG zero hours). For the same productio uit, at the ed of the treatmet equal to 52 cosecutive weeks, it is possible to apply agai for the beefit, but oly after productio has resumed for at least 52 weeks. If the eterprise beefits from the measure for o-cosecutive periods, the maximum legth of the treatmet is for 52 weeks i two years. To face the crisis, INPS otice No. 58 of 20 April 2009 modified the criteria to calculate the periods durig which beefits are paid by CIGO: previously, each week i which there had bee eve a partial reductio of workig hours was couted as a whole week of CIGO, ow this calculatio is based o the days i which workig hours have bee reduced. I practice this results i a loger period of CIGO availability. I terms of fudig, the CIGO is based o a isurace mechaism ad it is etirely fiaced by cotributios paid by the employers, who pay a cotributio o all wages to the INPS i order to provide for CIGO. I periods whe CIGO is used, the employer pays the wage support to the employees, ad the recoups the amout from INPS. Sice its itroductio, the CIGO budget has always bee i surplus ad, eve durig the curret crisis, its budget is i balace. The CIGS is the mai measure aimed explicitly aimed at maagig restructurig. It was itroduced i 1968 to help firms avoid makig dismissals. CIGS caot be used for seior executives, temporary agecy workers, home workers or appretices. It applies to blue ad white collar workers (full-time ad part-time), employed for at least 90 days i the followig eterprises: eterprises i the idustrial, costructio ad buildig supply sectors, with more tha 15 workers; eterprises i the commerce sector with more tha 50 employees; publishig compaies with ay umber of employees; eterprises i the craft sector with more tha15 employees ad complyig with Law 223/91; eterprises i the restaurat ad caterig sector with more tha 15 employees, oly if the cotractig eterprise is usig CIGS; eterprises providig cleaig services oly if the cotractig eterprise is usig CIGS; service eterprises with more tha 15 employees; cooperatives with more tha 15 employees; travel agecies ad tour operators with more tha 50 employees; 18 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013