Restructuring in SMEs: The Netherlands

Transcription

1 Restructurig i SMEs: The Netherlads Click for cotets Wyattville Road, Loughlistow, Dubli 18, Irelad. - Tel: (+353 1) Fax: / [email protected] - 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 evets Coclusios ad policy issues Bibliography

3 Itroductio This first chapter sketches a geeral picture of small ad medium eterprises (SMEs) i the Netherlads. I the Netherlads (ad i Dutch literature), active eterprises with fewer tha 100 employers are ofte referred to as SMEs. This is the case throughout this report uless idicated otherwise. This sectio examies the geeral situatio i the Dutch busiess world but will also iclude a preview of developmets expected i At the ed of the sectio, a overview of the structure of the report is give. But we start off with some geeral backgroud iformatio regardig restructurig i the Netherlads. Backgroud A reorgaisatio is a situatio where a chage is implemeted i a orgaisatio. Restructurig is particularly commo i recessios. But, eve i times of ecoomic prosperity, there ca be reorgaisatios. Usually, the goal is to reduce costs ad/or improve efficiecy, especially i ecoomically challegig times. As well as impactig o employees, reorgaisatios ca also affect the productio or service of a compay. But reorgaisatio always comes with a price. Its costs are ot oly the time ad eergy of the ower / maagemet. Whe a restructurig evet does ot go as plaed or is badly plaed, there is also the egative publicity of disgrutled employees. Furthermore, there are also costs related to the hirig of private experts regardig reorgaisatios, or dismissal paymets whe a compay eeds to dowsize its workforce. There are also costs for employees. Research udertake by a Dutch trade uio (Warig, 2009) regardig the effects of reorgaisatio shows that 40% of workers have health-related problems (stress, fatigue, isomia) because of a restructurig evet where employees had to be let go. Moreover, it appears that workers who are well iformed about a reorgaisatio have few or o health problems, eve whe they hear bad ews. Employees who kow little (ad are ot ivolved i the process) are show to be ofte ill. This is a largely ukow effect of restructurig. A reorgaisatio for a small compay requires a differet approach tha for a big multiatioal. I a small busiess the lies betwee workplace ad maagemet are shorter. A employer kows employees o a more persoal level ad they are more likely to feel persoally resposible for the jobs of employees. A small compay is also less likely to have a full-time huma resource departmet, with the time ad expertise to develop a restructurig pla. A commo way for SMEs to restructure i the Netherlads is to file for bakruptcy ad cotiue busiess with a ew start-up. A major reaso for this route is that it is a easy way to dowsize the workforce. Of course, there are alterative routes. A importat oe is ot extedig fixed cotracts, or hirig temporary workers. Preset situatio About 780,000 eterprises are active i the market sector i the Netherlads. The majority of these eterprises (about 775,000) are SMEs (Table 1): 99% of busiess eterprises are SMEs. Oly about 5,000 compaies fall ito the category of large-scale busiesses. SMEs have a importat share of the total sales, gross value added ad employmet. I 2010, SMEs accouted for 43% of total busiess sales ad 49% of total value added. Approximately 3.6 millio persos worked i SMEs, more tha half of total busiess employmet. Productivity i the SME is 62,000 per FTE (full-time equivalet) lower tha productivity for the total busiess world. SMEs profits (after correctio for salaries of the self-employed) are lower tha the profits of large-scale eterprises. The SME ivestmets are almost the same amout as those of large-scale eterprises. 1 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

4 Restructurig i SMEs: The Netherlads Table 1: SME core details i compariso with the total market sector* i 2010 Compay characteristics SME Large-scale eterprises Total Number of Eterprises (x 1000) Sales (i billio euro) Of which: abroad home Gross value added, expressed at ivoice cost ( bill) Total umber of FTEs (x 1000) 2,835 1,960 4,795 Number of employees (x 1000) 3,560 2,434 5,994 Of which: self-employed Productivity (i 1,000)** Profit after correctio for salary for self-employed ( bill) Ivestmets ( bill) * The market sector cosists of the busiess world without govermet authorities, but also without mieral extractio, retal ad exploitatio of real estate ad the heath care sector. SMEs are compaies with fewer tha 100 employees. Large-scale eterprises employ 100 employees or more. ** The productivity is see as the gross added value, expressed at ivoice cost, per FTE Source: EIM, 2011 Forecast A forecast of the structure ad ecoomic developmet i the busiess world is give i the publicatio Kleischalig Odereme (Small-scale eterprises) 2011 (EIM, 2011), divided betwee size classes ad sectors. The magazie discusses developmets i markets, SME employmet, profitability ad ivestmets. Other subjects dealt with are the icome developmets of etrepreeurs ad the fiacig of SMEs. Table 2 shows a overview of importat SME performace characteristics, ad forecast chages for 2011 ad SME sales are predicted to icrease by 1.75% i 2011 due to the growth i home demad ad world trade. The path to substatial recovery started with the modest sales growth of 0.25% i 2010 after the 5.75% declie i 2009 (ot show i table 2). Wholesale busiess, idustry ad busiess services are expected to realise the strogest growth i The massive pich i costructio is expected to come to a ed i Retail trade ad hotel ad caterig could grow a little i 2011, although cosumers remai reticet due to dimiishig spedig power. A growth i SME sales of 1.75% is also expected i Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

5 Restructurig i SMEs: The Netherlads Table 2: SME core details i the total market sector*, Level (i billio euro) Volume chage i respect to previous year i % Total market sector Turover Sales Of which: Foreig sales Home sales Gross value added Average pay Productivity (i 1,000) * The market sector cosists of the busiess world without govermet authorities, but also without mieral extractio, retal ad exploitatio of real estate ad the healthcare sector. SMEs are compaies with fewer tha 100 employees. Large-scale eterprises cosist of 100 employees or more. Source: EIM, 2011 Willigess to ivest decreased strogly amog SME etrepreeurs i 2009 as a result of the credit crisis (EIM, 2011). I 2010, willigess to ivest icreased slightly, ad i 2011, willigess to ivest was expressed by 66% of the SMEs, similar to the level i ecoomically good years, whe the percetage of willigess to ivest is aroud 70%. I 2010, ivestmet i SMEs dropped by 1.25%. Ivestmet i SMEs was expected to grow by 3.75% i 2011 ad a further 4% i Structure of the report First of all, it is importat to metio that Dutch studies ofte use differet SME size defiitios. Most studies treat SMEs as compaies with fewer tha 100 employees, but some use a defiitio of fewer tha 250 employees. I this report, the 100 employee defiitio is adopted, uless metioed otherwise. Sectio two provides a overview of differet types of restructurig for SMEs based o the Europea Restructurig Moitor (ERM) 1 categories. These categories are: relocatio, outsourcig, offshorig/delocalisatio, bakruptcy/closure, merger/acquisitio, iteral restructurig ad busiess expasio. Dutch studies vary i their coverage of the differet types of restructurig. Sectio three deals with the drivers of restructurig, ad elaborates o what is kow about motives for restructurig. Sectio four discusses the possible distictive characteristics of restructurig i SMEs. This sectio deals with subjects like the aticipatio, plaig ad preparatio of restructurig evets, how restructurig is maaged ad the actors ivolved. The mai challeges ad costraits facig SMEs i restructurig are discussed i sectio five Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

6 Restructurig i SMEs: The Netherlads Sectio six deals with the subject of busiess support from public ad private sources. This sectio elaborates o the available policy support ad demad for public support from firms ad/or employees. Sectio seve gives a outlie of the outcome of the restructurig evets. This sectio covers available iformatio about the orgaisatioal ad employmet effects of reorgaisatios. The fial sectio provides the most relevat coclusios ad discusses policy issues. This also icludes iformatio about gaps i the literature ad the limitatios of available data sources. Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

7 Relevace of differet types of restructurig for SMEs This sectio deals with the differet types of restructurig, ad what is kow for SMEs about the differet types. A busiess ca restructure i various ways. The followig types of restructurig fall withi the scope of this review. Relocatio: whe the activity stays withi the same compay but is relocated to aother locatio withi the same coutry. Outsourcig: whe the activity is subcotracted to aother compay. Offshorig/delocalisatio: whe the activity is relocated or outsourced outside of the coutry s borders. Bakruptcy/closure: whe a idustrial site is closed or a compay goes bakrupt for ecoomic reasos ot directly coected to relocatio or outsourcig. Merger/acquisitio: whe two compaies merge, or durig a acquisitio which the ivolves a iteral restructurig programme aimed at ratioalisig the orgaisatio by cuttig persoel. Iteral restructurig: whe the compay udertakes a restructurig pla which is ot liked to aother type of restructurig defied above ad is aimed at chagig the iteral orgaisatio of the compay. Busiess expasio: whe a compay exteds its busiess activities, hirig a ew workforce. These various types are discussed below. Relocatio With this type of restructurig, the activity stays withi the compay but is relocated to aother locatio withi the same coutry. With this kid of reorgaisatio it seems likely that some small compaies (with oly the etrepreeur as employee ) ru their busiess from their ow home. Relocatio would probably occur because the ower moves to aother house. There are o data available o this kid of relocatio. May relocatios take place i SMEs. I four years, half of SME compaies with employees have adapted their accommodatio by meas of expasio, refurbishmet or by relocatio (ING, 2008). Temporary adaptatio of busiess accommodatio is crucial for growth, accordig to ING. Good, moder accommodatio creates efficiecy advatages ad has a positive impact o logistics ad the productio process. Outsourcig Outsourcig refers to subcotractig of activities to aother compay, ad ca come about by various meas. There are o exact figures about the umber (or percetage) of SMEs that outsource certai activities. But a way i which outsourcig ca come about is because of lack of persoel, or ope vacacies. It is clear that (temporarily) ot fillig vacacies has cosequeces for the operatio of SMEs. A umber of etrepreeurs have foud solutios for difficulties i fillig vacacies by egagig agecy staff, subcotractig work ad alterig the strategy (Sel ad Gibcus, 2007) (Table 3). About a quarter of SME etrepreeurs (23%; the total uder actio 3 Subcotractig work ) subcotract work because of bottleecks i the executio of their activities. Subcotractig is ofte a solutio i costructio ad the trasport sector whe problems are experieced over vacacies. This is probably easier to realise i costructio ad the trasport sector because of the usual etworks ad the large umber of self-employed. 5 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

8 Restructurig i SMEs: The Netherlads Table 3: Actios by SME etrepreeurs to resolve the bottleecks caused by difficult-to-fill vacacies (% of SME etrepreeurs) 2 Sector Foodstuffs ad luxury food idustry Metal idustry Costructio Automotive sector Wholesale trade Retail trade Hotels ad caterig Trasport sector Fiacial establishmets Busiess services Other services Total = borrowig persoel, egagig employmet agecy 2 = headhutig persoel from other compaies 3 = subcotractig work 4 = adaptig compay strategy 5 = other 6 = problems have ot bee resolved 7 = do ot kow/ will ot say Source: EIM, 2007 Aother method of outsourcig is workig with other compaies. About oe i five SMEs worked with other compaies i 2004 (Sel, 2004). I additio, there is a small group of compaies, 8%, who would like to work together but do ot yet do so for oe reaso or aother. I most cases, collaboratios are i the field of productio. This is doe by subcotractig, providig additioal capacity or by implemetig complemetary actios. I additio, much work is doe together i the field of purchasig, product developmet ad marketig. Offshorig/delocalisatio Offshorig/delocalisatio is the relocatio or outsourcig of activities outside of the coutry s borders. Offshorig, or movig compay activities abroad, is ot a ew pheomeo. May productio activities have already bee relocated to low-wage coutries to achieve cost advatages. 2 This study does t provide totals, oly percetages. Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

9 Restructurig i SMEs: The Netherlads Various studies have bee carried out ito offshorig i recet years, may related to Dutch idustry (Gorter, Tag ad Toet, 2005). Some sketch a sombre picture: offshorig leads to a substatial relocatio of the capacity which is udoubtedly accompaied by job losses i the seder coutry. However, results vary substatially. A survey commissioed by MKB Nederlad (trade associatio for small ad medium eterprises, also metioed i Gorter, Tag ad Toet, 2005) metios the possibility of 6% of compaies relocatig productio capacity i the comig years (o data are available regardig the realisatio of these ambitios). O the other had, Bereschot expects about a quarter of idustrial jobs i the Brabat ad Limburg regios to disappear. The cosequeces for the ICT sector i geeral appear to be just as dramatic. Already, 16% of compaies have delocated productio abroad over the past umber of years ad aother 15% are cosiderig offshorig activities. The Offshorig Research Network shows that Dutch SMEs are also relocatig, or itedig to relocate, compay activities to easter Europe ad Chia (ORN, 2006). Whereas multiatioals place admiistrative ad IT fuctios offshore, SMEs choose offshorig for product developmet: aroud 45% of the iterviewed SMEs, as opposed to 22% of the multiatioals, did so. Nyerode ad the Vrije Uiversiteit show that eterprises with offshorig experiece durig the crisis have delocated activities abroad more ofte (ING, 2010). Coversely, compaies with little experiece i the crisis started to thik about the added value of offshorig. While large compaies were more ivolved i offshorig tha SMEs i the past, SMEs ow have more plas to relocate activities i the short term. Bakruptcy/closure Bakruptcy or closure refers to situatios ot directly coected to relocatio or outsourcig. The umber of bakruptcies i recet years ca be foud below (source: bakruptcy register of the Dutch courts). 2008: 14,835 bakruptcies 2009: 22,803 bakruptcies 2010: 26,097 bakruptcies 2011: 7,875 bakruptcies (Jauary April) There are o specific data available for the umber of SME bakruptcies. But because 99% of compaies i the Netherlads have fewer tha 100 employees (see Table 1), it is likely that most bakruptcies are amog SMEs. There is a risig umber of bakruptcies. The most likely explaatio is the ifluece of the ecoomic crisis i the Netherlads ad Europe. Volutary compay termiatios are ot icluded i the list above. May etrepreeurs close dow without beig made bakrupt because of the extremely difficult ecoomic climate. Bakruptcy ca also be liked to fraud. The impressio that fraud oly occurs i large compaies because may reowed fraud cases ivolve large compaies is ot true. Recet figures from the FIOD/ECD (Fiscal Iformatio ad Ivestigatio/Ecoomic Cotrol Service) suggest about 450 fraud cases are ivestigated every year. A small umber, about 25 50, ivolve large or quoted compaies. The other 400 cases ivolve SMEs ad allegatios ot oly of fiscal fraud but also forgery, embezzlemet ad theft. About oe-third of SME bakruptcies are the result of fraud. 7 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

10 Restructurig i SMEs: The Netherlads Merger/acquisitio There are several ways i which merger ad acquisitio ca come about. A etrepreeur ca take over aother compay. About 15,000 etrepreeurs put their compaies up for sale every year i the Netherlads (Teeffele, 2011). About 90% of compay take-overs ivolve SMEs with up to ie employees. Despite this high percetage, commercial parties ad the govermet focus maily o startig etrepreeurs. The umber of compaies available for take-over i the comig years will icrease due to the ageig populatio: 35% of Netherlads etrepreeurs are older tha 50. Takeovers play a importat ad costructive role i employmet, iovatio, productivity ad cotiuity. Lookig at the differeces ad similarities betwee take-over etrepreeurs, starters ad successors (withi family compaies), Teeffele (2011) ascertaied that take-over etrepreeurs were older ad had more maagemet experiece tha starters ad successors. Take-overs occur more frequetly i sectors with high startig costs ad etry thresholds (hotel ad caterig, agriculture, wholesale trade). The take-over market i the first half of 2011 could reasoably be called positive. But Dutch etrepreeurs ad ivestors did ot expect this situatio to cotiue i the secod half of the year, accordig to the Brookz Overame Barometer (Brookz Takeover Barometer), a survey of 237 etrepreeurs, advisors ad ivestors. Almost half of those iterviewed were optimistic about the umber of compaies comig up for sale: 44% expected that more compaies would be for sale i the secod half of 2011 tha i the previous six moths. O the other had 45% of those iterviewed thought there would be fewer take-overs i the last six moths of The deals that will go through were believed to have a lower average sales price (trasactio value) tha i the first half year accordig to almost two-thirds of those iterviewed. However, at the momet, deals are less easy to make. Iteral restructurig Iteral restructurig refers to chage that falls outside the categories previously metioed. It icludes iteral successio withi a family eterprise ad product/service diversificatio. There is o specific iformatio available about the exact umber of (these kids of) iteral restructurig i SMEs i the Netherlads. We do kow that a large portio of family busiesses have o itetio to sell or trasfer the compay i the future. About 11% idicate that the busiess is to be trasferred withi the ext five years (FBN Iteratioal, 2007). Of the compaies that are to be trasferred about two-thirds are supposedly to be trasferred to the ext geeratio ad a quarter to o-family members. The remaiig family busiesses did ot yet kow to whom the busiess would be trasferred. Iteral restructurig ca be realised i various further ways, ad improvig the iteral process is oe of them. Improvemet i operatioal processes is a very frequetly occurrig form of iteral restructurig i SMEs. From EIM data for 2010, it appears that almost half the SME eterprises (with fewer tha 100 employees) improved their operatioal process i the past three years (Table 4). But great differeces ca be see betwee sectors: 65% have improved operatioal processes i the chemical, rubber ad sythetic processig idustry, while oly 18% have doe so i the commuicatio sector. Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

11 Restructurig i SMEs: The Netherlads Table 4: % SME eterprises who have improved their iteral operatioal processes i the last three years (figures for 2010) Improvemets to iteral operatioal Sector processes i the last three years Commuicatio sector 18 Costructio 34 Retail trade 39 Automotive sector 40 Agriculture, forestry ad fishig 42 Other services 43 Trasport sector 44 Fiacial services 46 Hotels ad caterig 46 Wholesale trade 48 Foodstuffs ad luxury food idustry 49 Retal ad exploitatio of real estate 52 Busiess services 54 Metal idustry 55 Chemical, rubber ad sythetic processig idustry 65 Other services 43 Total 45 Source: EIM, 2011 Busiess expasio Busiess expasio icludes: expasio of curret premises, relocatio to larger premises, expasio of the umber of braches ad fusio ad take-over; hirig ew workers; ad focusig o ew groups of cliets ad/or markets. EIM carried out a survey i 2002 ito the success ad failure factors of expasio by SME compaies that could develop their opportuities further from a certai start or base positio (Mese, 2002). Fast-growig compaies ad re-starters are ofte compelled to relocate. Fast-growig compaies, i particular, play a large role i creatig ew jobs. What distiguishes fast-growig compaies from compaies that are ot growig fast? To aswer this questio, EIM carried out a survey i 2007 amog 500 SME compaies active for at least five years with persoel i the idustrial ad costructio ad trade ad services (icludig trasport) sectors (Sel ad Gibcus, 2007). A compay is cosidered to be fast-growig whe employmet icreases by at least 60% i a period of five years. The period was examied. Almost half of the SME compaies with persoel stated that the umber of employees had grow i the last five years. About 6% of the SME compaies i these sectors could be called fast-growig compaies. Ivestig abroad is also a type of busiess expasio. About half of SME compaies (51%) who ivest abroad choose to establish their ow compay or brach (Hessels ad Overweel, 2004). This occurs frequetly i idustrial ad tradig compaies. Approximately four-fifths of compaies ivestig i idustry ad half those ivestig i trade establish their ow compay or brach. SME compaies take over a foreig compay much less frequetly (9%) (Table 5). Participatios occur relatively ofte: 37% of ivestig compaies have a participatio i a foreig eterprise. Joit 9 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

12 Restructurig i SMEs: The Netherlads vetures are also started: 23% of cases cocer a joit veture with a Dutch ad/or foreig parter. A participatio or joit veture is possibly a step towards the complete take-over of a compay. Noticeably, SME compaies do ot appear to choose fusio with a foreig compay as a meas to expad (a fusio is the merger of two or more compaies ito a sigle compay). Table 5: Foreig ivestmets by the SME i types of ivestmet % of SME compaies that have ivested Types of ivestmet abroad i the last three years Establishmet of ow compay/brach abroad 51 Participatio i existig compay abroad 3 37 Joit veture with a Dutch or foreig parter 4 23 Take-over 9 Ivestmet betwee subsidiary ad paret compay 7 Fusio 0 Other 9 Source: Hessels & Overweel, For example by buyig a part of a compay via stocks. A joit veture is a busiess agreemet i which parties agree to develop, for a fiite time, a ew etity ad ew assets by cotributig equity. Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

13 Drivers of restructurig Much is reported about restructurig especially i ecoomically challegig times, but restructurig also occurs i times of ecoomic prosperity. The cocept of restructurig ofte etails (mass) dismissal, accordig to reports from various ews media. Motives for restructurig are ofte similar i SMEs ad large compaies. But, as broached i the previous sectio, there are ofte differeces i the various types of restructurig too. What is kow about the drivers of restructurig i SMEs is described below, but a problem with may studies is that they oly look at SMEs or oly at large eterprises. The ambitio to relocate ca be fuelled by dissatisfactio: 17% of Dutch SMEs are dissatisfied with their premises, ad 12% are ot satisfied with the locatio of the eterprise (Datuma, 2008). Too few parkig places ad poor accessibility are frequet complaits. This emerged from a ING Bak survey of 17,000 compaies with employees i Oe i five respodets felt that growth is curbed because of a lack of suitable accommodatio. The motivatio to subcotract work or tasks could origiate from various causes. Subcotractig work which is ot part of the core busiess is a importat motive. But a lack of persoel ca also be a importat motive for subcotractig. Subcotractig work is oe of the most importat solutios to compesate for the shortage of persoel i SMEs (EIM, 2007). Offshorig or delocalisatio of activities is becomig a icreasigly importat motive for restructurig. Research by the Offshorig Research Network (ORN), (ORN, 2006), shows that Dutch SMEs are delocatig, or itedig to delocate, activities to easter Europe ad Chia. Compared with multiatioals, which ofte choose offshorig for efficiecy reasos, SMEs adopt more strategic motives. SME eterprises fid a iteratioal strategy a importat motive for offshorig i about 70% of cases, as opposed to oly 33% of multiatioals (ORN, 2006). Access to ew markets is also stated by SME eterprises five times more ofte as motive for offshorig activities. Large compaies are more ivolved i offshorig tha SMEs (Nyerode, 2009). But the exact reaso for this differece, ad why (Dutch) orgaisatios start with offshorig or delocalisatio of activities is ot discussed i may studies. It seems likely that cost reductio or iteratioal ambitio play a very big role i the motivatio to start offshorig or delocalisatio. Take-overs ad fusios ca come about by various meas. About 90% of compay take-overs ivolve SME compaies with up to ie employees. For may SME etrepreeurs sellig their compay is a importat fiacial source for their pesio. Improvemet of the operatioal process is a frequetly occurrig motivatio for SME etrepreeurs to start iteral restructurig (EIM, 2010). 11 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

14 Distictive characteristics of restructurig i SMEs This sectio deals with possible distictive characteristics of restructurig i SMEs. It will look more closely at the aticipatio, plaig ad preparatio of restructurig evets, the maagig of the restructurig evet ad the actors ivolved. Aticipatio ad plaig of restructurig evets There are a lot of differet types of restructurig evets. It is importat for a compay to be well-prepared for situatios i which the orgaisatio is udergoig chage. This esures that whe eeded, plas are available for the restructurig evet. Not a lot is kow about SME plas made prior to the evet, but it seems likely that plas are oly made whe eeded. This ca be see i a EIM study i 2009 of compay plas for employee reductio (Wiubst et al, 2009). The study foud that about three-quarters of compaies have o plas (Table 6). The practices of SMEs ad large compaies differ, as might be expected. Larger compaies are more likely to have arragemets i place: 83% of small compaies, 65% of medium-sized compaies ad 46% of large compaies have made o plas (further specificatios regardig compay size ad the optios described i Table 6 are ot available). Large compaies more ofte set dow plas i formal documetatio. Oly 14% of compaies with plas also iclude a commuicatio pla detailig how employees will be iformed of dismissal procedures. So it is likely that SMEs start plaig whe the evet is immiet, ad more likely that SMEs do ot set everythig dow i (formal) documetatio. Table 6: Strategy pla ready or arragemets made for whe the umber of employees is to be reduced (percetage of all compaies, SMEs ad large) Strategy ad arragemets made Percetage Yes, have thought about it 7 Yes, discussed iterally, othig set dow i (formal) documetatio 7 Yes, discussed iterally, busy with the (formal) documetatio 3 Yes, discussed iterally ad set dow i (formal) documetatio 8 No strategy pla made 76 Total 100 Source: Wiubst et al, 2009 Maagig restructurig Little is kow about how SMEs maage restructurig evets. There is some iformatio available regardig the maagemet of restructurig where workforce reductios are likely. Part of restructurig is cocered with helpig employees to fid a ew job if they are threateed with uemploymet. Such activities ofte start with social plas agreed by uios ad employers. A survey from 2008 charted how may social plas 5 have bee agreed i the Netherlads sice 2004 ad which activities ad arragemets are icluded (De Kok et al, 2008). The developmets of the time ( ) were also mapped out. 5 A social pla is a collective scheme, which describes how a restructurig will proceed ad what has bee arraged for employees who lose their jobs. A social pla is ot legally required, but is madatory i may collective agreemets. Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

15 Restructurig i SMEs: The Netherlads Almost three-quarters of social plas came from large orgaisatios (100 or more employees). There are very few social plas from SMEs (with fewer tha 100 employees): the chace of a SME havig a social pla is less tha 1%. Explaatios for this might be that there is ofte less reaso to write a social pla i smaller orgaisatios (due to a lower risk of uemploymet); or because SMEs might set up social plas less frequetly at the momet employees are threateed with uemploymet. The secod explaatio appears to be more plausible tha the first (icidetally this has ot bee ivestigated further). Small compaies will formulate a social pla less frequetly, because: there are ofte fewer employees (as a result of which it could be more efficiet to orgaise mobility activities i aother way); small compaies are ivolved i slimmig-dow ad restructurig less ofte compared with some large compaies; they do ot have the relevat kowledge ad experiece required for settig up a social pla; they ofte have less fiacial headroom. Actors ivolved The (formal) parties ivolved deped partly o the maer of restructurig. A umber of specific situatios are described below. They cocer: dismissal; collective dismissal (ad the role of the works coucil ad trade uios); works coucil ad restructurig. These three situatios all are laid dow i law, so they must be followed by all employers, whatever their size, with the oly exceptio that a works coucil is oly madatory for employers with more tha 50 employees. There are also other types of actors, that do t have a legal (ad compulsory) status, like cosultats, family ad frieds. We discuss this at the ed of the chapter. Dismissal via the UWV WERKbedrijf ad the magistrate A dismissal procedure is a legal procedure aimed at (uilaterally) termiatig a employmet cotract by the employer. Two types of dismissal procedure are recogised: via the UWV WERKbedrijf (admiistrative office for the Employee Isurace Agecy) ad via the magistrate. I the UWV WERKbedrijf procedure, employers request permissio (from the UWV WERKbedrijf or the magistrate) to termiate the employmet cotract. Whe permissio is received, the employer must take the period of otice ito cosideratio. I the dismissal procedure via the magistrate, the employer (or employee) requests the magistrate to dissolve the employmet cotract. I 2007 about 55,000 employees were fired because of ecoomic reasos (Cetral Bureau of Statistics, 2012). There are three distict types of ecoomic dismissal reasos: dismissal via the UWV/magistrate, bakruptcy dismissal, ad collective dismissal. There is o specific figure available regardig the umber of dismissals i SMEs. The situatio described above refers to uilateral termiatio by the employer. Employer ad employee are of course free to make their ow (mutually agreed) arragemets whe they both wat to ed the employmet cotract. 13 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

16 Restructurig i SMEs: The Netherlads Collective dismissal (ad the role of the works coucil ad trade uios) The collective dismissal act is relevat whe 20 or more employees are dismissed at the same time. Employers must apply for a dismissal permit (from the UWV WERKbedrijf or the magistrate) followig trade uio ivolvemet ad cosultatio with the works coucil. Every compay i the Netherlads with 50 or more employees must orgaise a works coucil. It is the resposibility of the employer to give employees the opportuity to orgaise a works coucil. But this does t mea that all of the compaies with more tha 50 employees have a works coucil. This ca, for example, happe because the employees do t wat a works coucil. Table 7 shows the percetage of employers that have a works coucil. Table 7: Compliace percetage works coucil law ( Wet op de Oderemigsrade ) by size, 2008 Compay size Percetage % % % 200 or more 95% Total 71% Source: Visee ad Mevisse, 2009 Compaies with fewer tha 50 employees ca volutarily orgaise a works coucil, ad whe a majority of the staff asks for the establishmet of a works coucil, the employer is also obliged to let them form oe. Works coucils are represetative employee bodies who cosult with employers o behalf of employees about busiess policies, icludig collective dismissals. The size ad compositio may differ per compay. The works coucil has o role i idividual dismissal but it does i collective dismissal. The trade uios ofte use their right to draw up a social pla durig collective dismissal. The works coucil uses iformatio from the social pla to provide advice about the decisio behid the dismissal. Works coucils ad restructurig Whe a compay wishes to restructure ad has a works coucil, a request for advice has to be submitted to the coucil. There is o clear-cut lie regardig what kid of restructurig is subject to this rule, but ay decisio that (possibly) affects employees must be discussed with the works coucil. Whe formulatig the objectives ad layout of the advice, the works coucil must be guided by the most cocrete questios that employees would ask: Does this reorgaisatio really have to happe? If there are dismissals, why does it have to be me? Is there a arragemet to help me fid a ew job? If it has to be, ca it be as soo as possible? Whe the request for advice has bee received, the works coucil will first ivestigate the beefit ad the ecessity of the proposed restructurig. After discussios with the director, the works coucil must assess whether the proposed itervetios will resolve the problem ad whether there are better alteratives. After this phase, the works coucil ca map out the social cosequeces. What does the proposed measure mea to employmet, the fuctio cotet, the employmet situatio ad employmet coditios? These cosequeces must be icluded i a social pla. Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

17 Restructurig i SMEs: The Netherlads Other actors There is a wide variety of cosultats/advisors able to supply support services to SMEs, for example regardig taxes, busiess trasfers ad legislatio. These ca be public cosultats (available via the Chamber of Commerce, see sectio 5) ad private cosultats. There are o specific data available regardig the umber of SMEs that use a (public or private) cosultat durig a reorgaisatio. Furthermore, may employers are also members of a employers orgaisatio. Some orgaisatios provide help whe a busiess is plaig a restructurig evet. I coclusio, family ad frieds ca also help SME owers whe plaig or implemetig a restructurig evet. It is likely that family ad frieds play a larger role i (very) small busiesses, but there are o data available to substatiate this. 15 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

18 Mai challeges ad costraits facig SMEs i restructurig This sectio deals with the challeges ad costraits SMEs face i restructurig evets. There is a lack of specific iformatio regardig SMEs. Most literature idetifies geeral challeges ad costraits, rather tha focusig o SMEs specifically. First, we will deal with the problems regardig relocatio. A divisio exists betwee large ad small compaies regardig the locatios available (Datuma, 2008). Large compaies steal the most moder ew buildigs. SMEs are ofte left with atiquated buildigs, i poorly accessible locatios. Developers ad estate agets seem to be iterested i large-scale accommodatios built for big teats. It is less efficiet for them to deal with several smaller teats i a buildig tha a sigle large oe. But small compaies wat to be i a good positio too. Accommodatio is importat, partly for the image show to customers ad employees. Whe we look at offshorig ad delocalisatio, a problem ca be see with compaies that decide to retur relocated activities to the Netherlads (about 17% of the relocated activities are retured) (Nyerode, 2009). The mai challeges, that could t be overcome were that the costs were higher tha expected, it was more difficult to maage the tasks abroad ad the labour productivity was lower compared to the Netherlads. At the momet there is a slight decrease i the umber of mergers ad acquisitio. Deals are, at the momet, less easy to make. The Euro crisis ad the situatio i the fiacial markets are causig great ucertaity. More tha half of the etrepreeurs iterviewed (56%) see fiacig take-over as the most importat stumblig block for deals ot goig through (Brookz Takover Moitor). A large majority of those iterviewed thik that the fiacig climate i the Netherlads will become eve more difficult for SME take-overs i the comig period. A EIM survey (Mese, 2002) suggests that SME compaies watig to expad ofte meet problems. The greatest obstacles are rules ad legislatio. Objectios ad appeal procedures ca delay or eve halt plas. May etrepreeurs also experiece problems whe recruitig extra persoel ad acquirig the ecessary floor space. Furthermore, reorgaisatios ofte have a egative impact o employees. There is ofte a icreased workload ad job ucertaity ad a egative atmosphere i the workplace (Wiezer et al., 2011). A commo problem for SMEs is access to fiace. Baks ad (large) suppliers ofte refuse to offer credit. Cosequetly, SMEs lack moey which results i staff beig dismissed ad, i the worst case, bakruptcy. Baks (ad large cocers) ofte cosider SMEs risky. The followig argumets have bee put forward for this. SMEs: ofte deped o oe perso (cotiuity); have o access to the fiacial market due to closed structure; have lower solvecy (= fiacial resiliece) tha large compaies; deped greatly o baks ad suppliers for maitaiig liquidity. Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

19 Busiess support from public ad private sources This chapter examies the supply ad demad for public ad private support i respect of restructurig. The supply side of busiess support deals briefly with the restructurig support services available to SMEs. The demad side of busiess support refers to the eeds of small employers regardig support durig restructurig evets. Supply There are o public service providers who ca advise i all fields of restructurig. A umber of public orgaisatios ca provide advice ad iformatio i specific areas. First, chambers of commerce offer iformatio ad advice about the formal side of sellig a eterprise ad about compay trasfers. For this reaso, they have several types of advisors offerig a particular specialisatio (for example: lawyer, accoutat: trasfer specialist). Secod, the UWV WERKbedrijf offers support to employers about how to deal with surplus persoel. Employers ca direct employees threateed with uemploymet to the UWV Werkbedrijf service; it is the up to employees to cotact them. It is, however, ot clear to what extet SME etrepreeurs are aware of these opportuities ad/or make use of them. Surveys by EIM, RvB ad Cosult (2008) suggest that oly a small group of SME employers are aware of this. As well as public service provisio there is also the opportuity to egage private service providers to help with restructurig. Compaies ca use private legal orgaisatios to help with the legal part of a reorgaisatio. Additioally, employers (ad employees) ca make use of the structured mobility ad advice activities that have bee set up via (some of the) employers orgaisatios or via a regioal collaboratio of employers. I these collaboratio platforms, employers volutarily help each other by sharig vacacies, iformatio ad their experieces i restructurig evets. These platforms are sometimes supported with the help of public or private orgaisatios like employmet agecies ad muicipalities. There are a lot of differet types of these collaboratios, but ot all sectors ad regios have them. These platforms are ofte the result of a ambitio of (SME) employers who wat to collaborate, or because of the ambitios of a regioal govermet or a employer s orgaisatio that does ot wat to lose skilled employees withi their ow regio or brach. Demad It is likely that the support a SME desires is liked to the complexity of the restructurig evet ad the maagemet time ad expertise available. SME owers possess limited huma resources ad expertise to implemet a restructurig evet. This might especially be the case i offshorig/delocalisatio, iteratioal busiess expasio ad mergers because of the legal complexities. So, it is likely that SME owers eed more support i these situatios. But there is little published iformatio regardig employer demad for restructurig support services from public ad private sources. It appears there is a lack of familiarity with respect to public ad private support service provisio. A EIM survey shows that oly a small group of SME employers are familiar with the opportuities offered by the UWV WERKbedrijf (De Kok et al, 2008). It is, therefore, a questio of whether there is a demad shortage or a supply shortage. 17 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

20 Outcome of restructurig evets But what is the outcome of restructurig evets? The outcome ca be see as the impact or effect of restructurig activities o orgaisatios implemetig restructurig activities. What is kow about the outcome is largely described i previous sectios (for example, the umber of relocatios, bakruptcies, mergers etc.). But furthermore, Nyrerode (2009) shows that 17% of activities relocated abroad were retured to the Netherlads; that is amog all compaies, SMEs ad large oes. The reasos for this are: costs are higher tha expected; the difficulty of maagig tasks abroad; the lower labour productivity compared to the Netherlads. Compay take-overs play a importat ad costructive role i the ecoomy with regard to employmet, iovatio, productivity ad cotiuity. Take-overs have a prove better chace o the market tha starters: 96% of take-over etrepreeurs are still active after five years, as opposed to 50% of starters (Teeffele, 2011). Two-thirds of take-over etrepreeurs are successful i achievig icreases i turover, cliet base ad profitability. Furthermore, fewer tha half of Dutch SMEs (45%) have improved their iteral operatioal processes i the last three years (EIM, 2011). Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

21 Coclusios ad policy issues This sectio focuses o the key fidigs ad key policy issues. The highlights of the fidigs of this study are: About half of the SME compaies relocate withi a period of five years after start-up. A problem for SMEs is that large compaies steal the most moder ew buildigs. Almost a quarter of SME compaies that have difficulty fillig vacacies use subcotractig as a solutio to esure they are still able to perform the required activities. Multiatioals ofte choose offshorig for efficiecy reasos, but SMEs have more strategic motives. Multiatioals mostly choose offshorig for admiistrative ad IT fuctios; SMEs choose offshorig for product developmet. There is a growig umber of bakruptcies, most likely because of the ecoomic crisis i the Netherlads ad Europe. A third of all SME bakruptcies are the result of fraud. About 90% of compay take-overs ivolve SME compaies with up to ie employees. About 9% of the foreig ivestmets of Dutch SMEs ca be see as a take-over of a foreig compay. Fewer tha the half of Dutch SMEs (45%) have improved their iteral operatioal processes i the last three years. SMEs that wat to expad ofte meet problems. The greatest problems are obstacles regardig the rules ad legislatio. A lot of (geeral) literature is available about reorgaisatios, but ot everythig is aimed at SMEs. I survey studies the research is mostly aimed at restructurig i SMEs or restructurig of large compaies, but ot both. The relatioship ad the differeces betwee both size classes is ot always discussed withi oe study. For a good comparative aalysis, both groups (SMEs ad large compaies) eed to be icluded i, for example, a survey study. For good (statistical) evidecebased research regardig oe specific subject, both groups must be approached with the same method. This is defiitely a poit requirig attetio i future surveys / studies. Not a lot is kow about the eeds of compaies regardig support from public ad private sources. There are o studies that deal with this specific subject. But it maily appears that there is a lack of familiarity i respect to public ad private provisio of services. A survey by EIM (De Kok et al., 2008) shows that oly a small group of SME employers are familiar with the opportuities offered by the UWV WERKbedrijf. It is therefore a questio of whether there is a demad shortage or a supply shortage. The mai problem appears to relate to the familiarity with (public) orgaisatios that offer support durig restructurig. This requires more (policy) attetio. A specific problem that ca be see betwee SMEs ad large eterprises regardig equal opportuities is the availability of moder locatios. Developers ad estate agets seem to be iterested i havig large-scale accommodatio built ad are maily lookig for big teats. But small compaies wat to be i a good positio too. Accommodatio is importat, partly for the image show to customers ad employees ad for the iovatio power of SMEs. 19 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013

22 Bibliography Birch, D. (1987), Job creatio i America: How our smaller compaies put the most people to work, New York: Free Press. Brookz Overame Moitor (Brooks Takover Moitor), Cetral Bureau of Statistics, statlie.cbs.l/statweb, Datuma, E. (2008), Bedrijfshuisvestig e groei (Compay accommodatio ad growth) MKB Special 2008, Amsterdam: ING. De Kok, J.M.P., va Uitert, C.J., va der Hauw, P.A. ad Grijpstra, D.H. (2008), Werk op maat (Bespoke work). Curative from work-to-work activities i practice, Zoetermeer: EIM, RvB, Cosult. EIM (2007), Harder werke door moeilijk vervulbare vacatures i het MKB (Workig harder to fill difficult vacacies i the SME), Zoetermeer. EIM (2011), Kleischalig Odereme 2011 Structuur e otwikkelig va het Nederladse MKB (Small-scale Eterprise 2011 Structure ad developmet of the Dutch SME), Zoetermeer: author. FBN Iteratioal (2007), Family Busiess Moitor, Gorter, J., Tag, P., ad Toet, M. (2005), Verplaatsig vauit Nederlad (Relocatio from the Netherlads). Motives, cosequeces ad policy, The Hague: Cetral Plaig Bureau. Hessels, J. ad Overweel, M. (2004), Buiteladse ivesterige door het MKB (Foreig ivestmet by the SME). Toeemede ivesterige i lageloelade of op kousevoete aar buurlade? (Icreasig ivestmets i lowwage coutries or pussyfootig aroud i the eighbourig coutries?), Zoetermeer: EIM. ING (2010), Iteratioaliserig (Iteratioalisatio). Risk maagemet determies success of export ad offshorig, Amsterdam: author. Louw, E. ad Hiethaar, J.F.H. (1999), Bedrijveterreie over de groee gres (Idustrial parks over the gree border), Delft: Delft Uiversity. Mese, A.H.H.M. (2002), Voor wie iet altijd 'Kleiduimpje' i oderemerslad wil blijve (For those who do ot always wat to be Tom Thumb i the lad of eterprise): ee oderzoek aar factore voor ee succesvolle bedrijfsuitbreidig i het MKB (a survey ito the factors for a successful compay expasio i SMEs), Zoetermeer: EIM. Mese, A.H.H.M. ad va Rijt-Veltma, W.V.M. (2005), SME locatios. Oderzoek aar de aard e kwaliteit va de bedrijfslocaties va MKB-oderemige (Survey ito the ature ad quality of compay locatios of SME eterprises), Zoetermeer: EIM. Nyerode (2009), Offshorig i Nederlad. Het verplaatse va activiteite i tijde va ee fiaciële crisis (samevattig) (Relocatig activities i times of fiacial crisis (summary)) Breukele: author. Europea Foudatio for the Improvemet of Livig ad Workig Coditios,

23 Restructurig i SMEs: The Netherlads ORN, 2006, Rabobak (2003), Rabobak Cijfers & Treds (Figures & Treds) 2003/2004, Eidhove: author. RWI (2008), Same werke aa werk (Workig together o work). Praktijkgids Va Werk Naar Werk-activiteite voor met werkloosheid bedreigde werkemers (Practical guide from work-to-work for employees threateed with uemploymet), The Hague: Raad voor Werk e Ikome (Coucil for Work ad Icome). Sel, D. (2004), Samewerkig loot (Cooperatio pays), Zoetermeer: EIM. Sel, D. ad Gibcus, P. (2007), Selle groeiers zij ambitieus (Fast growers are ambitious). Selle groeiers versus ietselle groeiers (Fast growers versus ot so fast growers), Zoetermeer: EIM. Va Teeffele, L. (2011), Het profiel va overemers e opvolgers (The profiles of take-over etrepreeurs ad successors). Hu slaagkas e de verschille met starters (Their chace of success ad the differeces with starters), Utrecht: Hogeschool Utrecht. Visee, H.C. ad Mevisse, J.W.M. (2009), Nalevig va de wet op de oderemigsrade, stad va zake 2008 (Compliace with the law o works coucils, state of affairs 2008), Amsterdam: Regiopla. Warig, J. (2009), Ziek door ozekerheid (Sick through ucertaity). Utrecht: FNV Bodgeote. Wiezer, N., Nielse, K., Pahki, K., Widerszal-Bazyl, M., de Jog, T., Mattial-Holoppa, P., Mockallo, Z. (2011), Explorig the lik betwee restructurig ad employee well-beig, Hoofddorp: TNO. Wiubst, M.E., de Kok, J.M.P., va der Lide, B., Grüdema, R. ad va der Voorde, M. (2009), Slim e gezod afslake (Clever ad healthy slimmig), Zoetermeer: EIM & TNO. Michel Wiubst, EIM, Zoetermeer EF/12/47/EN 3 21 Europea Foudatio for the Improvemet of Livig ad Workig Coditios, 2013