Design Of Restructuring Scheme Of Changchun Municipal Engineering Design & Research Institute

Changchun Municipal Engineering Design and Research Institute is one of those state-owned survey and design enterprises which are in the process of restructuring reform. This institute has long been holding a position of administrative monopoly and adopting a management model typical of planned economy, resulting in a slow pace of marketization and leaving many problems which need to be solved immediately. Firstly, the backwardness in the management model of the enterprise leads to a backward management system, an unreasonable structure of organization and personnel as well as a motivation and restriction mechanism which is far from perfect. Secondly, with the changes in the municipal engineering design market, more and more severe market competition and the loss of the previous position of administrative monopoly, many problems gradually emerge. For example, the management system is rigid, the enterprise does not have adequate ability to adapt to the market changes and develop the exterior market. These require that the enterprise transform the conventional concept and reform the existing system quickly in order to adapt to the changes in the market and increase its own competitiveness. Finally, structural reform is also in line with the policies such as well managing large enterprises while adopting more flexible policies toward small ones, separating government functions from enterprise management and reforming the state-owned enterprises. All the factors above emphasize the necessity of enterprise restructuring that Changchun Municipal Engineering Design and Research Institute has to carry out.In 2005, when the government decided to speed up the structural reform of the state-owned survey and design enterprises, Changchun Municipal Engineering Design and Research Institute started with its first trial structural reform under the leadership of the Construction Committee of Changchun Municipality. At the very first stage of the reform, we achieved some good results mainly including clarifying the corporate form after the reform, solving the problem of reassigning people who are on long-term sick leave or unpaid leave and those redundant personnel in the offices. During this trial reform, we successfully acquainted employees with basic knowledge of the reform and give ideological education in this respect. But during the drafting process of restructuring scheme, the employee's interest and opinions were not fully considered. Thus the enterprise and the employees failed to reach an agreement concerning important issues like share allocation, separation of the secondary lines of business from the core business, reassignment of the redundant personnel and cost of reform. The result was that the scheme was vetoed by the Staff Representative Congress. The failure of the reform had a very negative impact on the enterprise itself and the employees. It greatly influenced the normal management of the enterprise, resulting in a series of problems such as weakened executive ability, decreased quality and frequent accidents in projects. Worse than all, it resulted in a loss of confidence of the employees in the enterprise and reform, hence bringing about subsequent problems such as intensified contradiction in the enterprise, loss of technical experts, and lower core competitiveness, etc. This situation, on the one hand, increases the difficulty of reform; while on the other hand, remind us of the urgency and necessity of reform. Only when the reform is successful, will we be able to solve the existing problems in the enterprise, ensure the stabilization in staff members, rationalize the relationship in enterprise management, establish motivation and restriction mechanism and increase the competitiveness of the enterprise.Firstly, this article analyzes some major problems arise during the process of reform including share allocation, reassignment of personnel, and cost of reform. The root causes are worked out and correspondent solutions are given. In the first place, this article targeted at equity allocation problem. Presently, equity allocation is unreasonable. It does not conform to the actual condition of the enterprise and the proportion of the technical experts'share rights is too small. After analysis, we set up a scheme proposing that all the employees hold shares of the enterprise and further proposed that during the equity reallocation process, the principle of employees holding shares, technical experts being controlling shareholders, managerial staff holding large proportions of share rights should be followed. In the second place, this article discusses the problem of separating the secondary lines of business from the core business. The author thinks that the key to solve this problem successfully is to design a more specific restructuring scheme so that the employees no longer have troubles back at home. The scheme should also consider the actual condition of different departments and deal with them differently. The best solution is to separate the secondary lines of business from the core business gradually on the basis of mutual consultation. Finally, it talks about the cost of reform. The main defect of the previous scheme is that it impairs the interests of the employees and compulsorily discharges liability of the enterprise to the employees. The solution proposed in this article is to allow all the employees to hold shares and the new enterprise should bear the entire creditor's rights and liabilities of the old enterprise. Only in this way can the enterprise solve the cost problem without impairing the interest of the employees.Then this article summarizes several problems that should be highlighted through analyzing the process and consequence of the failure of reform as well as the major issues involved. This mainly includes maintaining the lawful rights and interests of employees, putting emphasis on the education of the employees and setting up a specific restructuring scheme, etc. The solution of the above–mentioned problems will be the prerequisite and basis of the success of the future reform. In the first place, the article argues that the enterprise should maintain the lawful rights and interests of employees by paying compensation bonds for the dissolution of labor contracts with employees. The restructuring cost problem should not be solved at the expense of sacrificing employees'lawful interests. We should also have a more detailed scheme concerning the problem of separating the secondary lines of business from the core business. In the second place, the enterprise should put emphasis on educating the employees, enhancing their participation in the reform, respecting and considering their suggestions, promoting communication between the managerial staff and ordinary employees in order to work out the problems and ensure the smooth progress of the reform. Finally, we should provide the employees with a detailed restructuring scheme in order to increase the transparency and employees'confidence in the reform.Finally, this article redesigns the restructuring scheme of Changchun Municipal Engineering Design and Research Institute. This part deals with the reform of the enterprise and put forward a specific scheme on the basis of the above analysis. In the first place, it discusses the design of corporate equity structure. The principle of the new share holding scheme is managerial staff holding large proportion of shares, technical experts being controlling shareholders and ordinary employee holding shares. Therefore, besides 10% collective shares, the board of directors hold 35% of the total shares of the enterprise, with no less than 15% in the hands of the chairman of the board. The share ratio of the technical experts is 30% and that of other employees is 25%.It is required that the managerial staff and the technical experts must buy shares and other employees could buy shares on a voluntary basis. The shareholders are entitled to correspondent rights according to the number of shares they hold. In the second place, it discusses the scheme of the organizational structure. The main idea is to establish a system involving shareholders'meeting, the board of directors, supervisory commission and the managerial staff so as to change the former centralized decision-making model. According to the theory of corporate governance, we should adopt a modern corporate system; we should continue to increase the enterprise's vitality and market competitiveness to ensure a sustained development of the enterprise. Finally, this article advances a reform scheme on corporate management model. It states that we should transform the current engineering management system into a project management system, further develop new markets related with roads, environmental engineering, water processing design, project contracting, etc. We should also enhance human resources management and performance evaluation, establish a motivation and restriction mechanism in order to increase the enterprise's long-lasting competitiveness and the ability to achieve sustained development.