More firms gamble on high-risk shake-ups

The pace of these reorganisations has increased in recent months as companies prepare for leaner times. In the past year, Carillion, WS Atkins, Berkeley, Ballast and Morgan Sindall have all changed the way they do business.

What is still unclear is whether they are working as intended. Reorganisations are times of great danger for companies and their management – if they come off, they can give a firm an extra gear, but if they do not, employees and the City will lose confidence.

Typically, analysts are dubious about a restructuring until it works. Any savings are welcome, of course, but there is always some suspicion about the management's motives: are they trying to mask poor performance or get rid of some people they do not like? Are the changes cosmetic – a case of shuffling the deck rather than adding an ace?

If the new design fails to come off, or if senior managers have failed to persuade company opinion that the change is unavoidable and will be in the common interest, the result can be disastrous. Reorganisations have been known to drag on for months or even years, during which time profit, share price and morale fall, and analysts start talking about a boardroom clear-out.

Sometimes, as in the case of Berkeley Group and Morgan Sindall, the change-around is relatively minor. By contrast, the restructuring at Amec, Carillion and Atkins will change the identities of the companies. As a result, the impact on staff morale is more severe.

At Carillion, new chief executive John McDonough is instigating a cultural revolution as the group switches from contracting to support services. Its construction management business, Schal, is being slimmed down and merged into the group's building and consulting arm. About 300 jobs have gone, and as many as 100 more posts are earmarked for redundancy. Management and analysts do not doubt the changes are needed and will eventually benefit the group, but the short-term pain is overshadowing the long-term gain.

The depth of turmoil at Carillion has yet to be established, but tales of disaffected staff are commonplace. A director at one construction company has had three CVs from senior Carillion staff land on his desk since the new year.

None of these, however, is from the construction division, which suggests that the restructuring is unsettling the company as a whole. The director says: "There's definitely a feeling out there that there will be a clear-out – and not just from the construction division. Some people are not happy and will go."

The City is worried that the changes are too much, too soon and will lead to confusion. Others wonder if they will make any difference

A Carillion staff member confirms that the changes had taken their toll on morale. "It is uncomfortable and it has been difficult when people in my department have gone."

John Denning, Carillion's corporate affairs director, disputes these rumours, and maintains that morale at the company is higher than it had been for some time. "Clearly it's unfortunate for those affected," he says, "but it is a process that is essential to good business management. The morale of those who remain is very high."

Denning points out that Carillion has 15,000 UK staff – 6000 more than when the restructuring started – as the company grows its other businesses.

The jury is still out on Robin Southwell's changes at WS Atkins. Southwell, like McDonough, is a newcomer to the industry, and is reorganising the company into divisions based on markets rather than functions.

Atkins will also eventually shed about 150 jobs when it centralises its back office operations at a single site in Worcester. City observers are worried that the changes are too much, too soon and will lead to confusion. Others wonder if they will make any difference.

Amec says it is too early to say how many jobs will go when it turns itself into three divisions organised by geography (see box), but it is likely that 100 posts and at least two levels of management will be cut.

The changes will each cost Amec, Atkins and Carillion up to £10m each in redundancy and reorganisation costs but they are expected to produce savings next year as overheads – such as the wage bill – are reduced.