The Portuguese Government has recently established a plan to promote new ways of organising and developing the strategic management of human resources. It concentrates particularly on investment in new skills for employees, with a view to company restructuring and development, together with improving employees' skills and/or retraining.
The recession affecting Portuguese companies from 1991 to 1994 showed that the difficulties faced by the country stemmed not just from economic circumstances. Rather, the roots were far more complex and called for structural changes to competitive factors involving the very fabric of business and a general remodelling of managerial capacity, vocational qualifications and financial structure.
The fact that a whole raft of companies was suffering economic and financial difficulties because of greater market competition and the economic recession resulted in the Portuguese Council of Ministers Resolution no. 100/96 of 4 July 1996, which adopted a "framework of action to rescue companies in financial difficulty", or QARESD- Quadro de acção para a recuperação de empresas em situação financeira difícil(referred to in the media as the Mateus Plan - Mateus being the name of the Minister of the Economy).
The Mateus Plan
The framework seeks to turn around companies with undoubted business capacity, and is based on the concerted action of six ministries and various business sectors, including companies, trade unions and banks. The Resolution established an Enterprise Rescue Coordination Bureau (GACRE), in charge of promoting, developing and managing QARESD. GACRE operates under the aegis of the Ministry of the Economy. It comprises six coordinators, representing the Ministry of the Economy, the Ministry of Finance, theMinistry of Justice, the Ministry of Agriculture, Rural Development and Fisheries, theMinistry for Training and Employment and the Ministry of Welfare and Social Security.
The purpose of the framework is to develop and consolidate competitive company structures that can guarantee and maintain lasting and properly paid employment. The state's regulatory role involves supporting and encouraging credible enterprise-based solutions for companies which are in economic difficulty but are nevertheless potentially viable concerns.
As stated above, QARESD is based on concerted action. The aim is to spread the responsibility for rescuing companies, leading to a strengthening of market functions and involving mechanisms for ensuring the cohesion of Portugal's economic and manufacturing framework. Particular attention is paid to the problems arising from local manufacturing specialisation based on a single industry or company, so as to ensure a balance between competitiveness and solidarity. Thus, QARESD is based on three main foundations, as follows.
(1) Strengthening enterprise capacity
- Incentives to ensure that companies with a firmer foundation can help rescue companies in difficulties, gaining critical mass through acquisition, merger and integration or the creation of cooperation and subcontracting networks. The aim is to consolidate profits and losses in fiscal terms, to grant loans at the market rate, and to provide support for the creation of jobs that combine various fields of activity and lay-offs that incorporate vocational training and upgrading of skills.
- The creation of conditions enabling professional managers to play a part in enterprises through management buy-outs and management buy-ins offering new dimensions for managerial capacity.
- Establishing the conditions to rescue viable companies with a suitable enterprise structure.
- Establishing the conditions for combining restructuring with systems for helping to create and develop already existing micro-companies.
- Establishing more favourable conditions for the emergence of new company initiatives and new investment.
(2) Improving coordination between the financial system and companies
- The launch of a state guarantee system for bank loans (SGEEB), available to financially out-of-balance but nevertheless viable companies. This is based on "operations leading to financial consolidation and company restructuring", in which the state lays down the rules of access to the system and the banks provide the economic/financial and business analysis component.
- Financial consolidation and company restructuring contracts will be combined with agreements to repay tax and social security arrears, involving accord and satisfaction arrangements, conversions of loans into capital or their transfer at the market value, and the extension of payment deadlines.
- Major incentives for developing forms of venture capital based on private companies.
- The launch of investment funds and enterprise development plans based on public initiative, opening up manufacturing companies' capital to various forms of investment opportunities that are managed professionally.
(3) Coordinated and swift intervention by the state
- Setting up of an information network to generate rapid action and response.
- Simplification and expansion of the special company-rescue process and effective running of bankruptcy procedures.
- The establishment of GACRE to promote, develop and manage the three foundations of QARESD intervention.
Commentary
QARESD is a new element providing for the rescue of companies in financial difficulties. It has an all-embracing legal, administrative and operational framework to provide an effective and early response. The QARESD concept enables root-and-branch restructuring of companies that have undeniable managerial strengths. Interministerial coordination provides for the integration and cohesion of essential economic and social development policies. The concept will tie in economic development, social cohesion, the recovery of back taxes and outstanding social security payments, changes to companies' relationships with the banks and the creation of appropriate legal instruments, to form a coherent whole.
The aim is to put in place structural measures leading to:
- expansion of the number of companies benefiting from systems that provide incentives for investment and modernisation;
- the creation of effective mechanisms to reverse vicious circles and to create virtuous circles. That means turning financial decline, accelerated by the additional risk caused by the need to acquire the financing required, into financial consolidation and company restructuring, including payment of outstanding debts owed to the state in the medium term and facilitating understanding between companies and the financial world;
- the simplification, acceleration and reorientation of bankruptcy procedures, based on strictness and objectivity, to make the recovery of assets and the possible maintenance of employment a viable prospect;
- the guarantee that the means used to encourage investment, scientific and technological development, job creation, vocational training and regional development are applied as components of forward-looking initiatives;
- the creation of an all-embracing social protection and return-to-employment network to deal with the processes of sectoral and company restructuring. Structural economic adjustment calls for greater competitiveness and the retraining and upgrading of human resources; and
- the development of forms of positive discrimination for less-favoured regions, where the crisis of companies with little or no diversification which are major local employers requires a special approach to help them fall in line with the constitutional principle of equal opportunities.
On the subject of human resources and social questions, QARESD encourages new organisational and developmental forms of strategic human resource management, within the context of economic and technological change. In particular, it focuses on investment in new employee skills, with a view to restructuring and developing companies and upgrading/retraining employees.
Within that framework, more emphasis is given to the forward-looking and preventive management of jobs and skills to cope with restructuring and technological and/or organisational change. Additionally, QARESD provides for intervention in the organisation of work, management or reduced working hours and job-sharing; increasing the flexibility of working hours and reconciling working life with family and social life; making work more interesting and adding to the range of employees' skills; preventing occupational hazards and improving working conditions; and forms of management and organisation that are more favourable to employment and social inclusion.
To support that process, the Ministry for Training and Employment has set up the Interministerial Group for Vocational Retraining. This group will monitor the implementation of an operational consultation structure and of vocational training for companies undergoing rescue or restructuring. The results will culminate in company restructuring or development, and moves to retrain employees in the companies supported, or will provide for skills development, particularly for the lowest-skilled employees. A further aim will be job retention and creation. (Rui Moura)