Organizational Decline and Turnaround Management

Abstract

A panel of turnaround leaders, consultant, and academia responded to the theme on Organizational Decline and Turnaround Management. The panel members addressed the following issues: What are the causes of organizational decline? How do stakeholders respond to organizational decline? What are the turnaround challenges? The salient features of the responses are as follows: There is a divide among the turnaround leaders regarding the causes of decline. Some view the decline purely as the result of the failure of management to anticipate and act appropriately in time. For others, the decline is caused primarily due to external changes. People in academia and consulting view the problem as a mix of the two. According to them, a complex mix of variables-organizational processes, structure, leadership, vision, and technologies-lead to organizational decline. To safeguard against decline, organizations must carefully monitors difficulties in adapting changes and rigidity of systems declining profitability shift in customer preferences working capital problems like inventory build-up; dumping products on dealers; and increasing receivables from customers inability to plough back into the business lack of vision and explicit direction for the future frequent labour unrest regular plant breakdowns. The response of stakeholders to organizational decline becomes hostile. Often, financial institutions include compound interest and increase penal charges to secure their dues. The employees and union members tend to become aggressive owing to loss of credibility of management. Suppliers tend to evaluate the risk of their dues. Their hostility reduces if the management assures them of payment. Managers experience erosion of pride in their company. It leads to low individual initiatives.The turnaround challenges include the following: Leadership that provides a vision, induces creativity, challenges the existing business assumptions, and shows willingness to take tough decisions. The support of financial institutions by way of loan restructuring. Industry is experiencing a definite shift in the approach of financial institutions and banks; they are now tending to support the turnaround effort. Gaining the trust of the suppliers to seek their support. Internally, management needs to be concerned about: maximizing productivity of all resources and capacity utilization manpower rationalization stringent working capital management stretching the targets and making assets ‘sweat’ streamlining systems investing in technology upgradation through internal generation financial restructuring in low interest cost regime.