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Sinking Ship can Float and sail

Every company faces problems in

establishing and running the organization.

There are many factors which affects the

performance of the organization.

Decisions are made to run the

organizations successfully to earn money

for self and all the stake holders. Some

decision affects the company’s

performance adversely and company

starts sinking, generating bad results and hit the financials. By way of my

experience in various industries, I find company's top management many a times

takes wrong decisions. Effects are not immediate; result will come after 2-3

years, by that time, in some of the cases situation have gone out of hands. Lucky

are the organizations which senses the side effects at the early stage and instead

of waiting for the surgery put the situation on medication.

Here, I would like to highlight few of the crisis factors and some tips how to save

the sinking ship, repair it and keep it sailing.

Few decisions which may pave the company to the crisis are -

A) Appointment of wrong executive, which effect company' decision making,

B) wrong selection of plant and machinery,

C) wrong product selection and continue to supply in the market despite of

market rejection,

D) wrong sales policy, focus more on schemes, discounts, etc., instead of

focus on improving services, product quality, market penetration, making

the customer product aware,

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E) neglected brand management,

F) Compromise with quality of product, aiming at increasing the productivity.

There are many other relates issues also, which may be related to the above

reasons. Due to these reasons we see distress in the employees and stake

holders. Few of the distressing symptoms are following -

employees turnover

large and unplanned reductions in workforce

stock aging increases and wrong stock evaluation

declining cash flow

frequent changing in vendors terms

increasing creditors outstanding

increasing debtors outstanding

unstable finance and HR department

shrinking market share and market depth

How to fight against the adverse condition is a big question. Once distress is in

the company's culture, it is very difficult to come out of it. Revival becomes even

tougher.

Based on my experience, studies and what the big BPR institutes suggests, a

company can take following precautions and action plans -

1) Generate cash by liquidating dead wood from the stocks, it may be raw

material, semi finish or finish goods, otherwise its value will further

deteriorate. Finance may be financially attached with the old valuation

(Higher) and to show healthy asset side in the balance sheet, but ultimately

company has to take decision and generate the cash at the present rates or

face worst market rates of the products in the future. Why to wait worse

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to come? At least company get discounted rates, some cash to invest in

new projects and generate more cash by revolving it into the system.

2) Do SWOT analysis of the company’s business plan. Thorough analysis of

business plan has to be done and evaluate the inflow and outflow of the

plan. Throughput has to be calculated. Less than 100% is dangerous,

indicating review and revaluation of the business

plan. Top management team should regularly

review the risk factors in the business and should

apprise the board of directors. Help and

assistance will surely come from them. Hiding will

not help in long term.

3) Never compromise on targets, review goals,

targets and performance on daily basis. Every

day should have a target and give a message to

the team that no target can be carryforward to

next day. Setting monthly target waste 30 days

and it is too late to heal the damage and

recover the losses. Act now and achieve the daily sales and collection

targets. Both have to have to happen.

4) Old outstanding debtors to be continuously chased and should be helped

to clear all the bad debts. If required, a special task force may be deputed

for this job. Customers (dealers/distributors) are the front brand

ambassadors of the company. Regular discussions on their business health

to be discussed. Help them liquidating their old stock, if any. Categorize the

slow movers and don’t allow the outstanding to pileup beyond control.

5) Work for being profitable, generate cash and maintain the operations

intact. Consistent quality, healthy production / sales throughput, growing

distribution network, control on number skus (stock keeping unit) and

inventory aging. These can change the total scenario of the company's

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image and health.

6) Easy going mind set is the biggest obstacle

in dealing with crisis. Every manger should

act as a crisis manager. Every manger should

realize the crisis situation and the same

should be spread downstream. Hiding the

situation only aggravate the situation, because things will emerge as

gallery talks and whispers. Be open and make the change happen by

sharing the truth. True crisis managers will come forward for handling the

situation, take action and will act as catalysts in crisis management.

7) Discussions and Brain storming sessions

can only bring the company out of the

crisis. Every employee's suggestion

should be viewed in a serious note. 5S and

Kaizen tools are of great help in coming

out of the crisis situation. These activities

should be initiated by appointing the group leaders who can move in right

direction to help company come out of the crisis.

8) Never take big steps in handling the

crisis like, making drastic changing in

purchase policy effecting supplies and

also never change the distribution

channel in one shot. Big decisions

should be taken in steps and with

every possible precaution. Initially

organization should change with-in, effects will be immediate and

supporting. Many times internal changes bring about changes in external

environment also. Activities like Cost cutting inside the organization will

give a message across the organization, everyone will be part of change

management and will make the company get out of the crisis. Choose the

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catalysts in the company. If they think and work for beating the crisis,

others will follow them.

9) Target achievement based incentives should be initiated in the company's

incentive plans. These incentive plans should be activity based and short

term. Same Incentive plans, months over months will become a right for

the employees. Keep introducing new incentive plans. This will keep the

employees afresh, energetic and positive in their approach. Once

stagnation is removed, all are on their feet to take challenges; crisis will be

changed into challenge and then comes the success.

10) In my career of more than 25 years, I have seen

company coming out of crisis by replacing one or

two top team members. People who are attached

with the organization for longer time are in a

very stable and comfortable situation. They are

always working in a comfortable zone. They always feel difficulty in

changing their aged old fundamentals and philosophy. They talk about the

old philosophy and principles by which the Company has achieved targets

in the past. They don't realize and acknowledge the paradigm changes in

the business environment. They resist changes and always blame younger

employees and they are successful

also in convincing the management

due to closeness with the top

management. Company should

identify the employees working in

comfort zone and are inclined

resisting change to happen. They should be passes clear and sound signal

that company wants to change at any cost.

In my views the best asset which any company have is, positive, hardworking,

change makers and out of box thinkers employees. The company has to find out

these doers, integrate them and value them. Make them change leaders. In many

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situations I have find people emerging as crisis manger from two to three level

down the hierarchy. They are always waiting for the

opportunity to come out and perform. They may not be

old employees. They may be one or two years old and

may have analysed the company's internal bottle necks

and obstructions. They are the bull dozers who will

remove all the bottlenecks and speed breakers.

These are few of the points I have

realized and found workable to make

the change happen and bring the

company out of crisis.