organizational decline and turnaround-ob2

8/6/2019 Organizational Decline and Turnaround-Ob2

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Organizational Decline and

Turnaround

S Jeyavelu


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Organizational Life Cycles

Dr. S. Jeyavelu


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Do Organizations have life & death?

Do they go through significant lifestages?

Do they have to overcome differentlife stage crisis?


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Introducing Arul Kumar

Passionate about Environment,trekking, nature, etc

Start Up for eco tourism

One man show


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Crisis 1


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Crisis 2


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Crisis 3


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Organizational Life Cycle

ORGANIZATION STAGES OF DEVELOPMENT

1.

Entrepreneuri

al

Stage

2.

Collectivity

Stage

3.

Formalization

Stage

4.

Elaboration

Stage

:risiseed to dealith too much

ed tape:risiseed fordelegation

ith controlrisiseed forleadership

Creativity

ro vi sio n o f cl ear d ire ct ion

dd it ion of i nt ern al sy ste ms

evelopment of teamwork

:risiseed forrevitalization

Decline

Continuedmaturity

,treamlining-mall companythinking

S

I

Z

E

Large

Small

Sources:Adapted from Robert E. Quinn and Kim Cameron, Organizationa l Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence, ManagementScience 29 (1983): 33-51; and Larry E. Greiner, Evolution and Revolution as Organizations Grow, Harvard Business Review 50 (July-August 1972): 37-46.


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Organization Characteristics During Four Stages ofLife Cycle

1.Entrepreneurial

2.Collectivity

3.Formalization

4.Elaboration

Characteristic Nonbureaucratic Prebureaucratic Bureaucratic Very Bureaucratic

StructureInformal, one-personshow

Mostly informal, someprocedures

Formal procedures,division of labor,specialties added

Teamwork withinbureaucracy, small-company thinking

Products orservices

Single product orservice

Major product orservice with variations

Line of products orservices

Multiple product orservices lines

Reward and controlsystems

Personal, paternalistic Personal, contributionto success

Impersonal, formalizedsystems

Extensive, tailored toproduct and department

InnovationBy owner-manager By employees and

managersBy separate innovationgroup

By institutionalizedR&D

GoalSurvival Growth Internal stability,

market expansionReputation, completeorganization

Top ManagementStyle

Individualistic,entrepreneurial

Charismatic, direction-giving

Delegation with control Team approach, attackbureaucracy

Sources: Adapted from Larry E. Greiner, Evolution and Revolution as Organizations Grow,Harvard Business Review 50 (July-August 1972): 37-46; G. L. Lippitt and W. H. Schmidt,Crises in a Developing Organization,Harvard Business Review 45 (November-December 1967):102-12; B. R. Scott, The Industrial State: Old Myths and New Realities, Harvard Business

Review 51 (March-April 1973): 133-48; Robert E. Quinn and Kim Cameron; OrganizationalLife Cycles and Shifting Criteria of Effectiveness, Management Science 29 (1983): 33-51.


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ORGANIZATIONAL LIFE CYCLE STAGES TANSIK (80)

STAGE STRATEGY STRUCTURE

BIRTH CONCENTRATE SIMPLE ON A NICHE (Entrepreneural)

GROWTH HORIZ & VERTICAL FUNCTIONAL INTEGRATION (Managerial)

MATURITY DIVERSIFICATION DIVISIONAL(SBU)

DECLINE RETRENCHMENT CONSOLIDATION OR PROFIT (Structural Surgery)

DEATH LIQUIDATION DISMEMBERMENT - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - -

MAY HAVE A REVIVAL PHASE DURING THE MATURITY-DECLINESTAGES, THUS EXTENDING THE ORGANIZATIONS LIFE


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Weitzel and Jonssons Model ofOrganizational Decline

Time

Decline begins Dissolution and

organizational death

Stage 1:

Blinded

Stage 2:

Inaction

Stage 3:

Faulty action

Stage 4:

Crisis

Stage 5:

Dissolution

Good

information

Prompt action

Corrective

action

Acceptable

performance

Effectivereorganization

Actual

performance

Acceptable organizational performance

Actual organizational performance

Perfo

rman

ce


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WEITZEL AND JONSSON

Stage 1: Blindedorganizations are unable to recognize the internal or external problems that threaten their long-term

survival.Stage 2: Inactiondespite clear signs of declining performance, top

management

takes little action.Stage 3: Faulty Actionmanagers may have made the wrong decisions, or changed too little too late.


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WEITZEL AND JONSSON

Stage 4: Crisisby the time this stagehas

arrived, only radical changes instrategy

and structure can stop decline.Stage 5: Dissolutiondecline is

irreversible, the organization cannot recover.


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Symptoms of Decline

A slow decline in their markets

Falling ROCE and other returnsto sales and profits

Rapid decline in market shareand in performance measures

Industrial structural change


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Causes of Decline

ManagerialMistakes

Failure to Adapt to

external changes Neglect to Manage

critical issues /processes

Lack of resources

Overextension /overloading


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Typical Turnaround Strategies

Cost Reduction Strategies

Asset Reduction Strategies

Financial RestructuringStrategies

Management and CulturalChange Strategies

Revenue Increasing Strategies Product/Market Redefinition

Strategies


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Turnaround Types

Operational StrategicHumane Downsizing


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Situational Factors InfluencingChoice

Depth of Sickness

Cause of Decline

Resource Availability Stakeholder Support

Industry / Economic Situation


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organizational decline and turnaround-ob2

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