The Hindu Business Line : How to reverse organisational decline

While price competition is an important external cause for downfall, the internal culprit can often be organisational inertia, which in turn leads to `slow responsiveness to the changes in the environment', says Turnaround Excellence by Sunil Kumar Maheshwari.

Success and growth are popular themes these days. However, it is a reality that many organisations slip and decline and, at times, fail to survive. Unless, of course, they did an about-turn to return to the black. Sunil Kumar Maheshwari studies six cases of corporate renewal in Turnaround Excellence (www.penguinbooksindia.com).

The first question he seeks to answer is the `why' of organisational decline. Important among external causes is price competition, while the main internal culprit can be organisational inertia, which in turn leads to `slow responsiveness to the changes in the environment'.

Maheshwari dissects `inertia' to find the many problem-strands within it, such as `congenial niche, specialised assets, sunken investment, bureaucratic control, internal political and cultural constraints, external restrictions, and managerial commitment to status quo due to their longer tenure in the organisation and in the industry'.

He cites the case of Torrent Gujarat Biotech Ltd as example of congenial niche, or `safe product-market domain'. The company had conceptualised its Penicillin-G plant at a time when the demand for the drug far exceeded the supply. But market conditions changed quickly and many plants came up the world over; surplus capacity caused prices to fall. But TGBL could not respond to the changes "owing to its specialised, high-capacity and capital-intensive plant. It was left with no option but to wait for the dissolution of some of its competitors to earn profits."

The story of Mangalore Chemicals and Fertilisers Ltd exemplifies how specialised assets can act as a millstone. The company had adopted naphtha-based technology to produce fertiliser. "Naphtha is an extremely expensive raw material as compared to natural gas. However, shifting to natural gas-based technology requires high capital investment." Unable to do so and thus switch over to the cheaper input alternative, the company "continues to depend on government's subsidy under the `retention pricing' scheme."

Scooters India Ltd is an example of escalating commitment leading to downfall. The company "continued its plans to achieve volumes and sell scooters nationwide, despite the initial setbacks regarding acceptability of the scooters in the market. This led to hiring of excess people and building high-volume foundry plants, contributing to perpetual losses." In the face of adverse outcomes, managers may "instead of changing the decision, try to cognitively distort the negative consequences to make them appear more favourable," explains Maheshwari. It could also be because decision makers want to justify their previous behaviour to themselves and others, behavioural theories postulate.

Three other companies discussed elaborately in this educative book are Tinplate Company of India Ltd, Amal Products Ltd, and British Oxygen Company India Ltd. Pithy chapters delve into the turnaround process and `action choice framework'.

From discipline to ethics

When confronted with `accelerating globalisation, mounting quantities of information, the growing hegemony of science and technology, and the clash of civilisations,' what you need is not a hiding place but Howard Gardner's Five Minds for the Future (www.tatamcgrawhill.com).

The first mind is the disciplined one, which has mastered "at least one way of thinking — a distinctive mode of cognition that characterises a specific scholarly discipline, craft, or profession." It takes up to ten years to master a discipline, says Gardner, citing research. "Without at least one discipline under his belt, the individual is destined to march to someone else's tune."

The synthesising mind comes next. It can take information from disparate sources, understand and evaluate the same objectively, and put it together in ways that make sense. This capacity has become crucial in the context of information explosion.

The third, the creating mind, "puts forth new ideas, poses unfamiliar questions, conjures up fresh ways of thinking, and arrives at unexpected answers." Anchored in territories that are yet to be rule-governed, this mind can be "at least one step ahead of even the most sophisticated computers and robots."

No one can afford to be within one's own shell; it is increasingly necessary to understand others and work effectively with them. Which is why you need the fourth mind, the respectful one. "In a world where we are all interlinked, intolerance or disrespect is no longer a viable option," says the author.

More abstract than the respectful mind is the fifth and final mind Gardner describes: the ethical mind. It ponders "the nature of one's work and the needs and desires of the society in which one lives. This mind conceptualises how workers can serve purposes beyond self-interest and how citizens can work unselfishly to improve the lot of all."

As a society we have been blind to the importance of these five minds, rues the author. It is up to the educational system as a whole to ensure that the ensemble of minds is cultivated, he suggests. "The burden of education must be shared by parents, neighbours, the traditional and digital media, the church, and other communal institutions." Computers can help achieve `literacy and a measure of disciplined thinking,' but moving towards `synthesising and creating' are human realms.

Gardner wraps up his book on an ominous note: that it may take "far more immediate threats to our survival before we make common cause with our fellow human beings."

Worth a mindful read.

For a better batting average

In The Three Tensions (www.josseybass.com), Dominic Dodd and Ken Favaro grapple with common dilemmas that baffle many a manager: "Profitability or growth? Results today or tomorrow? More synergy or better standalone performance?"

The authors don't advise tradeoffs and concessions. For, "Great performance rises above compromise." Rather than `arbitrate between competing objectives,' the manager has to `reconcile them into great performance on many fronts at the same time.' Companies that master the three tensions are the winners, declare Dodd and Favaro. `Growth with profitability, earnings today that endure tomorrow, and high-performing parts within a valuable whole' — all these are worth far more than `performance that is trapped in trade-offs'. Alas, companies often make progress on one objective, only to fail on the other. "As priority shifts to one place, performance elsewhere declines. As performance elsewhere declines, priority shifts once more."

Work on your `batting average', the authors urge, borrowing a sporting phrase. They define it as "a measure of how often a company is able to achieve two performance objectives at the same time in a given year." A key finding they come up with is that `batting average' correlates closely with TSR (total shareholder returns), and is "a better predictor for TSR than any other single measure of operating performance."

For a compulsory study before you march on to the pitch.

India's first public sector refinery

Do you how oil was first discovered in Assam? Legend has it that the discovery was by an elephant which, "on a timber haul in the jungle, stepped into an oil seep and returned with one leg covered in black oil," narrates Jayavant Mallanah Shrinagesh in Between Two Stools (www.rupapublications.com).

The biography, edited by Rudolf and Shakuntala Hartog, chronicles the life of Shrinagesh in the ICS (Indian Civil Service) before and after Independence'. In one of the chapters, he talks about how his efforts to start the country's `first public sector refinery' met with an objection from the parliamentary Public Accounts Committee: that he had borrowed money from a bank to set up the refinery. "No public sector organisation was permitted to borrow money from anywhere else than from the government, but the government could only approve the funds, not appropriate them."

So, how did he overcome the prospect of the plant falling between two stools? He explained to the Committee that each day's delay to produce oil would cost the country Rs 7 lakh in foreign exchange. "This seemed to make good sense, for the Committee overruled Finance's objections and I was able to go ahead."

Books to keep you busy, while counting down to June.

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