The Hindu Business Line : Resuscitating companies that are sick

FOR successfully running a company, a corporate chieftain should develop the capacity to diagnose the early symptoms of emerging sickness and devise the appropriate measures to set right the situation.

Even where the symptoms are similar for different companies, the same remedies may not be relevant in view of the large number of variables such as the size, the age of the company, the nature of the product or service, the market, the technology, the quantum of investment, the collaborative tie-ups and the like. The approach, therefore, has to be company-specific.

When the sickness leaves the company in a comatose or terminal condition, it will not do to adopt the usual palliatives for turning around a setup that has fallen on, or looks like heading for, bad days. One has then to go the whole-hog for resuscitation in the comprehensive sense.

This is a concept that has not yet entered the lexicon of corporate management. The existing accounts are sketchy and do not do justice to the intractable nature of the problem.

For instance, a recent write-up comes up with the following nebulous nostrums: Rethink the underlying principles on which management is founded; generate a portfolio of strategic options; carefully examine resource allocation; ensure more effective corporate governance. They all add up to nothing meaningful.

The reason for this kind of abstract and abstruse verbiage is obvious: When it is touch-and-go for the company, those at the helm take the easy course of either filing for bankruptcy or, as has often happened in India, letting the Government take over. Also, resuscitation is a complex process calling for a sustained and prudent application of a cornucopia of countervailing strategies in a carefully nuanced fashion.

Broadly, they include hiving off activities that are proving a drag or unsuited to the company's special strengths; downsizing to get rid of deadwood and passengers; induction of a new management without the baggage of the old; diversification; financial, managerial or root-and-branch restructuring; change of technology; infusion of additional capital; and outright sale to a more competent and willing enterprise which would be able to give it a fresh lease of life.

The help of consultants with hands-on experience and sound judgment can be taken to advise on whether the remedies should be applied singly, in a mix of two or more, all together or in a particular sequence, and to closely monitor, almost on a daily basis, their effects on the company.

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