Organizational Decline and Turnaround-Ob2
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Transcript of 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 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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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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