By Dr Suresh Vidyasagar Menon-Chief Consultant & Business Advisory for Six Sigma, Operations, Strategic Management and Information Security
The prescription of consciously matching the organization structure to the particular needs and requirement of strategy has arisen out of research. Organizational structure and strategy are interrelated because strategy helps a company identify and construct its structure, on the other hand a company’s structure is based on outcomes of the analysis of strategy.
During crisis such as a natural disaster, war, political unstability the corporate strategy of retrenchment is followed when an organization aims at contraction of its activities through substantial reduction or elimination of the scope of one or more of its businesses in terms of their respective customer groups.
Retrenchment involves total or partial withdrawal from a customer group, customer function or use of an alternative technology, in this manner retrenchment attempt to ‘trim the fat’ and results in a slimmer organization. If the situation gets very worse and nothing seems to work the organization can go for bankrupting strategies.
Retrenchment may be done either internally or externally, for internal retrenchment to take place, emphasis is laid on improving internal efficiency. This usually takes the form of an operating turnaround strategy. Conditions for turnaround strategy are given below: –
- Persistent negative cash flow
- Negative profits
- Decling market share
- Deterioration of Physical facilities
- Over manning, high turnover of employees and low morale
- Uncompetitive products or services
- Mismanagement
The Conditions are given but then how do we implement it and make the company a better performer so please note the points below:
- The existing chief executive and management handles the entire turnaround strategy with the advisory support of a specialist external consultant. The use of this method can only be successful if the chief executive has a reasonable amount of creditability left with the banks and financial institutions and a qualified consultant is available.
- In another situation the existing team withdraws temporarily and an executive consultant or turnaround specialist is employed to do the job.
- The last method- the one most difficult to attempt but that is most often used -involves replacement of the existing team, especially the chief executive or merging the sick organization with a healthy one.
Turnaround Strategies in the Indian Context: In the Indian Context, turnaround takes a more legalistic approach rather than one within the control of the organization. Turnaround in the Indian context can be done once an industrial unit is declared sick.
As a part of retrenchment strategy one can also use Divestment Strategies which involves the sale or liquidation of a portion of business or a major profit center.
Are we in recession? With general elections in 2024, the uncertainties will persist. Despite the challenges of spillover risks, the Indian economy is all set to grow at 7 percent in FY24 and at 6.5 percent in FY25. All sectors of the economy are well poised to grow with the financial sector and monetary policy supporting growth.
Dr Suresh Vidyasagar Menon has 31 years plus of overall experience in IT, around 3 Years in Auditing of ISO 27001-Information Security Standard , has executed 25 plus projects in IT and two turnkey projects for eastern railways(Liluah) and has to his credit twelve publications in International journals of Science, Engineering & Technology.
