SICKNESS IN VENTURE

RBI definition: principal or interest has remained overdue for two consecutive quarters in a financial year and there is an erosion in the net worth due to the accumulated cash losses to the extent of 50% or more

Impact – unemployment, non-payment of dues, blockage of finance, non-utilization of assets

Causes of sickness- Personal

Lack of integrated knowledge/ training Incompatible personalities Health Shift in attitude Succession

Management Form of ownership Wrong choice of product/location Team building Planning Management information systems Inability to manage growth

HR issues Faulty recruitment Wage structure Industrial Relations Low productivity

Operational issues Technology obsolescence Quality up gradation

Production Management Plant location & layout Quality Capacity utilization Inventory Maintenance Environment Waste management

Financial Capital structure Capacity to bring capital Poor resources management Costing/pricing policy Over-dependence on concessions & subsidies Diversion of capital Over-trading Unfavorable gearing Lack of tax planning

Marketing Over-dependence on a single customer Marketing myopia Sales &distribution set-up Market feedback/ research Marketing strategies

Government Changing policies Scale of economy Controls Fiscal policies Role as facilitator

Act of God Accidents and injuries Catastrophes and disasters

B I F RBoard for Industrial and Financial

Reconstruction

Prevention is better than cure

All great companies have some kind of success formula. It could emanate from a unique set of strategic frames, resources, processes,relationships or values. But when the formula hardens,companies lose a vital ingredient for continued success

The Success Trap

Is your company at risk? Symptoms of Active Inertia Strategic frames become binders

“We are a growth company”

“We know our competitors well”

“We are number one” Resources harden into millstones

“Our brand means the product”

“We have it all”

“Our technology is a fortress”

Processes lapse into routines“We have a ‘bible’ for critical processes”“We hire and promote people like us”“We make our decisions by consensus”

Relationships become shackles“We know our place in the value chain”“We do the important tasks in-house”

Values ossify dogmas“We are a family, not a company”“We have a campus, not a headquarter”“Our competitors are our enemies”

Source:

Donald N Sull in his book “Revival of the Fittest: Why Good Companies Go Bad And How Great Managers Remake Them” : Harvard Business School Press,2003

Thank you