UNIT – 5 LEADERSHIP AND TURNAROUND MANAGEMENT

Chapter -11

CONTENTS
11. INTRODUCTION OF LEADERSHIP AND TURNAROUND
MANAGEMENT

11.1 OUTFITTING THE MANAGEMENT TEAM

11.2 PERSONAL CHARACTERISTICS

11.3 FOCUSING ON PRESENT OPERATIONS

11.4 FOCUS ON NEEDS IN TURNAROUNDS

11.5 STYLES OF DECISION MAKING IN THE TURNAROUND

PROCESS

11.6 ORGANIZATIONAL CHANGE

11.7 QUALITY IN THE MANAGERIAL PROCESS

11.8 TURNAROUND MANAGEMENT AS A SKILL

11.1: Introduction
Can you imagine how one leader of company would react if the company in which he is leading
runs into serious problem? Would he be able to keep a clear head and lead the company back to
sage ground? At the end, would he be considered a hero- or a loser?

When companies find themselves in troubled situations, it could be due to economic of other
reasons. Then there are various strategies applied to protect the company. Whether or not an
organisation is able to become profitable again, however is always highly depend on the behaviour
of the CEO and his management team. They have to prove they are capable of a discipline which
no university teaches, that is “Leading in Crisis”

Turnaround management requires courageous taking of action, continuous follow-through and a

strong sensitivity about the potential barriers involved. Expect a high level of uncertainty and
check out whether you are made for this tough job

11.2 Outfitting the Management Team

Though the leadership qualities of CEO profoundly affect successful turnaround, one person alone
cannot reverse the organisation. Turnaround requires teamwork; hence many companies are
having deep team along with a leader sharing both responsibility and the spotlight to make the
turnaround successful. At the time of serious problems victorious mangers or CEOs are only
trustworthy who motivate each other to make organisation again profitable.

Because company already in trouble cannot afford more failures, all elements of company must be
competent. Turnaround process is a team event and each functional area must do its job well. Sells
department must sells, manufacturing department must produce qualitative products efficiently,
finance team must keep firm operating within its available resource base.

The Management Team

The chief Executive

The characteristics needed by CEO reflects both nature of organisational difficulties and the
special organisational dynamics surrounding turnaround situations hence CEO should have
industry, technical and managerial experience because has to obtain the cooperation from
employees, creditors, dealers, investors and so on. Besides this he or she should possess the
quality of fairness and honesty. He or she should possess the quality which is needed in case to
determine what information is needed to address the issues of organisation and must be able to
separate what the organisation well from and what does the organisation well less from. The
individual should also have stamina and perseverance because at the time of troubles the
companies generally do not react well to frequent managerial changes.

Apart from the tangible qualification the turnaround CEO should have stuburn and contradictory
attribute in somewhat situations, he should not be over polite, amorphous functioning with little
technical ideas and less expereriance in business. It is doubtful the people within the company will
see a CEO as a credible person. On the other hand if CEO monopolizes all the credit when
progress is seen in the organisation, the hardworking people in the organisation who contributes in
the progress of company they may feel that their extraordinary efforts are not being recognized.
The CEO must be visible champion of ideas and an advocate for a change but in a nurturing way
that makes it possible for other people to share in accomplishment of task.

Experience in the industry makes CEO easy to turnaround the company and technical experience
also helps in providing better product with the lower cost. Successful turnaround also involve
much degree of managerial stability. if mangers are sustained in the organisation for more number
of years it also helps in making the turnaround successful because old values of managers
becomes a foundation of a news beliefs and ideas to make it successful, successful managers
sweeping changes in favour of incremental changes in strategies and policies whereas the
unsuccessful organisations change their CEO every year.

Product Team

The product team must not be able to develop a new product at the time of problems in the
organisation but it can product a quality and better product at a very lower cost .it must
accomplish this at a very shorter period of time. these are today’s market requirement some
companies are taking too long time and taking lightly to produce better product but not at a lower
cost. often they compound their errors by taking too long time. today’s product teams are
composed of various talented and responsible people across the corporation. The product team
must work with all the personnel i.e. manufacturing and engineering along with purchasing , legal,
marketing, service and other support activities. In case of Ford , product team of Ford paid a
painstaking attention to the requirement of customers and then realistically appraised the design
of Ford products with the design of competitors.

The Sales Team

Many turnaround efforts begins by firing people and bringing in a fresh team. It’s easy to
understand, but clearing the desk is not always an option. However company history may stand in
a way. CEO can turnaround business with the people they already have in their sales team. CEO
of Network System, Lyle Altman, described the sales team simply, A good salesperson is one who
sells for the firm which is at the struggling stage without much time, profit expansion strategy is
very risky for a troubled firm, yet attaining sufficient revenue is clearly identified and good
salesperson are responsible to a firm’s survival because sales are most often low at sick companies
because of low quality product, high prices and lack of differentiating features of product or even
ineffective sales administration, hence it is suggested that:

1. Existing and old sales people may be respected within the organisation. Good sales people may
be appraised inside as well as outside, the organisation. CEO may feel that sometimes that
stronger marketing executives are needed at the troubled time of the firm, but the replacement of
good and existing salespeople may hurt morale of those who are hard- working for the company
from many years.

2. if new sales and marketing are appointed , they may not know about the customers, hence CEO
should not take a risk of replacement of existing salespeople at the stage of turnaround.

3. New sales people if appointed always take more time to accomplish the task or target , the
company may or may not improve, and already sick company may spend more money on the
appointment of new sales people and operates less profit.

Special Teams:

Companies those are already are troubled often have special problems in different functional
department like financial , marketing, product etc. hence firm should appoint a special teams , who
are having additional skills and knowledge to handle a special problem of sick companies.

11.3 Personal Characteristics

Apart from the skills and competencies of the management team and turnaround leader , also
require following personal qualities to be a successful turnaround leader.

1. Demonstrate Strong and Optimistic leadership:

Turnaround leader should be the ‘true Believer’ when whole organisation may behave outside. He
should have the proud feeling for company, this optimistic behaviour of leader will be helpful for
the other members in the organisation those have negative feeling about the company or not
involved to take up the responsibilities at the troublesome time.

2. Fairness/Justice:

Turnaround leader should possess the quality of justice at the time of troublesome period of
company in promoting, retaining, firing, hiring with employees, otherwise it may down the moral
of employees and the result of turnaround may go in reverse direction.

3. Continue hard work and perseverance

Continuous hard work does not mean to sit for long hours to work. Because the people are more
respected who do not sit night and day to work than those are putting a lot of efforts into their
work. Hence Turnaround leader should have perseverance for its work with honesty, he should not
have any problem with sitting in extra hours and put a lot of efforts into its work, without
additional compensation, when the company is in actually desperate need.

4. Flexible

The CEO or Turnaround leader should be flexible in making the turnaround strategies

5. Co-operative:

The turnaround leader is connected to different teams , he has to work with the different
behavioural people , so he should be a cooperative and polite with its teams because people own
what they to create .

6. Visionary:

Turnaround has to be a practical and realistic. So leader must live in the future state and he should
carry the visionary and idealistic dream to make the turnaround company successful

7. Influential

The key to successful leadership today is influence, and not in “command and Control” authority.
We live in a new digital age with new set of rules. Influencing comes from listening to others not
talking , and command and control to others.

Successful turnaround leader clearly articulate his ideas, purposes and procedures using
unambiguous language.

11.4: Focusing on present Operations

Companies in trouble must focus on what needs to be done. Management or leaders cannot afford
to spend time on thinking global concepts and various unrelated issues with companies, this need
to focus begins with companies ideas which affects strategic planning, decision making and
organisational change.

11.5 Focus on Needs in Turnarounds

Clearly defined Ideals and Executive Responsibility:

The ideals of successful firms are easily understood basic concepts that emphasize service to the
community. But unsuccessful company ideals are often less specific and usually embrace
objective rather than service. People involved in turning a company around need something to get
excited about. They need ideals. These ideals must be clearly understood by organisation
members. Good leaders can cultivate ideals, but the leaders must be believable as individuals
appear to be operating within their own framework of idealism. With the special tensions of a
turnaround situation, the individual managers have to be perceived as fair, honest and appreciative
of the need to integrate the goals of the organisation with those of the individuals.

Ideals and executives responsibility frame the discipline system so essential to a focus on present
operations of the turnaround company.

Strategic Planning

Few successful turnaround leaders spend much time on general strategic planning. Successful
firms also more accurately stick their ability to fully implement their strategic plans. Unsuccessful
firms often had strategic plans that were inconsistent, it were not implemented successfully.
Turnaround Organisations focus should always to make strategic plans like working on new
venture, selling off an old business or buying a new one etc.and to implement it.

11.6 Styles of Decision Making in the Turnaround process.

The turnaround leader is often forced by circumstance to make decisions with something less than
complete details. Yet, the need for decision making does not change.

Mintzberg (1978) described three different modes of decision making;

1. Planning (Analytical)

2.Adaptive (Political)

3. entrepreneurial (Intuitive)

He suggested that these three modes are often intermixed at different levels in the organisation and
at different stages in the organisation’s development. Oftenly it is found that the turnaround
leaders too much depend upon intuition and present knowledge and not enough upon experience
and required knowledge. This is the fundamental dilemma for turnaround leaders needing to make
difficult decisions. Time pressure also force to take decision on the basis of their intuition and
intuition amortized over a very small domain usually leads to unfavourable results during the time
of crisis. For these reasons, the effective turnaround leader will wish to complement intuition with
knowledge exploration.

The successful companies arranged to gather the information, or to know the facts which are
critical in making the decision. But unsuccessful firms oftenly had a significant gap in their
information flows and take the decision mostly on what the information available to them, which
may be accurate or inaccurate . the depth and relevance of the information collected is a key factor
in the usefulness of the intuition and it is applied to the decision- making process.

11.7 Organizational Change:

Obviously , turnaround involve some changes in the manner in which the firm conducts its
business. Changes are very necessary. By keenly focusing on day-to-day operational matters and
by constantly making small incremental changes for the better, the wise leader builds team
confidence and gradually builds competitive strength. Old values provide useful and effective base
for the building of new values.

The accomplishment of essential change is one of the most important tasks of the turnaround
leader. To deal with the many aspects of resistance, the turnaround leader must be an effective
teacher using old values as a foundation in order to reduce cultural resistance to change. New
ways of fulfilling objectives must be taught with tacts and managerial skills in order to reduce
change resistance. Power can influence the change process, and some turnaround leaders have a
great deal more than the others like:

(a) Reward power, whereby leader has the ability to reward another person.

(b) Coercive power, whereby the influencer has the ability to punish others.

(c) Legitimate power, which means legally granted power.

(d) Expert power, based on the perceived special knowledge of the influencer.

The amount of power the turnaround leader has depends upon the personal history and qualities
of the individual and situations how he arrived on the scene. Power can bring the lot of changes in
making the troublesome organisation success.

Following are the key points which can be learned from focusing on present operations:

1. The troublesome companies should focus on its strategic planning implementation such as
improving the product, reducing the cost, and improving product quality and customer service.

2. In troublesome successful leaders centres the company’s attention on the business operations
and very little attention acquisitions, diversification schemes, new joint ventures etc.

3. Ideals play more of a role at successful companies. People at companies in trouble need
something to get excited about.

4. Incremental improvement are made constantly.

11.8: Quality in the managerial process:

Quality in managerial process reassures, how the companies turnaround. The process involved
would seem to be most qualitative to most companies facing financial crisis because the key
characteristics of turnaround success were business strategy, managerial competencies, technical
skills, knowledge, experience and personal characteristics rather than the availability of resources
Also , we must be concerned about the quality in the managerial process. How can we be satisfied
with failure? If we give the turnaround before us our most serious study and our most
conscientious efforts and we still fail, perhaps that is one possible outcome. But as professional,
we must be concerned with the quality of our managerial process.

During the times of stress how well does management understand its job? Do the leaders or
managers of companies undergoing difficult times know what needs to be done? Leadership based
on technical expertise, on relevant experience in the industry being served and on personal
integrity. During the time of shortage of cash managers set examples by taking less pay.in
unsuccessful cases, the managers often did not know what needed to be done and how to do what
is needed. management divert scare resources into poorly thought out plans for expansion while
critical day to day problems of high product cost and product quality were neglected. Management
approves the inconsistent strategies which were beyond the resource base of the firm.
Management changed more frequently, plays less of an exemplary role and exhibits less
appreciation of old values as foundations for new beliefs.

11.9 Turnaround management as a skill:

The first step in turnaround process is often to change the top management or leadership of the
business and to appoint an experienced manager, often strong, commanding leadership in
implementing the plan, and restructuring the business because turnaround management is a
skill .Turnaround leader should have an capability to get problems resolved, but this capability
exists only in potential for. That means developing the skills not only to analyse problems but to
remedy them. Many business schools and government make us into thinking that mere analysis of
the problem is the principal skill. To cope effectively with today’s problems, we need skills that
may be entirely different from those which served our nation better times. we must develop skills
that will help us to remedy troubled situations when they occur. We must know more about how to
accomplish more with less. leader should be more efficient in his practice of management, more
cost-effective, and more professional. In order to overcome the loopholes of firm leader must
modify his managerial behaviour. It is to be hoped that new people are being trained to take their
places. Instead of learning about real management in courses like operation management, we
should learn rules for selecting unit, batch or mass production systems, probably a once in a life
time decision for most companies. In courses on strategy we learn about portfolio management,
implication being that management is basically a selection process not an accomplishment
process. We learn how to detect and analyze problems, but we learn less about how to remedy
them. Even in engineering programmes, it is learned less about how goods are actually designed
and produced. In marketing programmes we cover less how to get an order and in finance courses
we learn less how to collect money. So remedial skills should be folded in the learning system, so
that the managerial skills those are necessary at the times of difficult situations or while taking
the turnaround decisions .without the necessary skills the implementation of turnaround will not
give a fruitful result to the organisation
 Question for self Practice
Q.1 : Explain the role of CEO and other Management teams in turnaround situation

Q.2: What are the personal characterstictics should turnaround leader should possess?

Q.3: What are the various decision making styles in turnaround process

Q.4: Write a short note on role of Chief Executive or turnaround leader?

Q.5: Write a short note on “ Turnaround Management as a Skill”

 Question paper – April-2018
Maximum Marks: 75 Duration: 2 ½ hours

N.B. 1) All the Questions are compulsory, subject to internal choice.

2) Figures to the right indicate full marks.

Q.1 Explain the concepts: (15)

(a) JIT
(b) SOHO
(c) Generic Process
(d) Backward Integration
(e) Restructuring

Q.2 a. Define Turnaround Management. Explain the characteristics of Turnaround

management 8

b. Explain Intensive Growth Strategies with advantages and disadvantages. 7

OR

c. discuss the effects of liberalization on Indian Economy . 8

d. define business organisation. Explain the characteristics of business organisation. 7

Q.3 a. Define Industrial Sickness? Explain Internal Reasons for industrial Sickness. 8

b. Explain the various problems faced by small scale industries in India? 7

OR

c. explain the remedial measures taken by government to reduce industrial sickness. 8

d. Explain the different stages of sickness. 7

Q.4. a. Explain the Six C’s in the proper implementation of TQM. 8

b. What is business restructuring? Explain the different types of restructuring. 7
OR

c. How BPR is different from TQM? Explain their difference. 8

d. Explain the Central Thrust of BPR. 7

5. a. Explain Franchising. What are the different types of franchises? 8

b. Explain the different types of outsourcing. 7
OR

c. what is an Agency? What are the duties of an agency to their client? 8

d. Explain the benefits of free-lancing. 7