Reasons and Remedies for Sickness in Smes by Amritraj d Bangera

7/28/2019 Reasons and Remedies for Sickness in Smes by Amritraj d Bangera

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REASONS AND REMEDIES


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A sick industrial unit may be defined as one when it fails to

generate surplus on a continuous basis and depends on frequent

infusion of external funds for its survival.


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Due to this indiscriminate sponsoring of small units, infant

mortality among them is fairly high. The 1972 census estimated

that 35 percent of all the small units were dead before they

started.


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Internal Causes:

(1) planning

(A) technical feasibility

(B) economic viability(2) implementation

(3) production

(A) production management

(B) labour management(C) marketing management

(D) financial management

(E) administrative management


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Infrastructure Bottlenecks

Non-availability of irregular supply of raw materials or other inputs

Power shortage

Transport bottlenecks Financial bottlenecks

Non-availability of finance

Government control and policies

Government price controls

Abrupt change in government policies


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Market constraints

Market saturation

Revolutionary technological advances making products obsolete

Extraneous factors Natural calamities

War

Sympathetic strikes


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Revival plan helps to bring back the business on track.

Revival plan should be time bound to be successful.

Seven steps to be followed for revival of business are:

1. Finalize the goals/objectives/targets for performance at all levels.2. Issue policy guidelines on major aspects that affect-

Image of company

Work culture of organization.


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3. Hold discussion with department heads to assess the departmental

problems.

4. Set up feedback/monitoring/audit systems to assess performance

and make corrections.

5. Implement use of modern management tools

IT - MIS

TQM

Inventory control

6. Plug the loopholes to achieve optimal productions.

7. Adopt BPR to do Right Things effectively.

Closing Unprofitable units

Planning expansion and diversification


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The following seven steps will enable a proper diagnosis of the

organizational sickness

1. Interviewing the people across the organization to have a general feel of

the problem that leads to the sickness.

Workers Suppliers

Customers

2. Hold fact finding sessions to list the known/possible factors contributing to

the sickness.

3. Hold discussions with department/divisional heads to assess the nature &

depth of the department problems

Production

Quality

Conduct of business in various department/divisions


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4. Setup feedback/monitoring/audit control systems to periodically assess

the performance, deviations and the needed corrections.

5. Implement the use of modern management tools, techniques, information

technology to improve the bottom-line.

JIT Cost control

TQM

Budgetary control/inventory control

6. Plug the loopholes and make the present deficiencies to achieve optimal

production and improved efficiencies.

7. Adopt Business Process Reengineering to do the right things and to

achieve major breakthroughs in

Cost

Quality

Profits


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1. Establishment of a proper management information system for

providing early warning signal from within.

2. Financial institutions and banks should initiate

necessary corrective action for sick or prone to be sick units based

on diagnostic studies.

3. Attempt should be made to restore sick

units to financial health. If not it should be

wound up.

4. Excessive concern over unemployment

resulting from the closure of sick unit is

unwarranted. In such case setting up ofnational fund for the purpose and providing

retraining for the workers.


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5. Setting up special institution The Broad for Financial and Industrial

reconstruction a single window clearing agency.

6. Responsible management for mismanagement of a firm must not be given

any assistance from financial institutions even for new venture.

7. In any scheme of reconstructing of sick units all the stock holders shouldbear sacrifice on equitable and just basis.

8. Company taking over a sick unit must have the technology, capital and

skill to save it.

9. Debt-equity ratio ought to be realistic. Fiscal policy, too, requires

rationalization.

10. Incentives should be provided to professional managers helping inreviving sick units.

11. Treatment of capital-intensive units prone to sickness has to on a different

footing than tackling of sickness in industry in general.


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Documents

Reasons and Remedies for Sickness in Smes by Amritraj d Bangera