Organizational Failure and Renewal - Case Study Example

1. Introduction In the fast transforming business dynamics, the survival of business is highly dependent on the various external and internal factors that significantly impact the performance outcome of the organizations. Indeed, success of the firm is always the driving force behind the business strategies. But it is nevertheless, highly unrealistic for every business to succeed at all times. Many a time, the tangible and intangible issues and factors within and outside the firm, may become the contributing elements for its deteriorating performance. In such a scenario, the managerial leadership becomes the major enabling factor for the companies to overcome failure and gain competitive advantage. The successful leaders ensure that failures become their stepping stones to success. They respond to adversities with fortitude and creative inputs. The paper would, thus be studying the reasons for failure of a cosmetic company and analyze the factors for its successful revival. 2. Brief summary of the case The cosmetic company XX was highly successful and had showed steep growth in the previous 5 years. But in the recent time, the new products of the company repeatedly failed to garner customer support and struggled in the market. The various products not only were of low quality but their defective packaging became a critical element for their failure. The faulty lid and the non working products that failed to deliver made the company a laughing stock in the competitive market. The managerial indifference to the falling market credibility was also an important aspect that contributed towards the company’s downfall. 3. Situation analysis The company was a high revenue cosmetic company that had a niche Market position. The lack of funds due to recent downtrend in world economy and recessive trend might have contributed to low business to some extent. But major factors that were responsible for the failure of new products were company’s lack of leadership initiatives that failed to anticipate the changing demands of the customers and introduce the corresponding changes within the work culture. The managerial leadership, under the stewardship of engineering manager who was responsible for new product development, was found to be huge lacking in various spheres of management. The manager did not apply his extensive experience in studying the changing requirements of the consumers, while at the same there was no precise guidelines and strategy for new product development. The teamwork lacked coordinated approach because of lack of requisite information and communication amongst themselves and with other departments like manufacturing, quality control, marketing and sales etc. that were intrinsically linked to the success of the new products. This had created a huge gap in the knowledge about the changing market trends, advancing technology and how it can add value to the products and finally the usefulness of the new product. The consumers had also no prior information of the new products before its launch, so they were not particularly enthusiastic about its use. Most important fact was that the products were being introduced to the new market without predefined guidelines for quality control and market strategy. Hence the defective packaging along with sub standard product, greatly contributed to the falling credibility of the company and failure of the new line of products. The organization was actually found to be working on ‘impulses of the manager’ rather than on strategically developed action plans for new products and worked with a team that lacked motivation and creativity. 4. Analysis and identification of factors contributing to the failure The management lacked focus and failed to develop an integrated approach. The success of the new products considerably depends on the three major factors: timeliness, pricing and quality. According to Slater and Narver (1995), markets support organization which ‘continuously acquire, process, and disseminate throughout the organization knowledge about markets, products, technologies, and business processes’. The following factors were ignored by the managerial leadership. 4.1 Ineffective strategy The management had neither prepared a definite strategy for development of new line of product nor proper guidelines for the commencement and development processes that are essential part of new product development. 4.2 lack of feedback The management did not promote frequent feedback on the progress and development of new products and thus failed to identify the shortcomings and major defects within the products and packaging. 4.3 Lack of communication within the team members Dissemination of important information and lack of communication within the organization was a key factor that had significantly impacted not only the development process but also the market outcome of the new product. 4.4 Ineffective market strategy The company’s inadequacy in developing a market strategy that would facilitate its products and services to meet the needs and requirements of the people ultimately became its nemesis. 4.5 Insufficient knowledge about customers’ changing requirements The managerial leadership disregarded the need for regular surveys, feedback processes and R&D activities to identify the opportunities for new products. Hence, they did not incorporate the changing requirements of the people within the new products and services that would meet the changing demands of the masses. 4.6 Lack of commitment The workers were not committed to their short term and long term goals. Various factors like weak management, conflict ridden organization culture and unrealistic expectations from the workforce did not help in inculcating security and sense of responsibility. 5. Turnaround strategy Turnaround strategy for a failing or failed company requires judicious action plan that relies heavily on the leadership initiatives of the company. Strong managerial leadership facilitates more accommodating approach to the changing dynamics of the organizational culture and management through integrated approach. It provides the necessary impetus to the employees to strive towards collective goals. The key features of turnaround strategy are detailed as follow: 5.1 Leadership initiatives Drucker (1999) argues that external environment is intrinsically linked to the business performance and managerial leadership must be able to identify and exploit their potential for the organization’s advantage. The open communication approach by the managerial leadership greatly helps in adapting to the strategic changes that are brought about transforming business dynamics. The leadership initiatives must encourage cross cultural understanding and develop joint goals. As Sjostrand and Tyrstrup (2001) assert that in the current times, the equation seems to have changed and ‘we approach managerial leadership as a relational, ongoing social construction process rather than as a single clear cut phenomenon’. People become the major link for change and inculcating confidence and mutual respect in the workforce has become one of the most important aspects of leadership initiatives. Shapiro, Slywotzky and Tedlow (2000) emphasize that major reason for companies that sustain their performance through thick and thin are their strong leadership. Leaders are able to anticipate the changes and face the adverse situations with high sense of urgency and innovative practices, well before the ‘warning bell’ starts to ring. They are able to explore and identify the opportunities even in the failing business and exploit them to turn failure into success. 5.2 Change management and tough decision making The changing business strategies to cope with the fast transforming socio-economical paradigms of the times have become crucial factors that enable the businesses to compete against their rivals. The different contextual factors vis-à-vis size, technology, environment, diversification and globalization are vital elements that have significant impact on the managerial decision making. Carroll and Mui (2008) have observed that ‘executives too often kid themselves into thinking that problem isn’t so severe and delay any reaction until it is too late’. Hence, in the process of revival of business, the leaders need to make tough decisions and implement changes to revitalize the business. Leaders’ foresight and vision ensures that changes are embraced with more understanding of changing business dynamics. Mintzberg (1990) emphasizes the need to exploit the informed choices, gained through the accumulated knowledge regarding the changing trends and preferences of the people and market conditions. Hence, in the competitive business environment, exemplary leadership makes certain that data, information and knowledge are effectively linked within the organizational goals and objectives to gain competitive advantage. 5.3 Strategic Action plan The changing equations of global business require proactive appraisals and measure for rejuvenating failing businesses. The strategic planning facilitates organizations in creating linkages to meet the needs of the markets. Bateman and Snell (2009:132) have defined planning as ‘the conscious, systematic process of making decisions about goals and activities that an individual, group, work unit or organization will pursue in future’. It provides the managerial leadership with well laid out but flexible course of future actions to meet the desired goals. Sull (2000) believes that the ‘problem is not an inability to take action but an inability to take appropriate action…. caught in the web of active inertia’. He further defines active inertia as the tendency of the organizations to follow established pattern of behavior even in response to dramatic environmental shift. Thus, under good leadership, dynamic action plans are evolved that are able face the challenges of fast transforming macro and micro environmental factors. In the renewal of business, this becomes the critical aspect of the turnaround strategy. 5.3a Effective communication and resetting of market oriented goals Effective communication becomes one of the most important tools of managerial leadership that have wide ranging influence in the smooth functioning of corporate bodies. The effective communication is significant in the administration of the organization and projection of organization’s aims and objectives in the eyes of the public and stakeholders. Hence, good managerial leadership demands a better informed leader who is capable of taking initiative and at the same time, he is also able to inculcate confidence in his people to move forward through effective communication. In the revival process, identification of various barriers to communication that are detrimental to the organizational effectiveness has become vital for prediction and improvisation in work place, leading to improved performance. 5.3b Teamwork and integrated approach Effective team work constitutes one of the most important factors that make valuable contribution to the organization. It promotes a sense of togetherness and collective responsibility that reflects in the increased output and improved performance of the organization. Thus, good leadership always strives to resolve workplace conflicts and other such barriers that have negative impact on the team performance. They promote creativity and empower people with decision making power to exploit their potential for improved performance, especially when the company needs to overcome the paradigms of failing business. 5.3c Strengthening customer relationship Customers are the mainstay of a business and therefore, the core competency of organizations is focused towards building constructive relationship with the customers. Nargundkar and Srivastava (2002), knowledge about customer and their required is considered to be critical for the long term success of a business. Thus, leaders ensure that customers’ requirements are intrinsically linked people-centric policies and plans that would meet the challenges of the changing social patterns and its changing demands. 5.3d New product development and pilot test through simulated test marketing with actual product Built-in instability within the market forces primarily serves to promote the concept of development of the innovative product line to meet the changing demands from the customer. Speed and flexibility have become extremely important ingredients for the products so that the organizations can timely and efficiently meet the fast changing preferences of the customers. But at the same time, the company must encourage failure-tolerant leaders who can make ‘employees understand that failure that results despite careful planning and conscientious execution offers a learning opportunity… as long as the employee continues to learn and adjust, chances are good that one of those risks will pay off’ (Field, 2008). 5.3e Feedback and reflective practice In failing businesses, it helps to identify elements that contribute towards continuous low outcome of the people and firm. Failure of projects and plans are not important in the longer run but learning from them is vital for growth. Kanter (2003) says that feedback and reflective practice become crucial because ‘all turnaround leaders share the overarching task of restoring confidence through empowerment – replacing denial with dialogue, blame with respect, isolation with collaboration and helplessness with opportunities for initiatives’. 6. Conclusion Kanter (2001) has correctly stressed that success ‘requires challenging assumptions about customers, internal and external communication, decision making, operating style, managerial behavior, employee motivation and retention and then redefining a new way’. The revival of failed business is highly complex, both terms of organizational goals in changing business equations and organizational culture in coping with the changes. The dynamic leadership initiatives become the vital ingredients that promote collective goals through shared learning to revive failed businesses. Interaction with the employees serves as the motivating factor which inspires them to excel and recover at a faster pace. (words: 2098) Reference Bateman and Snell. (2009). Management: Leading and Collaborating in a Competitive World. 8th ed. McGraw hill. Carroll, Paul B and Miu, Chunka.(2008). Seven ways to Fail Big. Harvard Business Review. Drucker,P. (1999). Management Challenges for the 21th Century. 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