REASONS AND REMEDIES

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.

 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.

 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

 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

 Market constraints
Market saturation Revolutionary technological advances making products obsolete

Extraneous factors
Natural calamities War Sympathetic strikes

 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. 2. Finalize the goals/objectives/targets for performance at all levels. Issue policy guidelines on major aspects that affect Image of company Work culture of organization.

3. 4. 5. 6. 7.

Hold discussion with department heads to assess the departmental problems. Set up feedback/monitoring/audit systems to assess performance and make corrections. Implement use of modern management tools IT - MIS TQM Inventory control Plug the loopholes to achieve optimal productions. Adopt BPR to do Right Things effectively. Closing Unprofitable units Planning expansion and diversification

 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

4. 5.

6. 7.

Setup feedback/monitoring/audit control systems to periodically assess the performance, deviations and the needed corrections. Implement the use of modern management tools, techniques, information technology to improve the bottom-line. JIT Cost control TQM Budgetary control/inventory control Plug the loopholes and make the present deficiencies to achieve optimal production and improved efficiencies. Adopt Business Process Reengineering to do the right things and to achieve major breakthroughs in Cost Quality Profits

1. 2.

3.

4.

Establishment of a proper management information system for providing early warning signal from within. Financial institutions and banks should initiate necessary corrective action for sick or prone to be sick units based on diagnostic studies. Attempt should be made to restore sick units to financial health. If not it should be wound up. Excessive concern over unemployment resulting from the closure of sick unit is unwarranted. In such case setting up of national fund for the purpose and providing retraining for the workers.

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 should bear 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 in reviving 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.