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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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