Management turnarounds: causes of decline. (Selected Topic).

Introduction

Businesses decline over a period of time, usually several years. Rapid decline only occurs when the external elements change rapidly, such as in cases of economic recession, rapid technological changes, political/legal instability (legislation adversely effecting a product line), cultural/social changes (consumers/purchasers' negative attitude against a product) or rapid market entrance by a competitor with pricing advantage.

The occasions of rapid business decline caused by the internal environment are rare, the exception being family managed businesses that have not prepared for the future. The internal elements, although manageable, are not managed well by businesses in decline.

Causes of Decline Internal and External

Internal and external signals of decline indicate larger, more universal problems that management teams should address immediately. For example, if you have noticed an increase in customer complaints or an erosion of customer confidence, it may be due to an inadequate understanding of customer needs. Signals of decline point to one or more definite causes of failure. Other common causes of decline include the following:

* Management by exception rather than flexible planning. This situation is most common in businesses that do not practice strategic planning. Decisions are made on an "ad hoc" basis and are generally reactionary; that is, the decision results from an immediate response to a problem. The problem was not anticipated and, therefore, there was not a plan in place to address the problem.

* Delegation without control; no feedback review or reinforcement. Business managers should delegate responsibility and authority to various key employees. Often, responsibility is delegated to an employee without a complete analysis of the transfer of authority. The transfer of authority has incumbent upon it the transfer of responsibility. Often, responsibility is transferred without the associated authority. Authority and responsibility should not be transferred without a complete understanding by both the manager and the employee of the goals and objectives to be accomplished by the transfer of power. A typical mistake made by managers is the transfer of control to the "next employee in line" without an understanding of the employee's management ability.