Article (January-2020)


Leadership should have done SWOT analysis

Mihir Gosalia

Designation : -  

Organization : -  Mumbai


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1. The CMD lacked business acumen as compared to Finance Director. The Finance Director had thoroughly done his homework on the project expansion viability including on the numbers. He had done some research too on other companies' expansion plans in steel industry and why they fail and what are the lessons learned from it. The Finance Director considered all 360 degree impacts on functions as a result of expansion of existing plants and acquiring new one's by pointing out impact on manpower and burden on finances as a consequence.

However the CMD chose to ignore the research and analysis by Finance Director and the warning signs and optimistically went ahead with the expansion plans assuming that things will work out. Let's be optimistic and not pessimistic like Finance. The Finance Director was grounded, realistic and driven by facts. CMD did not exhibit those tendencies.

Also, there showed lack of experience when selecting NIXON Steel for expansion of newly acquired steel plant KISCO. NIXON steel had nil experience in executing green field projects and also had never handled projects of worth Rs 3000 crore. NIXON steel neither had the resources nor the expertise to pull off a project of this magnitude. NIXON failed to keep a tab on the contractors and sub-contractors work and so did MAIL. The fact that the project was getting delayed should have ringed warning bells for MAIL leadership.

Leadership should have stepped in at that time and taken corrective actions mid-way instead of waiting for project completion and costs escalation.

CMD should have done SWOT analysis using PESTLE Method of the entire project before embarking on such a huge expansion. Action plans should have been made for addressing all Weaknesses (Internal) and Threats (External). All functions/stakeholders should have been involved and their views considered before arriving at a decision. This seems to be lacking.

The CMD may be good from a growth and expansion point of view, he may have the aggressive instincts, but he should have realized that by taking into consideration, the polar opposite views of his Finance colleague and others, the best, practical & realistic decision in the interests of the company would have been arrived at. A Leader should take all of his people along with him. It should not be a one-man show and decision, else it's bound to fail.

Also, the comments by CMD on "This is time when we can fill up our coffer. Let's cash on this golden opportunity." seemed to imply looking at only short term gains as compared to long term gains and sustainability. This is evident from the fact in present scenario that MAIL with burgeoning debt, poor demand of steel, additional 3000 employees on the rolls, increasing cost of raw materials and demand for wage revision, it was sitting on a ticking time bomb.

2. MAIL should attempt to turn around the organisations, through structural changes in the organisation and/or market repositioning. Probably should look at hiring a new management team or shrink operations to regain profitability. A change in leadership helps to make sure that those methods which resulted in the company's failure are not used. The new leader has to motivate employees, listen to their views and delegate powers. The combined effect of strong leadership and changes in the components of an organisation will bring about a new organisational culture.

Do a more detailed assessment of strengths and weaknesses in the areas of competitive position, finances, marketing, operations, organisational structure, and personnel. Then develop a strategic plan with specific goals and detailed functional actions.

Find a niche in the industry that offers good opportunities, that is free or taken by weaker competitors, whose existing resources and capabilities are advantageous. If MAIL cannot find a niche or expand its position, another option is to hold the industry position and at the same time maintain its HR costs until the recovery phase. A maintenance-oriented HR strategy will contribute to the recovery strategy needed to hold on to its industry position. Measures include reducing working hours, mandatory short weeks, the restriction of overtime work, sabbatical leaves or change to part time, impose hiring freezes. These measures can be applied for a certain period of time.

MAIL may initiate new marketing programs to broaden the business and customer base and increase market penetration. It may look at increasing revenue by carefully adding new products and improving customer service. Strategic alliances with other established organisations may be explored unlike the mistake done in this case with NIXON Steel.

Financially, shift the emphasis from cash flow concerns to maintaining a strong balance sheet, securing long-term financing, and implementing strategic accounting and control systems.