Professional Documents
Culture Documents
Meaning of Crisis
Crisis refers to sudden unplanned events which cause major disturbances in the Organisation
and trigger a feeling of fear and threat among the employees.
Definition of crisis
According to Barton “A Crisis is any event that can seriously harm the people, reputation, or
financial condition of an Organisation”
Nature of Crisis
1. Sudden Event: Crisis is a sequence of sudden disturbing events harming the
Organisation.It is a sudden event so that it is a element of surprise to the Organisation.
2. Short Notice: Crisis generally arises on a short notice. It does not have a reflecting
nature to alert the system, so that there is short period of time the decision making.
3. Triggers Fear: Crisis Trigger a feeling of fear and threat amongst the individuals. It
may range from light problem to the severe problem.
6. Quick Response needed: After the hit of Crisis, there may be limited time in which,
managers or owners have to make decisions about what to do. The more is the time taken in
decision-making more is the impact of Crisis.
TYPES OF CRISIS
1. Physical Damage Crisis
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A Crisis which is characterised by the Physical damage of the individual, organisation, or the
society is called physical damage.
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STAGES OF CRISIS
1. The pre-crisis stage:
When someone in an organization discovers a critical situation, they usually bring it to the attention of
their supervisors/managers. This is known as either the pre-crisis warning or precursor. At this point
in time, the critical situation is known only inside the organization and is not yet visible to the general
public.
Consequences of crisis:
1. Poor capital:
Capital represents the financial resources companies use to purchase goods or labor for their
business operations. Crisis frequently have serious negative effects on a company’s available
capital, since they must now spend money to restore assets rather than advance business
operations. Large companies can set aside a portion of their operational profits for future
crisis recovery plans.
2. Loss of assets:
Assets are the physical items companies use in business operations. Crisis often renders
physical assets unusable if damage is significant to the business. Large companies can
mitigate the loss of business assets from physical crisis by operating multiple locations with
multiple business assets.
3.Infrastructure destruction:
Another major impact of crisis may be the destruction of infrastructure of the business or the
company. Crisis either physical or non-physical ultimately leads to the misbalanced
infrastructure.
4. Threatened stakeholders:
Crisis can harm stakeholders physically, emotionally, and financially. A wide array of
stakeholders is adversely affected by a crisis including community members, employees,
customers, suppliers and stockholders.
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5.Damaged reputation:
Crisis damage reputations because it gives people to think badly of the organization. The
news media and the internet play a critical role as most stakeholders learn about crisis from
news reports and social media. If a reputation shifts from favorable to unfavorable,
stakeholders can change how they interact with the organization.
6. Lack of cashflow:
Most business experiences a lack of cash flow from business operations, which comes down
to two primary reasons. First, customers of the business are cutting spending in light of the
crisis, causing the cash flow coming into the business to slowdown. Because of this lack of
cash flow, many businesses turn to lenders to obtain small business loans or lines of credit.
Managing crisis
Crisis management may be defined as the technique of managing crisis situations. It is the
nature of activities to respond to a major threat to a person, group or organization. Typically,
proactive crisis management activities include forecasting potential crisis and planning how
to deal with them. It often includes strong focus on public relations to recover any damage to
public image and assure stakeholders that recovery is underway.
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For each of these channels it is important to maintain a consistent and accurate flow of
information. It should be through appropriate channels and to ensure a common context
across the channels.
By developing a consistent planning framework that is regularly reviewed can also enhance
the company’s capability to manage events more effectively.
9. Effective Spokesperson:
Depending in the nature of markets and the size of the organization, the organization may
need to consider professional help in this area. This may be through hiring spokesperson who
would work on company’s behalf or training internal candidates to fulfill the role.
10. Apologize:
Some organizations appear to be institutionally incapable of saying sorry. Demonstrating the
understanding of the difficulties of the situation and its impact on people is necessary to
manage the impact of crisis. Instead of demonstrating empathy with people and, through the
other actions and preparations, demonstrate that the company has acted reasonably as an
organization.
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5. Skill Shortages: Organizations have become complex and thus,in terms require
more specialist skill that are rare and scarce. The result is more dependency on the
professionals.
6. Governmental influence: Governmental control and changes in legislation with
regard to affirmative action for disadvantaged group,working condition and hours of
work, restrictions on women and child employment, causal and contract labour etc..,
have stimulated the organization to become involved in systematic manpower
planning.
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2)Internal factors:These are factors which affect manpower internally.These includes the
following;
A. Company policies and Strategies: The organization policies and strategies relating to
expansion, diversification, etc..,determine manpower demand in terms of quality and
quantity.
B. Manpower policies:Manpower policies of the company regarding quality of
manpower,compensation level,quality of working conditions, etc..,influence
manpower planning.
C. Job analysis:Detailed study of the job including the skill needed for a particular
job.Manpower planning is based on job analysis which determines the kind of
employees to be procured.
D. Type and quality of information:Any planning process needs qualitative and
accurate information about the organizational structure, capital budget, functional
areas objectives, level of technology being used job analysis,recruitment sources etc..,
E. Company’s production operational policy:Company’s policies regarding how much
to produce and how much to purchase from outside in order to manufacture the final
products influences the number and kind of people required.
F. Trade union:If the union declare that they will not work for more than and hour a day,
It affects the manpower planning.
IV. Supply forecasting:A manpower inventory is a data system which describes the
workforce of the organization.HR demand analysis provides the manager with a
means of estimating the number and kind of employees that will be required.
V. Estimating manpower gaps:Gap analysis is the process of comparing the workforce
supply projections to the workforce demand forecast.An analysis should consider the
composition of workforce, including demographic characteristics, geographic
location,size and employee competencies level.
VI. Action planning:Once the manpower gaps are identified,plans are prepared to bridge
these gaps. Plans to meet surplus manpower may be redeployed in other units and
retrenchment in consultation with the trade unions.
GROWTH DIMENSIONS
Growth dimensions are the methods for the growth of business.
GROWTH PHASES
Larry E Greiner has identified five stages in the growth of an organization each of which
begins with a prolonged period of peaceful growth
CREATIVITY
In this early stage, there are only few people in the company. They know each other well and
share their experience, knowledge, and information. All relevant issues are discussed among
all people. This is the typical creative start-up culture.
DIRECTION
Now the company is able to direct certain issues and tasks to certain people. Normally,
directives and control are highly centralized at this stage.
DELEGATION
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Management delegates some tasks, functions and authorities to other people in the company.
Departments emerge and develop their own dynamics.
CO-ORDINATION
Projects and tasks are coordinated between all parts and departments of the company so that
they are well in tune with each other.
COLLABORATION
The co-operation between all parts of the company is so well organized that they really can
work together effectively in whatever situation.
GROWTH BARRIERS
Following are the main growth barriers for the business.
FINANCIAL BARRIERS
These are the one of the biggest barriers to growth in business. The saying goes in
order to make money business should be willing to spend money, and this may be
particularly challenging for business.
ORGANISATIONAL BARRIERS
It can also be known as internal barriers these include managerial Capacity and
capability, skills and knowledge, objective of firm among other things. A start-up firm
may be well run by just a couple of individuals but as the company grows in size
fixed personnel will need to be employed to fill those gaps.
EXTERNAL BARRIERS
Michael Porter explains through five forces model the threats firms face when they
want to grow. But these are the same threats a company faces when they want to
grow. Any of these could affect the growth of a business.
SOCIAL BARRIERS
Recent studies have emphasized the need for networking trust and developing social
capital between entrepreneurs as ways if stimulating development and growth of
small enterprises.
LEGAL OR INSTITUTIONAL BARRIERS
Complicated laws rules and regulations can be big barriers when it comes to growth
of small companies. It may be in terms of unsuitable tax system and various
discriminatory legal regulations towards small firms that can really hinder their
capability
SUCCESSION STRATEGIES
Succession planning is described as having the right people in the right place at the right
time.
According to Bohlander and Snell, “Succession planning is the process of identifying,
developing and tracking key individuals for executive positions”.
Various succession planning strategies are follows;
VALUATION: The rule of thumb is that any time there is a transaction involving all
or part of the business, and then a valuation is recommended.
E.g.: competitors, customers or suppliers.
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When appraising a company, a valuator generally uses one or more of the following
approaches,
BUY-SELL AGREEMENTS: These are a useful and flexible way to plan for
ownership succession. A Buy-sell agreement is a legally binding agreement between
or among shareholders and the company that requires the shareholders or the
company to purchase the stock of the business owner.
There are three types of buy-sell agreements;
1. Stock Redemption: It occurs when the business itself purchases stock from
the existing shareholders.
2. Cross Purchase: It is between shareholders. Agreement is to purchase the
shares of one another upon certain trigger events
3. Wait and See plans: These plans combine the redemption and cross purchase
strategies. They first allow the other shareholders to purchase stock and then
require the company to redeem the remaining shares.
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EXIT OF BUSINESS
Exit strategies are methods used by companies to discontinue products, business, or
relationships with customers or suppliers. Exit strategies are techniques used by companies to
abandon products, divisions, or even entire industries.
REASONS FOR EXITING
Business owners make difficult decisions all the time in business. One of toughest decisions
can be whether to close their company. Several reasons can exist for closing a business.
Economic Conditions: There are common reason for closing the business. Low
national economic growth often due to a recession or depression directly effects the
company operations.
Low Profits: The inability to generate sufficient business profits is a common reason
to close a company. Business owners spend money on inventory, production over
head and general business expenses in operating a company.
Unavailable Resources: Companies need economic resources to produce consumer
goods and services. Economic resources include land, labour and capital. Land
represents the natural resources found in an economy. Labour represents the human
resources available to convert raw materials into consumer products. Capital
represents money, facilities and other physical assets needed to run a business.
Tough Competition: Competition represents the number of companies in the
economic market competing for consumers. Small business can face difficult
competition when attempting to maintain sufficient market share.
Better Future Goals: If the entrepreneur feels that a better business can be setup that
other opportunities is more exciting and profitable, the closing the current business is
the best option. To start a new venture exiting the ongoing business is very important.
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Liquidation: Business data struggling to survive may choose to liquidate their assets.
A common example of liquidation is the “going out of business sale”. When a
company liquidates it usually marks down the prices of its inventory to sell it quickly.
Friendly Sale: A business owner may choose to sell his or her enterprise in order to
retire or use the proceeds to start a new venture. This often occurs in family
businesses where the operation is passed from one family member to another.
The Life Style Company: In a life style company, the intent of the owner is to make
us possible for himself without planning for future expansion. All profits go directly
into her pocket instead of being put back into the business to help it grow, and
expenses are kept to the bare minimum.
IPO: An Initial Public Offering (IPO) occurs when a privately – owned business
decides to sell shares of stock to the public. This can be highly profitable for the
entrepreneur and investors, as this can generate a large amount of revenue in a short
period of time.
Mergers and Acquisition: with a merger or acquisition, the owner sells the
controlling interest in the business to another party but may still assume a smaller role
in the day to day operation. This strategy is often employed by an owner who wants to
live the business gradually without selling it out right.
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Evidencing the increased emphasis on exit strategy was research conducted during the mid-
1960’s through the mid – 1970’s that analyzed the exit process and created a frame work. The
business decision – makers could use to determine when and how to exit.
For example, Conrad Berenson posited an exit model in 1963 that identified 5 categories
are as follows,
1. Financial security: It entails determining if the minimum return on investment is
being met for the firm.
2. Financial opportunity: Financial opportunity, or calculating the return on alternative
uses of the firms resources.
3. Marketing Strategy: It determines the value of the product above pure financial
profit, such as brand-name worth and value of established distribution channels
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