Inadequate “rounded” managerial experience/understanding in line chosen Underestimation of capital required for the project

1. SEVEN BUSINESS CRISES
By
Ajay Dixit
Sr. Faculty
ENTREPRENEURSHIP DEVELOPMENT INSTITUTE OF INDIA
AHMEDABAD, GUJARAT

2. 2
1. THE STARTING CRISIS
2. THE CASH CRISIS (FIRST 3FIRST 3
YEARSYEARS)
3. THE DELEGATION CRISIS
(3 TO3 TO
7 YEARS7 YEARS)
4. THE LEADERSHIP CRISIS
WHAT ARE THE SEVEN
CRISES?

3. 5. THE PROSPERITY CRISIS
(7 to 10 years7 to 10 years)
6. THE FINANCE CRISIS
7. THE MANAGEMENT- (TEN ONWARDSTEN ONWARDS)
SUCCESSION CRISIS
WHAT ARE THE SEVEN
CRISES?

4. • Inadequate “rounded” managerial
experience/understanding in line chosen
• Underestimation of capital required for the
project
FIVE CAUSES OF STARTING
CRISIS

5. FIVE CAUSES OF STARTING
CRISIS
• Lack of understanding/ arrangements of
accounts
• Wrong choice of equipment/ technology/
project capacity
• Ignorance about taxation

6. AVOIDING STARTING
CRISIS
• Choose the project line you are most
familiar with (experience, education,
market contacts, special knowledge, etc)
• Make realistic plans, not over ambitious
• Allow project report to ‘thaw’ and recheck
optimistic assumptions

7. AVOIDING STARTING CRISIS
(Contd..)
• Be conservative about income (low and
late) and liberal about expenditure (high
and early) in making cash flow
projection
• Never start a project without assuring
sufficient funds - change it, curtail it,
drop it

8. AVOIDING STARTING CRISIS
(Contd..)
• Use as much advice and information as
possible from every sources
• Invest in an accountant at the earliest
(learn what important financial data are
needed)
• Visit officers of sales tax and excise

9. CRISIS II - CASH
• Excessive attention to profits and sales
growth rather than cash-on-hand (Over
investment in raw material stock, rising
outstanding amount)
• Excessive investment in fixed assets by
tying up funds
• Unplanned expansion in time and stages

10. FIGHTING THE CASH
CRISIS
• Understand the difference between profit
and cash & cash and assets
• Constantly watch for ways of
economizing on cash
• Consult a good Accountant, Bankers,
Financial Experts..

11. FIGHTING THE CASH CRISIS
(Contd..)
• Constantly assess cash position, prepare
cash-flow statements every three months
in advance
• Monitor raw material stock, semi- finished
goods, inventory of finished goods, and
outstanding recoveries

12. CRISIS III - DELEGATION
• Inability to delegate responsibilities and share
decision-making burden
• Psychological problem (only I can do better, lack
of capability to guide and groom others, a lack
of trust on subordinates.)
• Business grows, responsibility grows, time does
not - business suffers, success ends up in failure

13. AVOIDING DELEGATION
CRISIS
• Seek out or associate a second capable
person to supplement “you”
• Test him, watch him and start sharing
responsibilities

14. AVOIDING DELEGATION CRISIS
(Contd..)
• Consult management experts or
colleagues to identify own weaknesses
and select the second person who is
strong in your weak areas
• Be prepared for high salaries, appropriate
status, authority and share of profits to
retain key person

15. CRISIS IV - LEADERSHIP
• Single owner or partners unable to manage
responsibilities of a large firm
• Failure to delegate and develop a management
team
• Failure to change into new style of managing as
effective leader - doing and checking oneself : no
delegation of authorities to others

16. FACING LEADERSHIP
CRISIS
• An entrepreneur must train, discipline
and re-educate himself/herself in new
management skills and style for growth
• Old habits, Old knowledge and
management by one or two
subordinates, physical check on
everything won’t do.

17. FACING LEADERSHIP CRISIS
(Contd..)
• Act more like a leader than manager/ supervisor
• Constantly evaluate “How you spend your time
• Concentrate on business strategies, future plans,
competition, government policies etc.
• Develop a team of executives, give them
authorities to create time for leadership
responsibilities.

18. CRISIS V - FINANCIAL
• Failure to choose right source of funding for
expansion (excessive dependence on borrowed
funds)
• Failure to go public
• Over ambitious and unrealistic expansion plan
using up surplus funds
• Psychological problems of losing control - 100%
ownership of declining unit v/s 80% of a large
successful firm

19. PREPARING FOR FINANCIAL
CRISIS
• Sufficient delegation, good team and monitoring
help effective planning to avoid financial crisis
• Consult experts and bankers to choose best
source, time and mode of expansion funds
• Do not be afraid to go public
• Remember : 80% ownership of a growing firm is
better than 100% ownership of
stagnant/declining one

20. • Satisfaction with current success - caught napping
• Failure to watch out for new competition,
technological changes, raw material substitute,
new products, consumer tastes
• Loss of market share, profits
• Over confidence, a cockiness out of prosperity –
ambitious expansion moves - intoxication of
success
CRISIS VI - PROSPERITY

21. DEALING WITH PROSPERITY
CRISIS
• Keep eyes and ears open, do not relax
even in prosperity
• Remain firmly aggressive, not passive
• Do not be over confident and enter into
unknown project/over ambitious expansion
• Remember success today is no
guarantee of success of tomorrow

22. CRISIS VII - MANAGEMENT
SUCCESSION
• Long illness, accident, unexpected death
or incapability of the entrepreneur
• No one groomed to take over
management responsibilities
• Second key person not having sufficient
shares in the firm

23. CRISIS VII – MANAGEMENT
SUCCESSION (Contd..)
• Death duty, estate duty obligations
• Failure to delegate, lack of planning,
over confidence - all catching up

24. • Succession has to be planned - remove
doubts and apprehensions.
• Take advance action in selecting and
grooming a management – successor
• It is more reliable to have one person with
general management skills and have a
few others for special skills of the
entrepreneur
PLANNING FOR
“MANAGEMENT -
SUCCESSION”

25. • A team is better than single “Prince”
• Invite competent persons on the Board
of Directors
• Develop a club of like- minded
businessman
• Constantly interact with Bankers and
Investors
PLANNING FOR “MANAGEMENT-
SUCCESSION” (Cont..)

26. • Prepare a will, transfer shares and plan
for death duty etc.
• Brief your family, son, wife about
assets, liabilities and key elements of
business
PLANNING FOR “MANAGEMENT-
SUCCESSION” (Cont..)

27. PLANNING FOR SURVIVAL
AND GROWTH
• Entrepreneur attitude, psychology, behaviour,
more important than functional knowledge of
management
• Crises primarily due to internal causes (the
entrepreneur)
• Planning is a pre-requisite of success : more
important for SSIs.
• Myth - Entrepreneurs are high risk-takers, too
much in hurry and do not plan

28. PLAN FOR DELEGATING
WORK
The boss should have a clear picture of the
objectives of his department, the activities
necessary to accomplish each objective in
sequence of importance and the distribution of
the total work load to his subordinates.
This is best done on a worksheet – a practical
visual display – and should be reviewed as
often as necessary. This worksheet should
serve the purpose of a discussion guide.

29. PLAN FOR DELEGATING
WORK
The boss should have a clear picture of the
objectives of his department, the activities
necessary to accomplish each objective in
sequence of importance and the distribution of
the total work load to his subordinates.
This is best done on a worksheet – a practical
visual display – and should be reviewed as
often as necessary. This worksheet should
serve the purpose of a discussion guide.

30. WHY DOESN’T THE BOSS
DELEGATE MORE?
1. He doesn’t want subordinate to Learn too much
about his Job.
2. He doesn’t want to Lessen his importance both to
the organization and to his subordinates.
3. He is qualified to move quickly and get things
done better than turning the job over to someone
else.
4. He focus that the development of younger Men/
Women might force him to retire earlier.

31. WHAT EFFECT DOES THIS HAVE?
The boss is loaded down with Details. He does not
have time for his own Growth and Development,
and necessary qualifications for advancement for
advancement to larger responsibilities. There is also
lack of development of his own staff.

32. FOLLOW THROUGH
Periodic follow-through is necessary in respect to
time schedule, check points, performance to
determine whether changes should be made in the
assignment or remedial action initiated.
If the boss is relax with follow through, subordinates
develop Lack of concern and assignments “drag” on
or are sometimes even forgotten.

33. BENEFITS OF DELEGATION
Boss frees himself for the performance of his most
important Function.
1. To get things done through people.
2. To look for improvement
3. To develop subordinates
4. To do other things he is accountable for
It is a Necessary tool for the growth and
development of subordinates.

34. HOW TO DELEGATE
1. Acceptance, Understanding
The “Boss” is accountable for seeing that an
assignment is understood and interpreted
correctly.
That the person who receives the delegation
knows exactly What results are expected and
When
Telling alone is not enough.

35. HOW TO DELEGATE
2. State the End Result first
The Boss should take the time to think the
assignment through to the point when he can
state clearly the END Results Before beginning a
detailed discussion.
3. Put him on his own
Once the delegation has been made and
accepted and the employee understands the time
schedule, the check points, the performance
standards, and WHERE TO GO FOR HELP,
then he should be Left alone as far as possible.

36. DELEGATION
Management Climate Influences Delegation
This climate or atmosphere has a direct Influence on
the effectiveness with which delegation of
responsibility and authority can be made.
If climate is Favourable then it is relatively easy to
MAINTAIN effective delegation.
If the climate is Unfavourable then the boss of the
unit and his subordinates will need to understand
how this influence affects their relationship and the
manner in which delegations can be made by the
boss under the circumstances.

37. DELEGATION
Whenever the delegation of an assignment is
made the following steps help to achieve the
desired results:
• Get acceptance and understanding
• State end results first
• Put him on his own.

38. WHAT DOES THE ORGANISATION
WANT?
1. Economic welfare and growth
2. Maintenance of adequate staff to accomplish
workload on schedule within standards at
competitive costs.
3. Maximum utilization of total work force.
4. Good relations between management and
employees TEAMWORK Loyalty.

39. WHAT DOES THE EMPLOYEE
WANT?
1. Job security
2. Chance to advance on basis of Merits Performance.
3. Maximum utilization of ability, skills and interests.
4. Comparable compensation, incentives, welfare, fair
and uniform treatment.

40. PERFORMANCE IMPROVEMENT
PROGRAMME
PLANNING SHEET TO AVOID DELEGATION CRISIS
Sr.
No.
List out various areas /
activities of your
enterprises which has
scope of delegation
according to you. (Be
specific for Fin. Mktg.
A/cs. Banking, G M, etc.
Why do
you wish
to
delegate?
To whom
do you
want to
delegate?
When?
(Time
Frame)
How?
How will
you
monitor?
Remarks
1.
2.
3.
4.

41. PERFORMANCE IMPROVEMENT
PROGRAMME
PLANNING SHEET TO AVOID DELEGATION CRISIS
Sr.
No.
List out various areas /
activities of your
enterprises which has
scope of delegation
according to you. (Be
specific for Fin. Mktg.
A/cs. Banking, G M, etc.
Why do
you wish
to
delegate?
To whom
do you
want to
delegate?
When?
(Time
Frame)
How?
How will
you
monitor?
Remarks
5.
6.
7.
8.

42. PERFORMANCE IMPROVEMENT
PROGRAMME
PLANNING SHEET TO AVOID DELEGATION CRISIS
Sr.
No.
List out various areas /
activities of your
enterprises which has
scope of delegation
according to you. (Be
specific for Fin. Mktg.
A/cs. Banking, G M, etc.
Why do
you wish
to
delegate?
To whom
do you
want to
delegate?
When?
(Time
Frame)
How?
How will
you
monitor?
Remarks
9.
10.