On conclusion of a meeting, I was engaged in discussion with the promoters of the company, the father son duo. The younger one was energetically explaining all good stories about their business, glorifying the acumen of his father as an astute business man.
- Fifty years of existence,
- Father with hands-on experience in the field, singlehandedly taking forward the growth,
- High end imported machinery that produces unmatched quality,
- Key people are loyal to the organisation and working for long.
- Happy and long term clients,
- Virtually no impact of economic downturn,
- Stable revenue.
I was happy to know all these narratives. In fact, I had done some research on this organisation before taking up this assignment. Their success story is definitely impressive. A respected name in the locality.
At this stage, I enquired if the organisation anytime attempted understanding their weaknesses.
I received a blunt response and realised that I have touched a wrong point. This organisation is not adaptive in listening to tough questions, that may reveal softer side of the story or raise points to the promoters.
I realised that further enquiry on weakness will put these men in the defensive and switched to the positive side of the story keeping my inquisitiveness in the back. Anyway, my scope of engagement includes bringing out the potential risk factors, and identifying the weak areas is always a good starting point. Ultimately, my engagement would require access to the managers, floor supervisors, HR & accounts team. A few interaction would definitely provide some idea about what is on.
Taking A Deep Dive
Investopedia defines weakness as:
“Weakness stop an organization from performing at its optimum level. They are areas where the business needs to improve to remain competitive: a weak brand, higher-than-average turnover, high levels of debt, an inadequate supply chain, or lack of capital”
Every organisation will have some or the other areas of weakness and scrapping out questions on weakness indulges in arrogance, which is never a good sign. The first evidence of weakness became prominent as I entered the shop-floor (production area). It was clumsy, scrap everywhere, oil on the floor, dust and fumes coming in from outside. I started questioning on each of these points and received some vague answer.
|Why materials are not kept properly in the shop floor?||The supervisor did not ask to do that.|
|Why oil on the floor? Will it not cause slip or trip?||Last week, there was some oil spillage from plant. No accident so far.|
|Why people are not wearing personal protective equipment (PPEs)?||They are working in the plant for long and know what to do. They refuse to wear PPEs as it impacts their performance and low performance means no incentive.|
|Why dust is coming? Is it from your facility?||Our construction work is going on that side. It will complete in 4 months.|
|Why so much fume inside?||Chemical washing is on the other end and when there is wind, the fume directly spreads all across. It is an important process.|
These answers were sufficient for me to understand that all is not well in the organization. Evidence of good shop floor management or health & safety management or even environment management is non – existent. The company debates that improving house keeping is costly, but forget that by improving housekeeping they will be able to improve efficiency and reduce hazards. If translated in cost term, they are substantial.
That day, probably I received the biggest shock in their admin office, where I found two managers were engaged in vociferous quarrel in front of other junior members and both talking about reporting to their respective managers. It was so amusing that all the onlookers were astonishing looking at them with occasional nodding in some or the other remarks. They were so engaged that my entry to the room did not stop them from fighting.
I got my answer loud and clear. The company may be growing but its foundation is in the wrong footings. Good cultural values and clean management system is visibly absent.
Carrying Out A Diagnostic Test
It is often the fact that the management do not either believe that weakness exists within their organisation or they overlook it and avoid acknowledging facts. Not acknowledging weaknesse is as good as leaving with a serious ailment and believing that no medication is required, while accepting facts helps changing mental approach thus provokes diagnosis and remedial action.
As the weaknesses are company wide, looking into of all the functions of the organisation becomes important. One very important aspect is that weakness of one department can be weakness of another department due to their interrelations. For example, Maintenance function is integrated with Production and in case, Maintenance team is not sufficiently staffed or, suitably experienced which may lead to reduced plant up-time, then this is a weakness for the organisation.
Further, though weakness and threat are different in relation to an organisation – where weakness is internal and threat is external – there remains a strong cause and effect relation. Imagine a manufacturing plant producing lot of fume or dust and disposing hazardous chemicals in the nature. Should it not invite the wrath of employees / locals or the ire of pollution control departments?
Hence, it is important to know that the way of doing business is progressing towards a more responsible direction and only generating profit is not good organisational objective now. Any wrong methods working or work culture, can severely threat to an organisation including its existence.
The Environment – Industry – Society framework is shown in a simple view below, wherein ‘Other Stakeholders’ include, suppliers, lenders, investors etc.
However caustic it could be, fundamental questions need to be asked about every business process to evaluate the strength of the system and identify potential weaknesses. Such questions could be broken down into certain blocks like, ‘Project Management’, ‘Process Management’, ‘Information Management’, ‘Compliance Management’ and ‘Ethical Behaviour’.
These aspects of organisational revies are broadly explained as follows,
1. Project Management
Project management does not necessarily imply large project only. It also covers smaller projects projects like, adoption of a new technology, developing new product, reduction of cost, improvement of efficiency of a manufacturing line, reducing wastage, quality improvement, launching of a new product, entering into a new market, implementation of ERP system, recruitment in senior management positions and so on.
Some of the questions to be asked in case of a project environment could be,
- Whether the project team is formulated and are they competent?
- Is authority and responsibility of the team members suitability defined?
- Who is leading the team and what is his track record?
- Whether the documentation is complete with all essential aspects like, technology acquisition plan, cost, implementation timeline, potential risks and contingency plan?
- Whether proper due-diligence has been done in the selection of technology and approving cost?
- Whether progress information is documented and can be easily understood by third-party?
- Where progress monitoring is independent?
2. Process Management
Effective process management can make all the difference between a good- performing and a poor -performing company. It helps in improving financial results, investor return and employee happiness.
Assaessment of process should encompass all the processes of an organisation like, production, sales, finance, HR, admin, stores, procurement etc.
Where required, break down of processes under sub -processes to measure input / output may be relevant. It should attempt finding out the following,
- Do they have a documented process map and update it regularly?
- Is the process properly sequenced and is it effective?
- What competitors are doing and is there a possibility of gaining knowledge for other competitors?
- Is it possible to learn from any other industry or sector and emulate the best practices?
- Is the people driving the process understand it and accept the process to be the best?
- If they do not accept it to be the best, has the organisation tried to resolve the difference in opinion?
- Are the operating results of the process properly documented and up-to-date?
- Is there an evidence of continuous improvement?
Review of such information may lead to many aspects that can potentially be a risk.
3. Information Management
Future is in information science. Hence, management of information is of utmost importance in current century. The focus should be on, generation, adoption, action and security of information. It is not only related to the organisation, but also related to clients. The bare minimum assessment may include,
- Do the organisation understand the need for data security?
- Whether the generated information is genuine or reliable?
- Whether such information generated from different departments (even the most trivial ones) are suitably analysed and appropriate actions have been taken?
- Whether, such information is retained suitably and can be retrivable when required?
- Whether sufficient care is adopted to ensure stopping misuse of data / information and how?
- Where the company deployed stringent mechanism for data security relating to its clients and other stakeholders?
4. Compliance Management
Compliances are normally understood to be those related to external requirements. While it is true, this is one side of requirements only. The second side of compliances are those which constitute internal governance. A few examples of external and self -defined internal compliances could be as follows,
- External compliance
- Statutory and environmental,
- Accounting and financial norms,
- Safety and labour laws,
- Weights and measures,
- Self -defined internal compliance,
- are those that the organisation defines for it processes, follows them and continually update them. Examples of such internal compliance could be procedure for registration of a vendor or procedure for processing a payment etc.
- In certain cases, internal compliances could be much stringent than the external benchmark. For example, internal control of environmental pollution generation could be one such example.
A review of adherence of compliance should attempt finding out answers in the following areas,
- Whether responsibilities are fixed for different set of internal and external compliances?
- Whether a process for periodic review of compliance are established and can last three reports be traced?
- Through discussion, understand if the compliance team is following up the process only for the sake of meeting the requirement or they do it by believing it?
5. Ethical Behaviour
Ethics has become most important aspect of doing business and unethical business practices may severely damage reputation as well as financial implication.
It is important to understand the existence of high ethical values. Trying to find out questions in the following areas will be important,
- Whether the organisation has a defined ethics policy and whether the management follows these policies?
- Whether it percolates down to the lowest level of employees?
- Whether audit related to ethical behaviour is undertaken periodically?
Discussion with the people working in the organisation as well as people outside may help understanding the company’s ethical values to a great.
To understand the extent of implementation of ethics we need to look into,
Weakness takes organisations towards decline. In a growing economy and under low competition, such decline may not be immediate. But in a difficult environment, the organisations survival instincts are damaged by inherent weaknesses in the system.
The current adverse econimic condition, corresponding non-performing assets in the system and the quantum of business failures noticed are some examples of mismanagement. All these points towards existence of weaknesses within their systems which were either not understood or purposefully overlooked.
Hence the approach should to know the weaknesses and take appropriate action for improvement.
Understanding such weaknesses is not difficult. It does not necessarily need external support either as ultimately if the set of people running an organisation feels not to be transparent to an external agency, the extent of benefit received out of such exercise could be negligible, though an external involvement may help bringing out independent radically different approaches towards solving problems.