Leadership and Troubled Companies

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Every company, at sometimes, may get into a turnaround situation for a variety of reasons. During such tough situations, the company’s ability to recover its vitality, to stagnate, or disappear depends on its management initiatives (Bibeault 1982, p. 1). Economic experts suggest that a troubled company must fulfill certain preconditions to achieve an effective turnaround process.

Thus, troubled company should have human, financial, and physical resources to tackle the situation (Bibeault 1982, p. 1). Similarly, the troubled company’s management must be sensitive to internal and external challenges. Through this, the company’s management will be required to reengineer and restructure its organizations.

By doing so, the company may be required to reduce the size of their workforce and enhance exceptional leadership skills in their top management. This paper analyses a troubled company, American Suzuki Motor Corporation, and outlines measures that need to be adopted to recover their economic vitality.

During the turnaround process, troubled companies experience abnormal periods in their history. As such, executives are demoralized, employees are worried, financial resources are strained, and investors are in a state of turmoil. How the troubled companies’ managements solve these problems depends on their abilities to develop and implement effective turnaround prescriptions.

To recover, such companies must implement suitable management measures unique from those of growth management (Bibeault 1982, p. 1). During such situations, many of the old, proven management strategies, applicable to the growth of the companies, lose their validity.

While advisers and interim managers can provide some of the management skills necessary in a turnaround process, the companies’ executives must be prepared to structure their management organs.

Apart from changing their management teams, stakeholder management teams and organization development teams must note that leadership skills play crucial roles during such tough situations. Therefore, good turnaround leaders must portray good leadership skills and good management skills.

American Suzuki Motor Corporation

The American Suzuki Motor Corporation was first established in the US in the year 1963 (Hiller 1988, p. 2). A year later, the company established a motorcycle center to manage the importation and supply of its motorcycles in the country. Owing to its innovation, the company’s growth in the US market increased tremendously, and became one of the leading motorcycle brands during the 1970s.

In the early 1980s, the company made a breakthrough in the US markets when it introduced the first four stroke motorcycles (1963 Hiller 1988, P. 5). According to motorcycle reviews, the motorcycles were regarded as the best bikes in the US market during the 1980s. In the year 1985, in an agreement with General Motors, the company introduced Suzuki Cultus into the American market.

A year later, the automobile company began selling Samurai car models in the US and Canada. As compared to other Japanese automobiles, American Suzuki Corp managed to be the best automobile dealer during its first year of operation in the US (Ingrassia & White, 1994, P.12). Thereafter, the company’s growth increased tremendously with the introduction of several car models into the US market.

These cars were Swift, Sidekick, Geo Metro, and Geo Tracker (Ingrassia & White, 1994, P.12). In the early 1990s, the Consumer Reports negatively evaluated the company leading to a reduction in its sales. The negative evaluation resulted from one the Suzuki car models, Samurai, failing to pass the roll over test in the year 1988.

Owing to these allegations, the company experienced lawsuits, which were later settled in the year 2004. In the year 2004, the company purchased Daewoo Motors and rebadged their brands Laceti and Forenza. By the year 2006, the company had increased its sale to 100, 000 units per year marking their greatest sales in history.

In the year 2008, the company’s sales dropped by 18%, before dropping further by 48% in the year 2009. By the year 2010, the company had stopped importing its motorcycle brands into the US. Instead, the company relied on its earlier unsold brands.

It was not up to the year 2011 that the company resumed its importation of Japanese motorcycle brands into the US markets. Economists assert that in the last five years the company has been struggling with several economic challenges.

Among these challenges are low sales, increased costs of production, increased costs of distributions and unfavorable federal regulatory policies in the US. Currently, challenges in the US auto markets are forcing the automobile company to restructure its organization to meet the ever-increasing expectations of its customers and stakeholders.

Organization or structural changes that will address the company’s challenges

To address its current challenges, American Suzuki Motor Corporation needs to adopt appropriate management practices. Through this, the company should develop and implement suitable rescue plan. The plan should address the fundamental problems, tackle the underlying causes, and be broad enough to resolve all the key issues.

By doing so, American Suzuki Motor Corporation should ensure that their rescue plan is built on a robust foundation (Slatter & Barlow2006, p. 4). The plans should tackle every underlying problem affecting the performance of the company.

In this regard, the company’s senior managers need to reevaluate their policies. They are expected to question, challenge the validity of their management policies, and come up with appropriate measures to thwart the situation. If the company reevaluates its policies, it will ensure that they satisfy the ever-changing needs of the customers.

In its efforts to revive the company’s viability, American Suzuki Motor Corporation leaders should stabilize the current crisis. It is alleged that the company currently suffers from worsening cash position due to low sales volumes and lack of management control. This implies that the company’s future is being threatened by the possibility of running out of cash.

To thwart this situation, the company should appoint one of their leaders with effective management skills and authority to take control of the situation and initiate aggressive cash management. Through these, the company will be able to conserve its cash in the short term providing opportunity within which turnaround plans can be initiated. By doing so, the company can rebuild stakeholders’ confidence.

After stabilizing their financial situation, American Suzuki Motor Corporation should focus on restructuring its organization. The company should investigate dysfunctional behavior among its employees from the top management to subordinates. There are high chances that the company’s workforce has failed the company in achieving its corporate objectives.

Therefore, an appropriate structure that facilitates accountability and responsibility should be implemented. Through this plan, the company’s management shall be able to identify who in the organization is delivering against their objectives and who is not. Similarly, the revised structure should emphasize on the external market challenges.

Economic analysts argue that if troubled companies change their senior management team members, there are higher chances of kick starting the development of new cultures in their organization. In this regard, the American Suzuki Motor Corporation should change its senior management team members to rebuild the company’s morale as they struggle to recover their stability in the US market.

In their efforts to regain the economic viability in the US market, American Suzuki Motor Corporation should focus only on manufacturing products they have a competitive advantage. Through this, the company should focus their attention in the manufacture of motorcycles, ATVs, and marine products rather than on motor vehicles.

Unlike the motor vehicles’ division, motorcycles and marine products’ division are competitively positioned in the US market. Thus if the company specializes in the production of these products it will improve its long-term economic condition. To achieve this, the company should stop manufacturing motor vehicles with immediate effect.

Change model that would be utilized to implement these changes in the organization

During the turnaround process, American Suzuki Motor Corporation must identify the appropriate change model to be used in implementing these changes. Thus, the company should be cautious to identify the best change model. In respect to the challenges facing the American Suzuki Motor Corporation, it would be appropriate for the company to adopt the 7-S model for their organizational change.

Through this model, the company will be able to analyze and comprehend its structures for effective change. In line with this, the company will able to evaluate seven key aspects of the company and how they are related to each other.

The seven elements analyzed are strategies, structures, systems, shared values, style, staff, and skills. By evaluating the relationship between these aspects, organizations can identify and realign discrepancies in these aspects before change is initiated.

The underlying principle of this model is that all the seven aspects are linked with each other. Thus for effective structural change, each of the seven aspects has to be realigned and reinforced with the other six aspects. By adopting this method, American Suzuki Motor Corporation can analyze the implications of the chosen turnaround design, identify turnaround design mistakes, and identify how best the design can be executed.

Role of a turnaround leader in this change

The effectiveness of the turnaround initiatives in American Suzuki Motor Corporation will depend on the ability of its chosen turnaround leader to manage the troubled company. When a new management leader is chosen, his or her leadership styles may seem contradictory during the earlier stages of the company’s restructuring process.

The new leader is expected to ignore formal reports and cross-organizational lines to get directly at the source of the problem (Ventura 2003, p. 89). This expectation implies that the leader to be chosen by the company must be strong, smart, and decisive.

The chosen leader should come up with clear goals, trim organization, and be loyal to the company (Whitney 1987, P.23). Because the current economic state of the company cannot necessitate traditional management structures and processes, the chosen leader must turn around the situation in the company with strong, autocratic direction.

Through this, the leader should challenge all the previous assumptions and policies laid down by the precedent leaders to determine on their validity and viability (Ventura 2003, p. 93).

As the leader, the person chosen must be a customer focused individual. American Suzuki Motor Corporation volume sales, in the past 5 years, have dropped significantly in the US market. The drop in the sales can be attributed to the company’s shift to spending more on their internal affairs rather than on customer satisfaction initiatives.

Therefore, the new restructured organization must be customer focused. Through this, the company’s leader must not only ensure that they attract new customers, but also ensure that they retain the existing customers (Ventura 2003, p. 95).

Another important aspect of the leader to be chosen by the company is that he or she should be a person with keen interest on the company’s competitors. The American Suzuki Motor Corporation has several domestic and foreign competitors.

By keeping a close eye on their performance, the company’s leader can understand the dynamics of competition in the current markets. This implies that the company’s leader should ensure that legal and ethical ways of learning their competitors’ initiatives are put in place.

Another major aspect required from the company’s leader chosen is that the individual should be able to focus on the company’s future rather than on its past. Similarly, the company’s stakeholders should always focus on the future.

Even though the company has been performing poorly for some few years, dwelling on the past would be a waste of valuable time for the organization. Whether the American Suzuki Motor Corporation would collapse in the future depends entirely on what the company plans to do about their situation. Therefore, the chosen leader must be able to disseminate this philosophy to his or her subordinates.

Barriers to turnaround initiatives

In their turnaround initiatives, American Suzuki Motor Corporation management will experience design, execution, and marketing challenges. The new management team is required to enforce dramatic and dictatorial direction for the company to regain its viability. In the short term, the new management initiatives may demoralize the company’s personnel.

During the turnaround process, the American Suzuki Motor Corporation is likely to be faced with challenges during the selection of appropriate design to be implemented. To avoid the challenges, the company’s leaders are advised to consult with the turnaround professionals in identifying the best restructuring model to deal with their specific challenges.

Similarly, during the turnaround process the company may experience execution challenges. The success of the turnaround process largely depends on the execution of the chosen design. In this regard, the company’s leaders must ensure that appropriate management leaders are chosen to manage the restructuring process and ensure that the turnaround goals are achieved in time.

Turnaround experts assert that turnaround failures occur due to inappropriate execution procedures (Agarwal 2010, P.56). To overcome these challenges, the company through its management leaders should ensure that barriers to restructuring process are reduced.

Another major hurdle that will be faced by American Suzuki Motor Corporation in their turnaround process is the marketing challenges. It would not be easy for the company to convince its potential customers that their products are far better than those offered by their competitors.

To overcome this challenge, the company must look for ways to improve their public image. Thus, the company must resort to aggressive advertisements and promotions. Above all the company should ensure that their products meet their customers’ needs (Crainer 1999, P. 67).

References

Agarwal, O. P. (2010). Turnaround management with business process re-engineering (Rev. Ed.). Mumbai India: Himalaya Pub House.

Bibeault, D. B. (1982). Corporate turnaround: how managers turn losers into winners.. New York: McGraw-Hill.

Crainer, S. (1999). Business the Jack Welch way ten secrets of the world’s greatest turnaround king. Oxford: Capstone.

Hiller, T. B. (1988). Suzuki Samuri (Rev. 92/05/10. ed.). Boston, MA: Harvard Business School.

Ingrassia, P., & White, J. B. (1994). Comeback: the fall and rise of the American automobile industry . New York: Simon & Schuster.

Slatter, S. S., Lovett, D., & Barlow, L. (2006). Leading corporate turnaround: how leaders fix troubled companies. Chichester England: Jossey-Bass.

Ventura, J. (2003). The business turnaround & bankruptcy kit. Dearborn, Mich.: Dearborn Trade Pub.

Whitney, J. O. (1987). Taking charge: management guide to troubled companies and turnarounds . Homewood, Ill: Dow Jones-Irwin.

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