Reactivation or Collapse: How Difficult Situations Affect the Organizational Life and Success

Reactivation or Collapse: How Difficult Situations Affect the Organizational Life and Success

José María Mendoza Guerra (Universidad Simón Bolívar – Barranquilla, Colombia)
Copyright: © 2019 |Pages: 17
DOI: 10.4018/978-1-5225-8906-8.ch006

Abstract

This chapter is structured for contrasting how differentially firms applying strategies of contraction/reactivation reach converse results and how management models may impact the organizational life and success in these circumstances. It analyzes two organizations in difficult situation in Colombia (Aluminios Reynolds Santo Domingo and Hospital Niño Jesus in Barranquilla city), and it identifies strategies to be applied for maintaining alive these organizations, evaluates management styles accompanying the formulated strategies, and reveals the organizational denouement. In this work two styles for confronting turnaround are identified: classic, applied in a ruptured and aggressive way with strong reduction of direct cost; and inclusive, integrating members of the firm around the problem solution and socially building a strategy as a solution. For the empirical analysis, the case method is used accompanied by qualitative techniques as interviews, documental material, and observation.
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Theoretical Background

Four important factors impact the success of a business: the environment, path dependence, human interrelationships, and management.

  • The environment is affected by variables and actors that impact companies’ results.

  • Path dependence influences the consistency of organizational behavior, which itself may generate resistance to changes (Leonard-Barton, 1992).

  • Human relationships promote positive conflicts (reasonable pluralism, according to Rawls, 2001), based on human differences, and stimulate common action.

  • Management defines future behavior and sustains an equilibrium with the environment.

Together, all these factors help organizations achieve their goals. These effects are integrated in Equation 1.

978-1-5225-8906-8.ch006.m01
where:

  • E: environmental state or scenario

  • P: path dependence

  • I: interrelationships

  • D: direction

With these facts, organizations may either grow, survive, or fail. Quickly increasing situations are typical in management (Penrose, 1959) and could occur in favorable external conditions. Ansoff (1988) proposed four strategic categories: penetration, product development, market development, and diversification. Survival takes place in highly competitive environments (red ocean, Kim & Mauborgne, 2005), where the probability of failure is high. This chapter considers this topic.

An organization responds systematically to the outside world by means of development, leanness, and turnarounds. Development implements a growth strategy and requires an amplified structure, a proactive leadership, and the monitoring of results. Leanness (Socconini, 2013) eliminates waste, keeps costs low to maximize a company’s competitive position, maintains the functioning of business in a complicated environment, and creates value for clients. It comprises the entire organization, controls costs, and increases productivity. The goal of a turnaround is to confront a difficult situation, recover a business health, and establish different ways for keep it afloat.

A turnaround, which confronts an organization’s difficult situation, generally is accompanied by the following characteristics:

  • It is integral in scope.

  • It has a negative impact that challenges organizations.

  • It is urgent, requiring rapid solutions.

  • It has a duration and it takes time.

  • It uses scarce resources that need to be reallocated.

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