Networking and Organizational Performance: Decline and Turnaround of a Firm in India

Most studies of firm turnaround have typically examined the response of different stakeholders to organizational decline and turnaround. Network theory provides a unique opportunity to extend this stream of research to understand and examine the decline and turnaround of organizations. This article examines this issue by using an in-depth case study of an organization in India’s transition economy. The firm studied in this article was, Mangalore Chemicals and Fertilizers India Limited (MCFL), a major producer of fertilizers in India with more than 1000 employees and annual revenue of US $ 140 million annually. It has continued to survive in spite of reporting operating losses every year for a decade between 1986 and 1996 during which, it could be classified as a “permanently failing organization”. Even prior to 1986, it never reported impressive profits. Its retained earnings actually turned negative in 1994 and it was declared a "Sick Company" by Indian regulatory authorities. After ten straight years of losses and stultifying management practices, it undertook a turnaround in 1996. This study examines the process that led to decline and subsequent turnaround of the firm, especially the role of stakeholders and their networks in the decline and turnaround of firms. The study is further departure by studying different stakeholders of the company, their membership to different networks inside and outside the organization and their influence on the decisions in the organization. The study attempts to provide a linkage between macro network literature and micro decision-making by managers in the organizations.