Turnaround Management

The turnaround of a sick company depends on

the implementation of an appropriate remedy:
Address the fundamental problem
Tackle the underlying cause (rather than
symptoms)
Be broad in scope to resolve all the key issues
Seven Essential Ingredients
Crisis stabilization
New leadership
Stakeholder management
Strategic focus
Critical process improvement
Organizational change
Financial restructuring
Crisis Stabilization
To conserve cash flow in the short term and
provide a window of opportunity within which
to develop a turnaround plan
To rebuild stakeholder confidence by
demonstrating that senior management has
taken control of situation
Strong top-down control is imposed
Requires a very robust leadership

New Leadership
A new CEO is required in most cases:
The old CEO who is principal architect to
failure can hardly bring success
Enormous symbolic importance to stakeholder
that something positive is done
CEO with substantial industry experience vs.
CEO with prior turnaround experience
New Leadership
Senior Management Change
Change in senior / middle level management
who are resistance to change initiatives
In many cases new finance director is
introduced
Turnaround leader work with mediocre teams
to deliver superior performance
Management skill audit to fill in skill gap
Stakeholder Management
Sick companies suffer from poor relationship with
key stakeholders
Gaining support through clear unbiased support
communication about financial position to key
stakeholders
CEO seek involvement of stakeholders for
development of turnaround plans
On going communication about performance and
progress of the recovery at periodic interval
Strategic Focus
Requirement of viable strategy with clear
sense of purpose and ways of achieving long
term goals
Redefine the business
Divestment of non-core business
Growth via acquisition
Product / market refocusing (exiting unprofitable
products and refocusing on more profitable ones)
Outsource processes (focus on core processes
only)

Critical Process Improvement
Serious problems with core and support
processes
Problem with physical infrastructure, outdated
IT systems, and organization structure pose
problems
Turnaround situation calls for quick win
process re-engineering
Critical Process Improvement
Ways to improves business processes:
Demand generation (e.g. improving effectiveness
of sales force, brand management, advertising)
Demand fulfillment (e.g. improve effectiveness in
procurement, manufacturing, logistics and after
sales service)
Support systems (e.g. introduction of production
planning function to balance demand and supply
side of business)


Organizational Change
People problem (demoralized staff, resistance
to change, turnover, etc.)
New organization structure (removing
bureaucracy, hierarchy)
Accountability and performance management
(executives mapped to customer accounts)
Terms and conditions of employment (incentive
systems)
Improved communication (what, how, and who to
communicate)

Financial Restructuring
Restoring business to solvency on both cash
flow and balance sheet bases
Changing existing capital structure and raising
additional capital
Correcting an inappropriate debt structure
(long term vs. short term)