
What is Turnaround Management? Description.
Turnaround Management involves the formulation
and implementation of a strategic plan and a set of actions for corporate
renewal and restructuring, typically during times of severe corporate financial
distress. Often with the help of outside turnaround consultants or
strategy consultants, a Root Cause
Analysis is made and a turnaround plan is devised and executed,
assuming that the firm still offers the potential to return to financial solvency,
profitability and strategic viability.
Root Causes of Strategic distress
There are just a limited number of root causes for corporate
strategic distress:
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"Acts of God" - Certain risks may occur and cause irreparable
damage (despite proper anticipation and thorough preparation).
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Poor Vision / Understanding of the Market
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Poor Strategy
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Poor Business Model / Execution
More Immediate Causes of Strategic distress
Typically, when these root causes are not dealt with properly,
they will cause a range of problems, which can then trigger a corporate crisis:
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Lack of expertise, experience or education, weak management
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Market circumstances, weak economy
-
Business economical reasons, earnings crisis
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Bankruptcy of holding company
-
Board level arguments
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Fraud, insufficient financial controls
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Overly optimistic sales projections
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Financing problems, liquidity crisis, excessive
debt burden, undercapitalization
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Operating cost levels too high
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Very strong, successful competitor
-
Overinvestment
-
Insufficient resources, underinvestment
Often these triggers are interrelated, and several causes
are involved. Slywotzky and Drzik have categorized these triggers in
7 Classes of Strategic
Risk.
Steps in a Turnaround Process
The first step in a turnaround process is
often to change the top management or leadership of the business and to appoint
an experienced turnaround manager. Often strong,
Commanding Leadership
or even Charismatic Leadership
is exerted. The turnaround process typically consists out of the following
key steps (in approximate chronological order):
-
Assess the situation and future business viability
-
Implement emergency steps ("stop the bleeding")
-
Develop strategic survival plan
-
Implement the plan, restructuring the business. Survive
the crisis
-
Return to normal operations, profitability and growth
-
Prepare for departure of turnaround management
Recent User Comments
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Dave WItt - USA
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Start with Call to Action |
"I support the idea that turn around mgt be considered a method.
I would highly recommend that the first step be a call to action section - enabling the managers to determine the urgency of the situation. The risk of closing the doors or the loss of the stakeholders investments, needs to be taken into consideration for the speed at which a turn around needs to happen." |
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Catriona - UK
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Turnaround Strategy Hoffman Model |
"This seems like an impressive method... Has anyone heard of the Hoffman Model, it's a method I've been recommended and I was wondering if anyone has any details concerning it?" |
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Narendra - India
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Turnaround Management |
"I am impressed by the method. Probabily in India this method can be widely applied by outsider intervention in a company, coz my personal experience with few companies make me say so." |
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Anonymous - USA
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Insider or Outsider |
"I wonder, what is preferable? Use an insider for a turnaround, because (s)he knows the complexity of the situation very well, or an outsider, because (s)he can act independently and without any attachments to the current situation and stakeholders?" |
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Rob Snelders - NL
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Turnaround Management |
"I do not see the value in this addition and I do not see where 12manage is going to:
* Turnaround management cannot be considered a Method, Technique
* Turnaround management - as depicted - is just an approach, but it is too shallow and empty to provide any value.
Maybe it's just a trigger to sell the Premium membership, but doing so 12manage is losing my high regards." |
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