Turnaround Management

Knowledge Center

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:

1. "Acts of God" - Certain risks may occur and cause irreparable damage (despite proper anticipation and thorough preparation).

2. Poor Vision / Understanding of the Market

3. Poor Strategy

4. 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:

• Lack of expertise, experience or education, weak management

• Market circumstances, weak economy

• Business economical reasons, earnings crisis

• Bankruptcy of holding company

• Board level arguments

• Fraud, insufficient financial controls

• Overly optimistic sales projections

• Financing problems, liquidity crisis, excessive debt burden, undercapitalization

• Operating cost levels too high

• 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):

1. Assess the situation and future business viability

2. Implement emergency steps ("stop the bleeding")

3. Develop strategic survival plan

4. Implement the plan, restructuring the business. Survive the crisis

5. Return to normal operations, profitability and growth

6. Prepare for departure of turnaround management

Forum - Turnaround Management   Discussions about Turnaround Management.   Turnaround Management is like Surgery If an organisation is viewed as a person and its health is taken as its condition then management is the sum of its good (...)           Does TM Apply to Organizational Departments Also? Does the concept of "turnaround management" only applies to organization as a whole, or is it also applicable to an orga (...)           What is Turn Around Time? Can anyone explain me turn around time (...)           Turnaround Management in India I am impressed by the method. Probabily in India this method can be widely applied by outsider intervention in a company (...)           Two Dimensions to Turnaround Management There are two dimensions to turnaround management; who leads it and what are the process stages. We may put who leads on (...)           Periodic Health Check of Organization and Turnaround Management In my opinion the sickness of the organization can be pre determined if a health check is periodically done. We use the (...)           Recognizing When Turnaround is a Must The most important part of the whole exercise is to recognize when / if a turnaround is required or if some path adjustm (...)           Turnaround Management and Culture TM is a challenging process that depends of leadership of the manager and the organizational context to engage success a (...)         Financial Distress in Hospitals FINANCIAL DISTRESS IN FIRMS The financial managers of a firm in financial distress do not have the financial ability to (...)           Whatever the Name Tag, Turnaround Management is Desirable In Kenya, the method goes by the name tag restructuring (often used by the media. Now this 'restructuring' has taken dif (...)           Linear Programming and Turnaround Management In business speak, as I understand it, Turnaround Management (TM) also involves strategic decision making. As such, I se (...)           Turnaround Professional Certification Does someone know any certifications for shutdown or turnaround professionals other than the PMP. Thanks... (...)           Turnaround Management in Upstream Oil & Gas Facilities (FPSO Specific) I am interested in the upstream Oil & Gas facilities turnaround management. This is a major maintenance campaign that of (...)           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 (...)           Recovery and Turnaround It is my impression that most recovery and turnaround scenario's are too complex. The true challenge comes trying to cha (...)

Compare with Turnaround Management: Strategic Risk Management  |  Root Cause Analysis  |  Business Process Reengineering  |  Acquisition Integration Approaches  |  Leveraged Buy-Out  |  Management Buy-Out  |  Liquidation Value  |  Commanding Leadership  |  Charismatic Leadership  |  Interim Management  |  General Management

Return to Management Hub: Change & Organization  |  Finance & Investing  |  Leadership  |  Strategy

More Management Methods, Models and Theory