Turnaround Management

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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

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Best Practices The best, top-rated topics about Turnaround Management. Here you will find the most valuable ideas and practical suggestions. 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 practices to keep it healthy, and a turnaround is the treatment when it has fal... 15   21 comments 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 organizational department / product / function which is not performing well for a co... 15   2 comments Use an Insider or an Outsider as a Turnaround Manager? 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 attach... 13   8 comments Role of Marketing in Business Turnaround What is the role that marketers can play in the turnaround of a business? Thanks for your ideas.... 11   3 comments 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 profit pool technique to determine the robustness of each profit centre and we ... 5   3 comments

Expert Tips Advanced insights about Turnaround Management. Here you will find professional advices by experts. Required Skills of a Turnaround Manager Turnaround Management In his book “Corporate Turnaround: How Managers Turn Losers Into Winners”, D. B. Bibeault mentioned four skills r... What Change Agents Should I Use? Change Management, Organizational Change, Turnaround Management When choosing between internal or external change agents, organizations should consider following advantages and disadva... Driving Factors for a Turnaround Analysis of Causes of a Turnaround In the management consulting practices 6 key factors have been identified that are very likely to lead a Company towards... What Turnaround Strategy is Appropriate? Turnaround Stages and Strategies Model Hoffman described 5 turnaround strategies in 3 stages in a turnaround: Source: Harlan D. Platt, Principles of Corpor... Turnaround Management Best Practices Turnaround Management Implementation Today's complex competitive scenario is stretching the survival abilities of many companies. Meanwhile certain skills an...

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