WHO NEEDS A TURNAROUND ?

#marketing #leadership #lean #strategy

A company TURNAROUND is a complex and multifaceted process undertaken to reverse the fortunes of a struggling or financially distressed organization. It demands a comprehensive overhaul of operations, financial management, and strategic direction, often involving drastic measures like restructuring, downsizing, and innovative initiatives to reestablish profitability and market viability.

A crisis serious enough to necessitate turnaround is a feature event for any company, an experience that can be catastrophic or a healthy and positive force of strengthening and renewal.

A turnaround attempt can draw together the people of the organization or it can tear them apart. It can foster innovation or stop it completely. It is different from other periods of economic reversal because of the uncommon severity of the situation. A turnaround event occurs when the very existence of the company is threatened.

Yet, turnaround situations frequently go UNRECOGNIZED. Company managers often fail to differentiate routine business situations requiring less spectacular change from more serious situations where extraordinary action is required for the firm's survival.

Typically, gradual drift takes place until the threatened firm deteriorates beyond the point where reasonable action can save it. The resulting drama takes a toll on employees, creditors, suppliers, stockholders, customers, and members of the local community.

For all the stakeholders, it is worthwhile to understand the early signs of decline.

SIX WARNING SIGNALS Present during the onset of decline frequently occur in one or more of these six basic families of problems which are easy to detect:

1. Liquidity problems including frequent cash shortages, borrowing levels up to collateral limits, or cash-on-demand status with many vendors

2. Profit problems such as ongoing losses in the general business or chronic losses in a main segment

3. Quality problems and other product problems resulting in low levels of customer acceptance

4. Employee problems including attrition of high-caliber people, low morale, high rates of absenteeism, or low productivity

5. Organizational problems including a confusing organizational structure, dispersed responsibility, or inappropriate staffing for key positions

6. Ethical problems including the falsification of financial statements, excessive executive compensation, unreasonable privileges, theft, chemical dependency, or improper supplier-purchaser relationships.

Now that the company recognizes one or more warning, it is time to ponder about the root causes that once again we could recap into six families:

SIX MAJOR CAUSES of decline, often as a sequential process involving a succession of steps:

1. Poor management, including one-man rule, a non-participative board of directors, an unbalanced top team, and lack of management depth

2. Defective accounting information, including erroneous or absent cash flow forecasts, costing systems, and asset valuations

3. Exposure to change, including competitive, economic, social, and technological change

4. Over-trading, involving expansion that is faster than cash flow or profits will permit

5. Excessive gearing, in which the company borrows more money than the volume of business can reasonably support

6. Inadequacy to face normal business hazards, as strikes by suppliers and fires or other disasters for which the firm is unprepared.

If one or more of these causes are identified, and the company is genuinely committed to making a change, there is likely still the opportunity to avoid the crisis. Alternatively, the best of luck!