Restructuring: With the successful implementation of the EAP, the effort shifts its focus to implementing the turnaround plan. This is a much more extend effort and requires a dedication on the part of all parties involved. The major components of the turnaround plan need to be put in motion. The management team begins to focus on achieving sustained profitability.
In turnaround situations, getting the right arrangements at the beginning can make the difference between success and failure. The first steps in the process are crucial to outcome. When they are accomplished, the future of the company will start to seem brighter – the stakeholders will experience fresh hope and begin to see the possibility of success when failure seemed to be the only option.
© Dr. Earl R. Smith II
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Related Articles:
- Moving the Ball
- Turnaround Engagement – Part I
- Turnaround Engagement – Part II
- Turnaround Management – Cash Flow
- Turnaround Management – the Income Statement
- Turnaround Management – the Balance Sheet
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[1] I feel compelled to mention that many times one or more of these ‘causes’ are actually symptoms – correctly separating out the two is one of the keys to a successful turnaround
[2] I know CEOs who are very good at building a company from startup to around five or ten million dollars in run rate – but begin to flounder when the company gets larger. I also know CEOs who cannot seem to manage start-ups but really hit their stride when the gross revenue moves north of 50 million dollars annually. The right CEO, in the right situation at the right time and no longer is the good rule.
[3] I have had to remove entire boards and repopulate them with new members whose experience, knowledge and range of connections were more appropriate.
[4] Many engagements involve a major strategic planning retreat early on in the process
[5] In many of my engagements, I initially encounter situations like this. Many times the CEO and the rest of the team are addicted to ‘strategic speak’ – and leave the actual implementation to the ‘worker bees’. This creates a schism in the company – a division between the people who work for a living and those who sit around and think up things for them to do.
[6] Most management teams have diagnosed the underlying causes of a negative trend but, in my experience, most of those diagnoses are at least partially wrong. Current management has a stake in making themselves look good – and there is the rub. That is why an independent review is essential to the process.
[7] Try it this way – you are a CEO running a mid-market company and you sales people tell you that they expect to do 10 million dollars in new business next month. You meet with your senior team and plan the resourcing and staffing to manage the new business – all of the plans have been carefully made and reviewed. Then your sales people come to you at the end of the month with the news that the number will be 20 million – or, on the negative side, only 5 million. As a CEO, consider the negative impact on the company and the pressure that you are going to put the rest of the team under. The point here is that a professional sales team ought to be able to accurately project results and their inability to do so can have a negative impact on the welfare of the company.
[8] One of the most frequent is management that has chosen the most costly way of arranging for the financial resources that the company need in order to grow.
[9] Most often, the client is the board of directors, sometimes it is the CEO and at others only part of the board or shareholders.
[10] Immediate action can have a major, positive effect on morale within a company. Most employees want the company to succeed and will respond with renewed effort and commitment when it becomes clear that there is a new vision – and a new way forward.
One Response to “Turnaround Management – Initial Steps”
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Thought provoking article.
Sharing some views on prevention. Where estimates are provided by M&S they need to carry a +/- to indicate a level of planning fexibility. Risk management would involve asking the questions: What if we only get half or what if we double? They should then have the strategies to back up the flexibility. This would require supply chain flexibility, financial flexibility anf maybe even a ‘throttle’ on the sales force to slow down or reschedule customer agreed deliveries so that operations can cope. They in their turn need to have plans in place to downscale eg 3 day week or upscale eg overtime and or agency. Where customer is at the heart of a company, you may even decide to divert surplus into a ‘Partnership’ which could involve some form of structured reward sharing when this ‘overflow’ is needed. Once again it’s all in the preparation and communication between departments and how well they each prepare for a given scenario. ‘Joined-up thinking’ being the buzz words currently used in ‘lip-service’ to this concept.
On the root cause analysis, many large companies sruggle to do this because of the size of the operation, the fact that a symptom appears in one department as a result of failure in another, is often addressed where it becomes ‘visible’, politics ensures that the levers of change necessary to fix the cause, are inaccessible to the department suffering the symptoms and short sighted fixing will put resources into the wrong area as an expedient. This usually allows the problem to grow as volumes increase, and encourages the department fixing to become ‘more efficient’ (reduce the cost) on what is a cost of failure process ie one that should not even be there if the root cause was fixed.
Regards
Mili