Dr. Earl R. Smith II

State four – restructuring the company – tends to be along and difficult one. After the rush and emotion of triage, the tam settles down to the hard task of rebuilding the house. If the turnaround effort goes well, we eventually get to the point where we are working to establish a sustainable stability. In this final step of a turnaround, the company will be returning to profitability. While earlier steps concentrated on correcting problems, this final stage focuses on institutionalizing the gains achieved with an increased emphasis on profitability and return on equity. It is at this stage that we often consider initiating new marketing programs to broaden the business and customer base and increase market penetration or re-launching the product development activities. We may begin to expand the value proposition and product/service offerings in order to increase revenue by carefully adding new products and improving customer service. Because the company is now healthier, we may consider establishing strategic alliances with other organizations. Financially, our focus shifts from cash flow concerns to building and maintaining a strong balance sheet, securing long-term financing, and implementing strategic accounting and control systems.

One of the most important parts of the turnaround process is the psychological shift that needs to happen when accompany moves into the sustainability phase of the process. Tensions tend to ease off and people relax as the ‘crisis’ seems to have passed. This is the critical time when old habits may surface and an intended return to the ‘bad old days’ may occur. Rebuilding momentum and morale is almost as important as rebuilding return on investment. Seeing that the new corporate culture avoids the mistakes of the past is also essential. I have seen superficially successful turnaround efforts founder because these things were not seen to – because victory was celebrated too early. A successful turnaround means a new corporate culture – transforming negative attitudes to positive, confident ones as the company maps out its future.