Turnaround Process

Main Problem

The main problems are usually:

  1. Non-profitable

  2. Insufficient management

  3. Negative cash flow

  4. Sales decline and loss of market shares

  5. Absenteeism and staff turnover

  6. Quality problems

Leadership & Professional Assistance

A turnaround process has to start and to be led from the top and all employees have to be a part of it. (Involvement creates commitment) The process is often about survival of a business and there is no time for not succeeding the first time around. Therefore, it is important to have the right caliber of leader at the top of the organization. If that person does not have the experience of a turnaround, the most effective and less painful way will be to hire an outside professional expert with a proven strong track record in turnarounds to act through the company leader.

Two-Step Plan For A Viable Business

Very often the situation is so critical that the first plan will be to reach break-even in order to stop the outflow of cash. Thereafter the plan is made for being profitable and to reach a return of investment level required by the shareholders. The first step is crises management, focused on short-term survival to solve the immediate financial crises and stabilize the business. The second step is some kind of a re-launch of the business in order to achieve long-term sustainable competitive growth and development.

It is a kind of revolution the company needs to go through. It will hurt and it is hard work, especially in the beginning. It is a kind of a survival. But the positive thing is, in the future the company will be profitable and provide jobs, which will benefit all parties in the short and long term.

– If the business cannot be rebuilt and become a viable business that has future potential growth and a required profitability level, a decision may have to be taken to divest partly or the entire business.

Delays of turnaround process

  1. Organizational structure and level of authorization

  2. Decision-making process

  3. Financing

The 6 Key Areas

Although a business turnaround process is different depending on the type and nature of the business, there are 6 common key areas to be reviewed and acted upon.

  1. Review and assess the company's situation

  2. Review the organization and resources

  3. Develop plans and strategies

  4. Communication

  5. Transformation

  6. Implementation and follow-up

1. Review and assess the company's situation.

It is vital to know where the company is before making plans for where to go.

  • Cash flow and planning

  • Cost of the turnaround

  • Supply, quality, safety and cost of raw materials and packaging materials

  • Plant capacity and efficiency

  • Absenteeism and staff turnover

  • Consumer complaints and returns

  • Planning and Production

  • Products and quality

  • SKU's and profitability

  • Distribution

  • Marketing

  • Sales

  • Internal control system

2. Review the organization and resources

In order to have an effective organization, it is important to have few levels with clear directions, roles and responsibilities defined.

  • Identify key leaders and key staff

  • Create an effective organization

  • Clear directions, roles and responsibilities

3. Develop plans and strategies

Knowing where to go, it is important to develop specific plans with action to be taken by whom and when.

  • SWOT analyses

  • Key issues

  • Vision and mission

  • Break-even plan

  • Budget - short and long term

  • Short and long term plans with objectives, strategies with due dates and by whom

4. Communication

Communication is important during the entire turnaround process.

  • Internal communication

  • External communication

  • Vision, mission and relevant part of the plans to Stakeholders (in addition to shareholders and employees, also to suppliers, customers, banks, unions, government, the community, or the like)

5. Transformation

Change is inevitable. A successful change will occur when the vision is shared and there is perceived a need and ability for change. It is important to have all staff be a part of the turnaround process which creates commitment. Empowerment requires the staff to have the information they need to make appropriate decisions.

  • Plan for involvement

  • Plan for implementation

  • Focus on alignment, involvement, empowerment, communication and building trust

  • Focus on simplification, being different and best

6. Implementation and follow-up

To ensure an effective implementation, it is important that everyone understands, knows the the goals, roles, responsibilities and are committed to doing the necessary actions and changes in order to achieve the objectives.

  • Key performance indicators

  • Progress reports

  • Results measured against plans. - If any deviations, corrective actions to be taken

  • Communication both internal and external on the achievements