Business Turnaround Professionals

Business Turnaround Professionals are interim managers who only stay as long as it takes to achieve the turnaround. Assignments can take anything from 3 to 24 months depending on the size of the organization and the complexity of the job.

Turnaround management applies to all kind of distressed companies, in fact, it can help in any situation where direction, strategy or a general change of the ways of working needs to be implemented. Therefore turnaround management is closely related to change management, transformation managemen, and post-merger-integration management. Intense growth situations are one typical scenario where turnaround experts are requested to help. Business turnaround professionals are becoming a one-stop-shop and provide help with corporate funding (working closely with banks and the Private Equity community) and with professional services firms (such as lawyers and insolvency practitioners) to have access to a full range of services that are typically needed in a turnaround process. Most turnaround managers are freelancers and work on day rates.

Stages of a Business Turnaround 

1. The evaluation and assessment stage – What is the status / Where are we now

At this stage the business evaluation  in terms of market perspectives ( competition, product, market positioning, clients and suppliers )  and assessment of existing business processes, organization and staff is extremely important. Besides the already mentioned aspects also clients , suppliers , products and financing is evaluated. For market perspectives business processes, organization and staff evaluations usually 3-rd party independent studies and services are used.

2. The acute needs stage – Wildfire stage / stop the bleeding

At this stage, the “fire” is localized on the “heat-map” and immediate mitigation measures are dispatched. This fixing of the acute needs does not yet solve the re-set of the troubled company, it only reduces the “heat” that was pointed out in the the heat-map.   Immediate results should be observed.

At this stage, retrenchment strategy is most indicated to solve immediate issues.

The Retrenchment strategy of the turnaround management describes wide-ranging short-term actions, to cut financial losses, to stabilize the company and to work against the problems, that caused the poor performance. The essential content of the Retrenchment strategy is therefore to reduce the scope and the size of a business through Shrinking Selective Strategy. This can be done by selling assets, abandoning difficult markets, stopping unprofitable production lines, downsizing and outsourcing. These procedures are used to generate resources, with the intention to utilize those for more productive activities, and prevent financial losses. Retrenchment is therefore all about an efficient orientation and a refocus on the core business. Despite that many companies are inhibited to perform cutbacks, some of them manage to overcome the resistance. As a result, they are able to get a better market position in spite of the reductions they made and increase productivity and efficiency.

3. The restructuring stage – in depth Fire-fighting stage  / operation room

Starting with this stage in depth measures are introduced through the organization.  Usually, at this stage, the change management faces most of the change resistance. The resistance factors need to be identified, isolated and mitigated. Detailed measures implementation is needed to make sure that everything is under control and the requested outcome is not jeopardized.

At this stage, the most used strategy is the repositioning strategy. The repositioning strategy, also known as “entrepreneurial strategy”, attempts to generate revenue with new innovations and change in product portfolio and market position. This includes the development of new products, entering new markets, exploring alternative sources of revenue and modifying the image or the mission of a company.

4. The stabilization stage – We are starting to win

At this, the expected results start to be visible. Consolidation of the initiated measures has at this stage TOP PRIORITY. At this stage future, oriented measures are introduced for the assurance of further business development. The new business processes are restated and remapped on the new layout of the business. Early warning systems and KPI’s are introduced and implemented.

With a Renewal, a company pursues long-term actions, which are supposed to end in a successful managerial performance. The first step here is to analyse the existing structures within the organization. This examination may end with a closure of some divisions, a development of new markets/ projects or an expansion in other business areas. A Renewal may also lead to consequences within a company, like the removal of efficient routines or resources. On the other hand are innovative core competencies implemented, which conclude in an increase of knowledge and a stabilization of the company value.

5. The revitalization stage

The business has stabilized at this stage. The restructuring and stabilization measures are finalized and future new forward oriented measures are introduced and strengthened. By now the new business organization and business supporting processes are in place and  functioning well.

The implication of the new strategy  ensues in the following stage. It is a necessary determinant of organizational success and has to be a fundamental element of a valid turnaround model.

The outcomes of the turnaround strategies can result in three different ways. First of all, a terminal decline may occur. This is possible for situations, where a bad strategy was chosen or a good strategy might have been implemented poorly. Another conceivable outcome is a continued failure.  Here is the restructuring plan failed, but dominant members within the company and the environment still believe that a repositioning is possible. If that’s the case, they need to restart at stage four and look for a new strategy. Does an outcome of the new strategy turns out to be good, a turnaround  is called successful. This is achieved, when its appropriate benchmark reaches the level of commercial success, like it was the case before the onset of decline. This is commonly measured in a time frame between two and four year.

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