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An effective turnaround

A company hires a turnaround manager when its results are decreasing. The most applied parameters in such cases are solvability, liquidity and profitability.

The first mission of a turnaround manager is to slow down the downward tendency and convert it into an ascending line. In practice, it usually takes more time to reach the ascending line again. The company might not be able anymore to meet the requirements of the banks if its performances keep decreasing. In such a case, the restructuring department of the bank will deal with the company. The next step might be deferral of payment or even bankruptcy.

As far as turnaround management is concerned, the highest priority is given to the execution speed. Waiting for better times is not a good alternative. Based on my own practical experience of the past few years, I give you some advice:
  • During the turnaround process, it is impossible to satisfy all stakeholders. You have to choose. Sometimes, the shareholders win. Sometimes, the banks win. Sometimes, the staff does. Anyhow, there are winners and losers in this process. Usually, an optimal balance can be obtained, however. In case of bankruptcy, there are often huge differences: banks, shareholders and creditors often come off worst. In case of a relaunch, it is often the staff that benefits from the situation.
  • Before initiating the turnaround, it is crucial to determine the long-term goal and vision. What will we do? What will we stop doing? In other words: the perspectives must be clear. No trust without a vision; no future without trust.
  • An essential element in the entire turnaround process is consistent and especially proactive communication towards the staff, the works council and the trade unions. According to my practical experience, we know that good communication allows you to act much faster. Communication is also required in order to create a “sense of urgency”, since we have noticed that there is often a lack of communication within organizations.
  • I have had some good experiences with early participation of works council and trade unions because it improves the quality and the basis of the decision-making process.
  • Another condition for a successful turnaround is that the management should operate as a team. The pressure is high and comes from everywhere. Not all managers can deal with this kind of situations and - let us be honest - the company has ended up in this bad situation for some reasons. In this case, the Management Team must be reinforced and changed. My urgent piece of advice? Clarify the situation as soon as possible!
  • Sometimes, you hear people say: “We must keep on selling during the conversion period”. Although a turnaround is radical, it should not paralyze the organization. The quality of the products and of the processes must remain high, and the commercial impact must be increased. Even the top managers need to remain available within this period, in order to visit the customers.
  • Be prepared for unexpected developments or more setbacks. Keep your eyes and ears open. Cases of fraud, stolen knowledge, employees taking information with them when they leave the company, are all examples of what you can be confronted with during a turnaround.
There are many similarities, but also large differences between turnaround management and regular management. Above, I have discussed some aspects of turnaround management I have been dealing with throughout the years. According to my experience, consistent and proactive internal/external communication really enables you to make a difference. I would like to discuss this topic again in one of the next columns.

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