Turnaround Management

Times of corporate distress present special strategic management challenges. In such situations a firm may be in bankruptcy or nearing bankruptcy. Often turnaround consultants are brought into the company to devise and execute a plan of corporate renewal, assuming that the firm has enough potential to make it worth saving.

Turnaround management is a process which aims at corporate renewal. It uses analysis and planning to save distressed companies and return them to solvency, and to identify the reasons for failing performance in the market, and rectify them. Turnaround management involves management review; root failure causes analysis, and SWOT analysis to determine why the company is failing. Once all these analysis is completed, a long term strategic plan and restructuring plan are created. These plans may or may not involve a bankruptcy filing. Once approved, turnaround professionals begin to implement the plan, continually reviewing its progress and make changes to the plan as needed to ensure the company returns to solvency.

Before a viable turnaround strategy can be formulated, one must identify the root cause or causes of the crisis. Few of the causes which may create trouble for the company can be:

·        Revenue downturn caused by a weak economy

·        Overly optimistic sales projections

·        Poor strategic choices

·        Poor execution of a good strategy

·        High operating costs

·        High fixed cost that decreases flexibility

·        Insufficient resources

·        Unsuccessful R&D projects

·        Highly successful competitor

·        Excessive debt burden

·        Inadequate financial controls

Business restructuring and performance improvement require multidisciplinary resources and change management skills, acting quickly to minimize disruption to the operations.

Turnaround management is the systematic and rapid implementation of a range of measures to correct a seriously unprofitable situation. It might include dealing with a financial disaster or measures to avoid the highly likely occurrence of such a disaster.

 When firms are doing so badly that failure seems imminent then turnaround management can restore performance and profitability. The increasing competition, rapid advances in technology and rising complexity of the business conditions accompanied by blend of customers and employees, the challenges for any corporate have been rising. Only a timely response to this situation can save organizations.

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