some troubles that we fix.
- ineffective management style
- operating without a business plan
- failed big projects or acquisitions
- family versus business matters
- inadequate financial control
- poor working capital management
- poor lender relationships
- high costs
- lack of operating controls
- lack of sales and marketing effort
- market lag
- precarious customer base
- movements in commodity prices
- explosive growth
Nowadays, we are living in a very turbulent environment where the past successfully business model does not guarantee the firm success in the future. The borders between industries become blurred by companies connecting strategy, innovation and organizational changes. The globalization force is a reality. Technology is another impacting market force, and so on. As Darwin said “It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.”
The Strategok goal of our turnaround services is to produce fast and impacting changes in our customers ‘organizations that allow them to recuperate and sustain the growth and profitability path. In this turnaround webpage, we cover the main processes to manage the short-term turnaround. However, most corporate turnaround cases would probably require the full bundle of Strategok processes or at least a few of them. I mean cost reduction, supply chain transformation, sales transformation, strategy reframe and this short-term turnaround.
For people facing the tough turnaround situation, we would like to offer three pieces of advice:
- Don’t underestimate the complexity and time need it to perform the turnaround !!! The business situation used to be worse than expected. You could identify the problem to fix but probably the time spent to identify and need it to solve the problem has created many other problems in many areas of the company (finance, legal, quality, suppliers, customers, employees, etc.)
- Don’t prioritize cost saving over quick cash flow generation !!! Run out of cash is like “cutting off your oxygen, you will die quickly.” You should probably spend some money to find support for accelerating the turnaround process before the company time (and cash) is over.
- Request experienced support !!! Many managers be panic and get into “100% cost reduction mode” because the firm is loosing a lot of money. But they do not realize that investing any money in specialized support could be much cheaper than delay the high value needed actions. So that inaction and non-sense cost avoidance are killing fast the firm. Your business has little time to fix its problems before run out of cash, and you have just one “shot.” If you don´t have turnaround experience, it’s not time to make “experiments.”
The objective is first achieving stability and second restoring value. The stabilization require focused, leadership, resilience and ingenuousness. At this stage “cash is the king” and management need to accept that the preservation and generation of cash often need to take precedence over the delivery of profit in the short-term. The second more important task on stabilization is dealing with some non-compliance of legal and regulatory matters that the crisis has likely created.
- cash management
- management controls
- financial controls
- first-stage cost reduction
- compliance with legal and regulatory matters
Stakeholders (any party with an interest in a business, and usually a financial interest) and especially the external ones need to see that their interests are being preserved. It is likely that the firm’s recent history has been characterized by a lack of progress, broken promises and late delivery of information. So, engaging stakeholders in the turnaround process and to rebuild credibility and confidence is key. However, rebuilding stakeholder confidence at a time when the business has gone through a dramatic decline, incumbent management may be disinclined to face reality, and stakeholders believe their positions to be at risk is a huge handicap. Additionally, most of the times it is going to be needed at least a new Interim Manager to rebuild that credibility and confidence because the relationship with the previous management team has deteriorated a lot and they probably lack this uncommon skill to reengage stakeholders again.
- manage perceptions and reality
- manage expectations
- manage the information flow
- manage people
This is affecting independent corporate entities rather than subsidiaries where funding are provided for parent companies. The overall objective of financial restructuring is to achieve a debt and equity structure that enables the company to implement its turnaround plans. Tensions arise in this process since, to achieve the overall objective, external funding stakeholders often have to acknowledge potential and actual loss and thereby reduce their interest in the company.
- short-term refinancing
- standstill agreements and moratoria
- priority of interest
- long-term financial restructuring
cultural and change management
“Many organizational cultures value stability and their leaders find comfort in the status quo and leave change with less than full commitment. They may receive generous rewards even in the company goes under” said Richard Bevan. Nowadays, 70% of the change management initiatives fail. This is a luxury that companies cannot take any more. In order to survive companies in the near future, teams and firms need to be more flexible, agile and being able to change in order to adapt themselves to customers and market high demand requirements. Cultural transformation and change management is one of the pillars of Strategok methodology to guarantee and accelerate the delivery of dramatic results to their customers. We build cultures based on high performance and a relentless focus on goals, “making things happen”.
- change management
- leading & motivating
- teams building