By Terry Corbell
The Biz Coach
Management Strategies for a Successful Turnaround
Businesspeople everywhere are preoccupied by budget woes – the need for turnarounds in business and government. The U.S. government debt situation causes unfortunate uncertainty because policies in the nation’s capital affect business.
Despite their challenges in business, by a wide margin, the most-viewed news videos on this business portal have been the reports on the debt-limit debate in Congress. To summarize the fiscal doldrums of the United States – the nation has been managed poorly – a turnaround is necessary.
A quote by financial-world wizard Warren Buffett is apropos.
“I could end the deficit in 5 minutes,” he said on CNBC. “You just pass a law that says that anytime there is a deficit of more than 3 percent of GDP, all sitting members of Congress are ineligible for re-election.”
To Mr. Buffett’s observation, I’d add another thought about politicians: Cancel the security blankets – their lifetime benefits. Relatively few politicians are paying attention to the available reams of risk analysis.
In considering management strategies for successful turnarounds, certainly one of the considerations is the evaluation of risks. In this regard, another relevant quote by Mr. Buffett strikes me as funny, but true.
“Risk comes from not knowing what you’re doing,” Mr. Buffett said.
My response: “Touché.”
It’s all about capital mobility created by effective management.
Indeed, companies can be successful when they’re managed well. It stands to reason that turnaround success starts at the top – management must know what it’s doing.
Not to oversimplify because every situation is different, here are 11 principles in turnarounds:
- Before acting, get the right information. Don’t get paralysis from too-much analysis, but know the difference when to act quickly or to be still. That’s where having experienced advisors will be productive for you.
- For a 180-degree turnaround, use a 360-degree approach – many solutions lie within your company. Employees should be assets. Conduct an organizational assessment. Some employees can provide valuable insights about company culture, accountability, middle management, processes, internal communication, and customer preferences.
- Consider yourself a CEO of your profession, not just your company. Complete balance is necessary. Whether you’re in the automobile business or technology, consider the perspectives of all your stakeholders not just your company.
- Be careful to whom you listen. Lawyers don’t always know best. After the Gulf oil spill, my sense is that BP suffered by listening more to lawyers than reputation experts.
- Become a master in tough-love management. Don’t allow yourself to become uncomfortably straitjacketed. You have to make tough decisions on which to act. This is not a time for people-pleasing. Get rid of unproductive employees.
- Analyze the root causes of your situation. They usually include the poor-employee performance, marketplace competition, inaccurate sales forecasts, unproductive strategies, weak execution of strategies, expenses, inadequate cash flow, ineffective financial controls, and weak economy (which is why my writing also focuses on public policy).
- Assuming your firm is worth the turnaround effort, assess your prospects.
- Consider time-proven tactics, which include dumping poor assets, increasing revenue, lower costs, and making strategic purchases.
- Develop and implement an emergency cash-flow plan.
- Restructure your company by improving company culture, making operational changes, adding or changing products, and by fixing your branding approach.
- Think big picture – start working to become the authority for your industry. That includes public policy.
If you can’t enjoy a return to profits, an exit strategy is your last alternative. An immediate abandonment strategy means you might have to sell to another company or liquidate your assets.
Otherwise, you might consider harvest strategies, which allow you to evaluate your success against benchmarks. Options include preparing an initial public offering or selling to your employees in an employee stock option plan (ESOP).
For an ESOP, you’ll need a positive company culture. Poor morale or divisions among employees will lead to their failure as a company.
From the Coach’s Corner, consider these financial-resource links:
“The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.”
– Peter F. Drucker
Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.