Business leaders often recognize that they are in a turnaround situation after missed financial forecasts for an extended period of time. Maybe you are experiencing consistent declining revenues and increasing operational expenses, higher customer turnover, a shrinking marketplace, or other signs of distress. The leaders of an organization find themselves reacting to try to stop the financial misses. The reactions are commonly either in fire-fighter mode where the team members are averting or putting out one crisis after another. Or the team members begin throwing spaghetti on the wall to see what will hopefully stick. The work environment has become chaotic and stressful.
As you can imagine, this can be the beginning to a long and painful downward spiral. Swift changes in organizational direction and perceived panic decisions made by top management can diminish the confidence of the strongest employees, causing them to job search and leave. The CFO/Sr VP of Finance is renegotiating credit terms with debtors and trying to get billables stretched as far as possible. Cash flow reports are needed daily to ensure there is enough to cover payroll.
Investors, lenders, shareholders and board members start increasing the pressure and scrutiny which in turn results in more fire-fighting and more spaghetti at faster and riskier rates. If something doesn’t change and change soon, the organization could find itself in dire straits.
Turnaround operations or turnaround management requires quick implementation of a focused strategy developed to fix the underlying issues of the business. It is often very difficult for an organization to implement an objective turnaround plan internally due to emotions, biases and a lack of turnaround expertise. A turnaround requires a formal and structured plan with benchmarks and data points.
Turnaround itself implies the important point in which an organization begins to shift upward and make improvements. Depending on the underlying issues, size, culture and adaptability of the organization the turnaround can happen quickly or take a significant period of time.
Questions that need answered:
- Do you have the data to explain why you are in this situation?
- Has your target audience/client changed in the last 1-5 years? Have you changed along with them?
- Emotions aside, do you have the right leaders? Is a change in top leadership necessary to facilitate this turnaround? Do you have the right employees? Are they in the right positions?
- Is the organization aligned properly and effectively? Does the infrastructure compliment the business?
- Is your business model efficient? Centralization vs. decentralization? Is your mix the right one?
- Do you have the funding and support to actuate the turnaround?
Turning around a poor performing company is daunting to anyone. It is often best to bring in an expert; someone who has previously had to turnaround an organization. A person who has lived through that pain and came out stronger on the other side can bring a lot of insight and save the organization time and money. And let’s face it, in a turnaround situation especially, time and money are your most prized commodities.
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