Rules for turning a company around.

I wish I could tell you that our company could do magic with your company, but in reality no magic is involved. There are in fact, proven rules for turning companies around. This section is dedicated to these rules and applying them. Management turnaround is a sophisticated, complex, procedure based process. Business leaders can do it, but it is wise to engage a seasoned professional.

The first rule, as simple as it may be, is that no matter what else you do, pay close attention to your customers. You must guarantee that they really receive good product and high quality service. In a turnaround, this requires personal contact with customers by senior management. Another significant rule concerns the character of people who succeed in turning companies around. A management turnaround leader has broad business knowledge (including knowledge of many different industries), an ability to learn very quickly. They are very disciplined in thought process and very disciplined with timely action, and absolute integrity. The management turnaround leader/manager must possess these attributes to an incomparably greater degree than managers in non-turnaround environments.

Typically the management turnaround leader is an individualist. Our company’s turnaround experience has made us realize that turnarounds are much more a work of science than art. Turnarounds are principally based on disciplined and systematic application of planning, controlling, organizing and motivating functions, taking many calculated risks, planning for contingencies and much independent creative thought, and hard work.

This means doing what has to be done, when it has to be done. It also means not showing favoritism, and still doing what has to be done whether it is popular or not. It means doing all of the fundamentals, and letting some other things go. Turnarounds are not big on ritual, but big on business discipline. Additionally, in turnarounds, time is always of the essence.

Management turnaround priorities in the crisis management stage and for considerable time afterwards are also exceedingly different from priorities involved in operating a profitable business, for reasons which are summarized as follows:

Cash bleeding must be stopped, and positive cash flow must be restored. Similarly, the decline of morale and good will must be terminated. By putting an end to disparaging rumors of future cuts, layoffs, discontinuation of product lines and closing of facilities.

This stabilization must be achieved swiftly at a pace that the troubled company is not used to. Almost nothing can stand in the way of actions that are required to achieve these objectives. It is by reaching them that a distressed company gains some breathing room and time to reposition, restructure and re-engineer itself.

The breathing room and time gained is vital, and the management turnaround leader knows that this is a limited amnesty to be used wisely and that the impetus of changes must continue. The room for making expensive errors and for tolerating a lack of performance is gone. The turnaround is the crowning point.

Not the largest profit but the shortest payback is paramount until basic viability is restored. Objectives with short-term paybacks like days, weeks, or a few months are an absolute priority well past the crisis management stage and almost until the end of the turnaround.

Additionally, during the critical stages of a turnaround, there is no time for formal studies before drastic actions are taken and decisions guiding these actions must be based on a quick and penetrating analysis.

In management turnarounds, business owners approve drastic, unpopular and unpleasant actions, such as firing or furloughing employees, even good ones, or closing facilities. If things continue on their present course, owners will lose their equity and the loans they advanced to the company.

A drastic and rapid turnaround is a business revolution. Can it be anything less than that, in a financial crisis when the company is bleeding money, morale and good will? Can it be anything less than that, when owners' equity is vanishing and there is no time to move at the usual business pace?