Turnaround Management

What is turnaround management?  It’s a process that puts viable but troubled companies back on track by identifying and fixing major problems. 

What’s the difference between turnaround management, corporate transformation and crisis management?

On the Corporate Renewal Timeline, visible in the sidebar to the right, there are two types of companies: underperforming and distressed.  Healthy companies that want to continuously improve an already strong performance, undertake transformations. 

Companies that are "underperforming" find themselves in various levels of decline.  Whether in early, mid-, or late decline, a turnaround should only be attempted by those who are viable.  Those firms that are no longer viable require crisis management.  Think of this phase as triage. 

The major difference between any of these categories is the amount of time that management has left to diagnose and fix the problems.  That time is directly inverse to the size of the problem:  management can take a year or more on a full-scale transformation, but has just months or even weeks to resolve a liquidity crisis.

Underperforming companies can be transformed or turned around.

Corporate Transformation.  Companies that are “best in class” get there and stay there by creating a culture of continual transformation.  These “high performers” know that the business cycle is like the seasons, and that winter always comes.  So they make sure that they have in-house the tools and the expertise to stay ahead of the inevitable downward curve.  

Companies that are still profitable but find themselves slightly underperforming industry benchmarks or even their own recent history, are also transformation candidates. 

Both transformations and turnarounds are management-led corrections as opposed to creditor- or court-imposed corrections.  Even though management is still calling the shots in these situations, it is wise to bring in a skilled expert to take a fresh look.  As always, early detection increases the odds of fixing short-term problems. 

Turnaround Management.  Companies often wait until the signs of trouble are obvious. By this point, the conditions have deteriorated for so long that the situation becomes a turnaround and is much more serious. 

Turnaround management, as a classification, covers the widest variety of renewal situations, ranging from underperforming firms, to corporate distress, which includes workouts and restructuring.  And the tools of turnaround management may be put to use in anywhere on the renewal timeline -- from corporate transformations to crisis management. This is why turnaround managers are always in such high demand: their toolkits, when used practically and consistently, deliver superior operating results -- particularly when applied to organizations that have not yet reached the point of pain. 

When management teams use the tools of turnaround management every day, they can prevent problems from getting started in the first place.    

Distressed companies must be evaluated before attempting a turnaround.  If they fail the viability test, the situation becomes crisis management.   It is very important to note that many turnaround efforts never succeed, and many more should never even be attempted because management waited too long and the value evaporated. Click on Distressed Companies to read about this side of Corporate Renewal. 
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These are the three formal phases to corporate renewal: corporate transformation and turnaround management for underperforming companies, and the possibility of a turnaround or else crisis management for distressed companies.  Remember that it is far less important to assign the correct label to the situation than it is to quickly and aggressively diagnose the problems and start to work on them. In all cases, the probability of success decreases as time progresses.

Contact turnaround manager Melissa Craig for an informal conversation about where your firm falls on the Corporate Renewal timeline.