Underperforming Companies

On the Corporate Renewal Timeline there are two types of companies: underperforming and distressed.

The definition of performing is to get something done, so an underperforming company is one that is not getting something done. 

Of course, the most critical function that a company must get done is to bring in enough cash to pay bills as they become due. A failure to do so results in on-going operating losses. This is a serious condition that indicates insolvency and falls into the category of corporate distress. It demands some form of triage, such as a creditor workout or financial restructuring.  

But corporate distress does not happen overnight - it starts with underperformance.

Research shows that most business failures are 2-3 years in the making. This suggests that there are many little problems that are not addressed and become big problems. This is how declining performance turns into distress.    

The good news for management teams is there are many little problems that can be identified, analyzed and dealt with. This is the crux of turnaround management. 

There is accessible information technology available today that allows decision-makers to see their performance measures in context, such as with a dashboard or a scorecard.  When management combines these technologies with their knowledge of the early warning signs of corporate decline, they get ahead of the curve. 

Companies that do this are vigilant and proactive. These 21st century management teams practice turnaround management every day. They know that downturns in the business cycle are inevitable and they make certain that they have tools and expertise on hand to address problems before the situation gets out of their control. 

They know that the early stages of decline are the ideal time to vigorously confront performance issues because the cost of doing so is lower, management has the greatest amount of influence over the outcome, and more importantly, the odds of success are higher.

But most importantly, there is much that can be done to halt declining performance and turn it positive again. Look at the Key Questions in the Corporate Renewal Timeline for an example of the kind of insights that a practical turnaround manager brings to a complex situation.  

Your company may be in the early stages of decline. Or it may not have the tools and or the expertise to track minor issues so that they do not become major issues. 

Or your company may be a lender or creditor to a firm that fits the description above. 

If any of these situations are the case, please contact turnaround manager Melissa Craig for a confidential and informal conversation about the underperforming company.