While many businesses hire turnaround management firms at the request of their lender, some key planning techniques will assist the business in receiving the best outcome from the turnaround management professional selected. Using the planning process outlined in this article during the interviews with potential turnaround management firms will help a business ensure the firm being hired will assist in achieving the best outcome possible for the initiative.
Although every company is unique and a turnaround management initiative requires a tailored approach, there are several key principles that can help guide a successful turnaround management initiative.
1. Develop a Clear Vision and Goals – Developing a clear vision and set of goals is essential for any turnaround management initiative. If the lender has requested the company hire a turnaround management firm, then the goals should be reviewed and approved by the lender prior to the work beginning. Typically, the goals become part of a scope of work with the turnaround management firm. It is important the goals align with the company’s overall mission, meet the immediate needs of the company, and facilitate a stronger relationship with the lender. The goals or scope of work should be specific enough to provide measurable objectives during the turnaround management initiative.
2. Set Realistic Timelines – Time is of the essence when it comes to turnaround management initiatives. It is important to set realistic timelines for each step of the process and ensure that everyone understands the importance of staying on track. Having a timeline in place allows for better planning and can help keep the initiative on track. The company’s timeline should align with the lender’s timeline and the turnaround management firm’s timeline. Identify the deliverables required and the date due. For example, is a weekly cash flow required? If so, when is it due? If the company already knows it will run out of cash in a certain period of time, then the due date for the deliverable must be before the company exhausts its cash resources. If the company has a forbearance agreement that expires on a date, the initial assessment, the Situation Analysis, may need to be submitted to the lender before that date.
3. Analyze the Situation – Before beginning the turnaround process and interviewing turnaround professionals, the company’s management team should assess the current situation and identify the areas that need to be addressed. This can involve looking at financial statements, evaluating performance to plan and performance to KPIs, customer feedback, and other data. This review should be completed quickly and be used to assist in developing the scope of work that most benefits the company. This part of the process will allow the company to better develop the timeline and deliverables, and add items to the lender’s scope that will benefit the company.
4. Engage Key Stakeholders – It is essential to involve key stakeholders, such as the senior management team, the owners or investors, and the lenders in the turnaround management process. If stakeholders are not engaged, it will be difficult to make changes and gain buy-in. Open communication and collaboration between stakeholders is key to ensuring a successful turnaround process.
5. Take a Holistic Approach – A successful turnaround management initiative requires a holistic approach that looks at all aspects of the company. This includes operations, finance, marketing, and other areas of the business. It is important to identify and address any issues affecting the company’s performance and consider ways to streamline processes and reduce costs. A turnaround professional should have a clearly identified evaluation process that will result in recommendations and findings within a three to four week time period. These recommendations and findings should be documented in a Situation Analysis Report, that can be used to drive the implementation of the turnaround initiative.
6. Focus on Improving Performance – The goal of any turnaround management initiative is to improve the company’s performance. Not only should the initiative address profitability, it should address working capital management and debt structure. A turnaround management initiative should result in weekly cash flow and working capital management planning to ensure the expected results are being achieved and liquidity and financial performance are improving. These goals should be developed as 1) immediate implementation, 2) short term implementation (within 13 weeks) and 3) long term implementation. All goals should have measurable performance mechanisms. In addition to financial objectives, KPIs should be developed to ensure sales, operations, customer service, and other departments are all contributing to the turnaround initiative.
7. Measure Progress – Measuring progress is an important part of any turnaround management process. Companies should track progress against goals and milestones to ensure that the turnaround initiative is on track. At a minimum a turnaround management initiative should result in weekly cash flow and working capital reporting, operating KPIs, and timely preparation of financial information for the key decision makers.
Leading a successful turnaround management initiative is no easy task, but with the right strategies and approach, it is possible to turn a struggling company into a thriving business. By following the principles outlined above, you can ensure that your turnaround management initiative is successful. If a business works with its turnaround management firm to agree on this type of plan as the project begins, the outcome of the initiative will be improved.
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