Executing Your Turnaround: 6 Important Steps
A business turnaround, by definition, is a change in direction and operations based on the assumption that the business is headed the wrong way. This assumption is usually based on the fact that the business is losing money and likely to do more of the same.
Successful business turnarounds can be very complex, transformative processes, but always combine at least the following six steps:
- The assessment of the business in all areas of financial and non-financial activity that leads to a conclusion that there is a sense of urgency for action and that action is warranted. Sometimes it may be too late for rehabilitative action and closing the business and liquidating assets is the best strategy for “cutting your losses.”
- Going forward, it is essential to know what the values of the company are and how they are reflected in the goods and/or services provided. Any disconnect between the two is related to some critical aspect of the current business difficulties and must be addressed going forward.
- Business turnarounds usually are necessitated because the company has “lost its way” or position in the marketplace. The focus here should be both on clarity of positioning and an actionable business plan that is executed with quantitative performance indicators in place.
- Restructuring, at some level, occurs in all turnarounds. It should be guided by the need to reduce expenses and the desire to create a foundation for future growth. It is also a wonderful opportunity to send a clear organizational message about the values underlying the future direction of the company.
- Careful cash management, and general resource control, are central turnaround issues, even in large public institutions. The management and reporting of resource management should be prominent on the dashboard of performance indicators.
- The quality of communication in a turnaround is critical. Many turnarounds occur in environments that are characterized as lacking regular and clear communication about the company’s direction and performance. Within this re-clarifying activity is often the need to re-establish performance expectations throughout the organization. Fuzzy expectations generally lead to fuzzy performance.
While there are other important activities in some turnarounds, if you address these you will be headed in the right direction. Many turnarounds end up being enriching and even exhilarating experiences, with a redemptive quality for those who participated in taking the wrong turn and now able to get back on the right track.