Typically, a business facing a turnaround mode is the result of an extended period of poor financial performance – plus there doesn’t appear to be any indication that business models in use or short-term fixes will correct the situation.
Meanwhile, other factors also might push a business toward a turnaround mode.
Sudden disruption in your market from an innovator that crushes the assumptions on which your business operates, or emergent technologies that others quickly embrace, leaving you in the position of a major retooling.
A short list of challenges indicating the need for a turnaround include:
< Revenues not covering costs.
< Inability to pay creditors, contractors or suppliers.
< Successive layoffs.
< Dwindling revenues and loss of market share to innovators/competitors.
< Poor management.
< Not keeping pace with technological advancements.
Entering a turnaround can be daunting, and it’s not surprising that many companies choose liquidation or entertain a bankruptcy reorganization.
If pursuing a turnaround, one of the first places to look for change is management and leadership.
A company must explore how leadership contributed to the hardship.
Is there too much antiquated thinking? Are models that govern the activities of the company no longer valid?
When looking at staff, do you have the right people with the correct competencies and skills that can enable doing things differently than in the past?
Turnarounds usually imply staff reductions are the quickest way to stem costs.
Many companies that have experienced turnarounds had drastic layoffs, leaving them with a core group of people pressed to work harder, differently and without additional compensation or rewards for those efforts.
These people can be left shell-shocked, burnt out and embittered depending on the length of the turnaround effort.
Depending on the labor market, the talent you might need the most may move on to greener pastures rather than enduring the pain of staying with a turnaround.
A turnaround effort requires constant evaluation of the plans and goals you establish.
Depending on the size of the company, each department will develop strategies that can get the company back on track.
Quite often this includes short- and long-term plans that are being worked simultaneously.
Short-term plans are reviewed weekly or even daily to ensure corrective results are successful.
There is one constant during a turnaround for every business in this situation. That constant is change.
A turnaround will require everyone on the bus with you to embrace and have a high tolerance for change.
Plans, tactics and strategies will constantly be evolving, and what made sense today may not make sense tomorrow, when a new course may be set.
Not everyone can accept or work in such an environment, and a company will be better off without them than consistently trying to get them on board.
SIMILAR TO A STARTUP
It’s fairly accurate to conclude that much of this sounds like the entrepreneurial environment.
Financial stress is part of the norm for startups and entrepreneurs. Virtually all startups and entrepreneurial enterprises have business plans, but once they begin operations, there can be constant re-evaluation and change.
Change in direction, assumptions and processes are not uncommon, and it is the same attitude that is required for a turnaround.
Because the thinking is similar between startups, entrepreneurial organizations and turnarounds, it can be beneficial to bring in leadership that thrives in those environments.
Turnarounds are not impossible but they will take extraordinary effort and different thinking.
It can be devastating to have built a business that suddenly finds itself in a different environment.
But tenacity, willingness to change and getting the right people involved can make it happen.
Marianne Chester is founder and CEO of mEnterprise Solutions LLC, a strategic services consultancy based in Stroudsburg. She can be reached at 570-460-9599 or firstname.lastname@example.org.