Management - The 360º Renovation Strategy
in India, perhaps two-thirds of all sizeable organisations
are becoming insolvent. The single greatest cause accounting
for this is inappropriate management, characterized by such
deficiencies as corruption, lack of professionalism, needless
growth, excessive conservatism, bureaucratic rigidity, lack
of proper systems, etc. Turnaround at this point can be very
rewarding. To have a successful turnaround, requires enormous
personal effort and the enthusiastic support of everyone involved
from management down. The art of successful turnaround is
the business of:
1. Identifying the strengths and capabilities of the incumbent
2. The potential value of the components which make up the
3. Determining financial and human resources
A turnaround can be defined as "a process by which companies
reduce their losses and achieve increased profitability".
It is a process of converting an unsatisfactory result into
a satisfactory result - a 'sick' company into a profitable
company. The first 90 days of any turnaround mission is crucial
in terms of defining the actions that will have to be implemented
inorder to restore the company to financial health and then
communicate those to the concerned.
Key Signals to Turnaround Management 1. Employees are ignorant
about the full business picture. 2. Department Managers and
first line supervisors do not participate in the decision-making
process. 3. Employees do not understand the nature of consumer
product business where flexibility to respond to market changes
is paramount. 4. Employees do not trust the company's intentions
and motives. 5. Product mix is composed of low growth brands.
6. Work force is faction ridden with strong line loyalties.
7. 'Manager' and 'worker' relationship is "deal"
based and not "principle" based. 8. Equipment reliability
is poor. 9. Packaging materials quality is poor. 10. Employees
do not discern any stake or personal commitment to the company.
11. Competent people with potential are misled and weakened
by an autocratic leadership style.
Often a company suffers a decline due to a combination of
internal and external elements.
The external elements that cause business trouble are mainly
market changes, customer preference changes, foreign competition,
legal precedents, and the political climate. A major problem
with these elements is their interaction with each other.
A cultural/social change, for example, can result in a legal/political
change. This, in turn, can affect the economic environment,
leading to a shift in technological developments. The rate
of technological development affects the status of the competition,
which in turn influences the cultural/social environment,
and the circle is complete. Since all businesses are similarly
affected, they can survive only because of their ability of
management. Foresight and flexibility will help management
safeguard against these uncontrollable elements, using tactics
such as promotion, education of the consumer, accelerated
research and development, product improvements or elimination,
changing expansion plans, and channels of distribution.
Though management is the force that drives the internal functions
of finance, production, and marketing/distribution, these
elements are at the root of the majority of business failures.
Production techniques can become antiquated. Marketing/distribution
can be in the wrong market with the wrong product. Finance
can be unaware that the financial requirements of the other
departments have changed. Poor information flow between departments
is another signal of decline. The heart of any company is
the synergy developed between the efficient operations of
its various departments.
Assessing The Forces For And Against Turnaround
In order to concentrate effort where it will bring the best
return, you need to strengthen the positive factors for turnaround
and weaken the negative influences. Clarify the current situation
of your own organisation and the desired future state that
you seek. Then identify the relevant forces within the organisation,
distinguishing between driving forces that can be seen to
facilitate turnaround and restraining forces that might inhibit
turnaround. To use this approach follow these steps:
those individuals/groups who ideally need to support the
from this list those whose support is essential for the
the present/future level of commitment from each person
or group within this critical mass required for the proposed
turnaround to be successful.
Techniques / Approaches
The selection of a turnaround strategy should depend upon
the situation, in particular the business's closeness to breakeven.
Basically, there are two major approaches to turnaround:
This approach is sought in order to replace the Chief Executive
of an ailing corporation by a new Chief. The product mix is
revamped, obsolete machinery is replaced, research and development
is stepped up, marketing is strengthened, controls are toughened,
accountability for performance is highlighted, and so on.
By doing so, though ailing companies can no doubt improve,
the loss to the company is of commitment, skills, experience,
know-how and productive capacities.
This involves negotiated and humane layoffs and divestiture.
It tries to create a strong work culture, and generally creates
a strong sense of participation in the employees. Management
spends a great deal of time trying to understand what the
problems are, takes all the stakeholders, including unions,
into confidence and brainstorms together on what needs to
be done to solve the problems.
Five Generic Turnaround Strategies
The selection of a turnaround strategy should depend on the
situation - in particular the business' closeness to breakeven.
If a business is far below breakeven, an asset redeployment
strategy is warranted. Such a business must recognize that
it should be smaller than it once hoped it would be. If a
business is moderately below breakeven, a selective product/
market strategy is called for. Here, the business probably
does not have enough idle capacity to allow major asset disposal,
nor can it prosper simply by cutting costs. If a business
is very close to breakeven, a cost-cutting strategy is appropriate.
Such a strategy often will be sufficient to push the business
to acceptable profit levels without exposing it to undue risks.
The market share of a business might be another factor affecting
its choice of turnaround strategy. High-share businesses might
rely on attempts to exert their relative market power by following
the more offensive strategy -Selective product/ market strategy.
Restructure Leadership and Organisation / Culture
Changes in leadership usually occur during the preparatory
stage. This change seems to be made for both symbolic and
substantive reasons. Replacing managers stimulates change
by; unfreezing current attitudes; breaking mindsets conditioned
by the industry; removing concentrations of power; and providing
a new view of the situation. Replacing leadership often creates
the level of stress or tension needed to stimulate organisational
2. Cost Reduction strategies
A cost reduction strategy involves reduction in administrative,
R&D, marketing and other discretionary expenses. Controlling
costs appears to be the key to successful turnarounds. Defensive
tactics include reducing expenses, receivables, inventory
levels, and personnel. Offensive tactics involve the installation
of proper management controls to either eliminate past errors
or prevent them in the future.
3. Asset Redeployment Strategies
An asset redeployment strategy involves disposal of assets,
primarily fixed assets. The goal is to improve capacity utilization
and employee productivity. Common redeployment strategies
include: relocating plants affording better-cost advantages
and merging branch operations. Production economics can also
be improved through capacity increases or decreases.
4. Selective Product / Market Strategies
This strategy is 'entrepreneurial' in nature. It involves
short run changes in the firm's marketing mix aimed at increasing
revenues. Defensive strategies include reducing marketing
expenses or divesting certain products. Offensive strategies
involve increasing process, promotion, quality, or customer
service. Combining offensive and defensive product/market
activities form parts of successful turnaround strategies.
5. Repositioning Strategies
These strategies aim at ensuring that the turnaround is permanent
by repositioning the firm either in its current markets or
in new ones to ensure future growth and profits. Repositioning
starts by redefining or refocusing the mission of the firm.
Defensive activities involve repositioning the firm using
its current products. Offensive repositioning activities involve
diversification efforts to expand product lines or to enter
new business areas via (most popular listed first): acquisition,
internal development, joint venture, or vertical integration.
Interventions To Turnaround Strategy Right management and
improved marketing helps the employees acquire information,
skills and commitment through complete involvement. The specific
interventions of turnaround strategy are:
and Information Sharing
Since employees do not have an integrated picture of business
and plant operations they do not tend to see what their actions
are contributing to. To overcome this problem, communication
forums need to be started e.g. daily management meetings,
supervisor-workers group meetings, meetings with the Union
Committee and periodic plant-wide and company-wide information
sharing meetings. This helps to build awareness, clarify purpose
and intentions, and evaluate the suggestions and action plans
that are being considered to achieve ends.
Management should focus on communication and demonstrate through
consistent actions that productivity process and quality improvements
along with waste elimination are vital to plant's long-term
survival. Each executive and department must be asked to evolve
a list of tasks that would result in cost and /or quality
improvement. A master list of focus areas along with a timetable
should be compiled for the whole plant and communicated widely.
In most organizations, no system exists for the employees
to find out 'first-hand' how their products are received in
the market place. Employees do not adequately understand the
products and the processes on which they are working everyday.
To correct this situation, massive doses of professional and
managerial training need to be provided based on individual
needs - regardless of levels. Job rotation should be pursued
aggressively. All these activities help people improve their
capabilities and leads to a feeling in the employees that
the company is genuinely interested in their development and
is willing to spend money on any meaningful activity.
The major reason for system reliability to be low is because
of poorly conceived manufacturing and packaging equipment.
Following should be the course of action: - Improving the
design and layout of equipment - Improving the quality of
support services. This leads to an improvement in the working
environment and a belief among the employees that for improvement
you need not always work harder but often need to work smarter.
Turnaround Formula : Standard actions to recover the profitability
of current scene and needs while reducing the stress by
building confidence in the eventual success.
sources of the dangerous condition with clear identification
of proven solutions.
of the problem(s) and ensuring no re-occurrence.
of management (and key staff) to enhance skills to meet
top management to adopt policies that will detect and prevent
situations from recurring.
to Manage Your People
There is evidence that people can be trained to increase some
of the skills that good turnaround managers demonstrate. Useable
tools of diagnosis and decision-making such as SWOT (strength,
weakness, opportunity, threats), action research, brainstorming,
survey feedback, and so forth can readily be taught to turnaround
managers. Turnaround managers can be trained once we understand
better their personality traits, abilities, decision heuristics,
and management techniques that can contribute to effective
of turnaround on all groups varies according to their degree
of involvement and their vested interests. You therefore need
to identify all such stakeholders. They could include Shareholders,
Employees, Unions, Suppliers, Customers and the local community.
In stable business environments the concept of turnaround
is alien to all stakeholders. People are damaged by seeing
their colleagues sacked and jobs cut seemingly arbitrarily,
in the wake of badly managed surgical turnaround the resistance
to further change will be high.
base is becoming one of an organisation's major assets so
it is vital to engage the hearts and minds of the workforce
not just their hands. A token shareholding given to staff
to make their interests similar to those of shareholders will
not suffice; they need to be involved in all significant decisions.
"The empires of the future are the empires of the mind"
offer splendid sites for studying processes by which organizational
leadership acquires charisma. Turnarounds may also examine
the improvisation by management of an intuitive sort of action
research leading to effective change-agentry, and transformational
processes that rejuvenate decayed organisations by getting
employees to unlearn learned helplessness and learn a constructive
sort of opportunism. They are also arenas where attitudes,
values, beliefs, and action heuristics undergo a sea change
in a relatively short period. Thus, they offer fascinating
arenas for studying this phenomena and social information
processing for collective change.
from 'Turnaround Management - The 360º Renovation Strategy',
a one-day Seminar designed and conducted by L.R. Management
in Indian Express - Headstart.
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