Description
Effective Corporate Turnaround Strategies
In The Offce
ADVICE - EXEC2EXEC
I
t is better to plan for the worst and hope
for the best.
This year, the Australian business
community will have to deal with an
estimated 15,700 corporate insolvencies. This
equates to a fnancial impact on our economy of
$14.9 billion – and don’t forget every insolvency
has a fow-on effect, so the impact will be felt by
another 700,000 businesses.
The good news is that it is possible to make a
positive impact on our country’s rate of
corporate failure and business distress.
Turnaround management is a relatively new
feld in Australia, and, as more businesses
become aware of it, this will make a positive
impact on the rate of corporate failure and
business distress.
GUIDING PRINCIPLES
The following points should be top of mind
when developing or executing a turnaround
plan.
WITH CORPORATE INSOLVENCIES AT AN ALL-TIME HIGH AND SET TO GET WORSE,
IT’S WORTH TAKING TIME TO REVIEW BEST-PRACTICE TURNAROUND TECHNIQUES
TO ENSURE YOUR BUSINESS IS PREPARED FOR ANY COLLATERAL DAMAGE.
Stakeholder management is the key. Of course, it is important to
focus signifcant attention on fnancial and operational
restructuring, but any business that puts its attention here and
ignores stakeholder management will suffer the consequences.
Good stakeholder management involves communicating with all
key parties – fnanciers, employees, shareholders, creditors and
customers.
Turning a business around is as much to do with maintaining
confdence as it is to the initiatives being executed.
Most turnarounds fail due to insuffcient focus on stakeholder
management, particularly employee engagement.
It’s also important to remember that very rarely is there is quick fx
in turnaround situations.
In most circumstances, the CEO needs to come up with one or two
big decisions around which the turnaround plan can be built. This
could mean a fundamental change in the business model, selling off
non-core or non-essential assets/businesses, paring back the
business to its core, or maybe even an acquisition or merger for
greater economies of scale.
Pick one or two big plays that could save the business – tinkering
around the edges simply causes more distress and value destruction.
FIVE KEY PHASES OF A TURNAROUND
These are the key phases for a typical turnaround project:
1. Analyse the situation by conducting a strategic review to determine
how the business got into the position in the frst place, the key risks
facing the business, the key issues and recommendations to mitigate
them – plus strategic options for consideration.
2. Implement a stabilisation plan, including a 100-day workplan,
aggressive stakeholder and working capital management, and
identifcation of ‘quick wins’ to develop momentum.
3. Change management, which often involves changing key personnel due
to underperformance, or simply bolstering the management team by
engaging a chief restructuring offcer to project-manage the many and
varied initiatives. This frees up management to stay focused on the core
business.
4. Restructure the business, whether by changing the business model, a
rebranding exercise to drive revenue, changing the customer or product
mix, sale of non-core assets/divisions, or redundancies.
5. Return to normal, or sell along the way if that will drive greater value
for stakeholders.
Michael Fingland, Group Managing Director of national business
transformation and turnaround frm Vantage Performance, was
awarded Australasian Turnaround Professional of the Year 2011
by the Turnaround Management Association for his work with fast
growth and troubled companies.
vantageperformance.com.au, or see our blog businessstrateg yblog.com.au.
Effective Corporate
Turnaround Strategies
SIX ESSENTIAL ELEMENTS FOR SUCCESSFUL TURNAROUNDS
It’s crucial that the management team is confdent of being able to
positively answer the following questions at key intervals along the way:
• Can we prove the business is viable?
• Can we manage and ‘motivate’ key stakeholders?
• Does management have suffcient credibility?
• Is the business reputation intact?
• Can we obtain suffcient credit from suppliers?
• Can we secure internal and/or external funding?
The knock-on impact of Australia’s record-high insolvencies will be
signifcant director bankruptcies, loss of government taxes, numerous
marriage breakdowns due to fnancial pressure, and signifcant social
impacts such as suicides and depression.
The unfortunate reality is that so many corporate collapses can be
prevented. The key issue is that the majority of the corporate world is not
aware that the turnaround management industry exists, and they are not
aware of the above best-practice techniques.
Given the signifcant economic and social benefts of reducing corporate
failure, I think we can all do more to spread the word.
BY MICHAEL FINGLAND
1 • CEO
theceomagazine.com.au
CEO • 2
theceomagazine.com.au
doc_308841913.pdf
Effective Corporate Turnaround Strategies
In The Offce
ADVICE - EXEC2EXEC
I
t is better to plan for the worst and hope
for the best.
This year, the Australian business
community will have to deal with an
estimated 15,700 corporate insolvencies. This
equates to a fnancial impact on our economy of
$14.9 billion – and don’t forget every insolvency
has a fow-on effect, so the impact will be felt by
another 700,000 businesses.
The good news is that it is possible to make a
positive impact on our country’s rate of
corporate failure and business distress.
Turnaround management is a relatively new
feld in Australia, and, as more businesses
become aware of it, this will make a positive
impact on the rate of corporate failure and
business distress.
GUIDING PRINCIPLES
The following points should be top of mind
when developing or executing a turnaround
plan.
WITH CORPORATE INSOLVENCIES AT AN ALL-TIME HIGH AND SET TO GET WORSE,
IT’S WORTH TAKING TIME TO REVIEW BEST-PRACTICE TURNAROUND TECHNIQUES
TO ENSURE YOUR BUSINESS IS PREPARED FOR ANY COLLATERAL DAMAGE.
Stakeholder management is the key. Of course, it is important to
focus signifcant attention on fnancial and operational
restructuring, but any business that puts its attention here and
ignores stakeholder management will suffer the consequences.
Good stakeholder management involves communicating with all
key parties – fnanciers, employees, shareholders, creditors and
customers.
Turning a business around is as much to do with maintaining
confdence as it is to the initiatives being executed.
Most turnarounds fail due to insuffcient focus on stakeholder
management, particularly employee engagement.
It’s also important to remember that very rarely is there is quick fx
in turnaround situations.
In most circumstances, the CEO needs to come up with one or two
big decisions around which the turnaround plan can be built. This
could mean a fundamental change in the business model, selling off
non-core or non-essential assets/businesses, paring back the
business to its core, or maybe even an acquisition or merger for
greater economies of scale.
Pick one or two big plays that could save the business – tinkering
around the edges simply causes more distress and value destruction.
FIVE KEY PHASES OF A TURNAROUND
These are the key phases for a typical turnaround project:
1. Analyse the situation by conducting a strategic review to determine
how the business got into the position in the frst place, the key risks
facing the business, the key issues and recommendations to mitigate
them – plus strategic options for consideration.
2. Implement a stabilisation plan, including a 100-day workplan,
aggressive stakeholder and working capital management, and
identifcation of ‘quick wins’ to develop momentum.
3. Change management, which often involves changing key personnel due
to underperformance, or simply bolstering the management team by
engaging a chief restructuring offcer to project-manage the many and
varied initiatives. This frees up management to stay focused on the core
business.
4. Restructure the business, whether by changing the business model, a
rebranding exercise to drive revenue, changing the customer or product
mix, sale of non-core assets/divisions, or redundancies.
5. Return to normal, or sell along the way if that will drive greater value
for stakeholders.
Michael Fingland, Group Managing Director of national business
transformation and turnaround frm Vantage Performance, was
awarded Australasian Turnaround Professional of the Year 2011
by the Turnaround Management Association for his work with fast
growth and troubled companies.
vantageperformance.com.au, or see our blog businessstrateg yblog.com.au.
Effective Corporate
Turnaround Strategies
SIX ESSENTIAL ELEMENTS FOR SUCCESSFUL TURNAROUNDS
It’s crucial that the management team is confdent of being able to
positively answer the following questions at key intervals along the way:
• Can we prove the business is viable?
• Can we manage and ‘motivate’ key stakeholders?
• Does management have suffcient credibility?
• Is the business reputation intact?
• Can we obtain suffcient credit from suppliers?
• Can we secure internal and/or external funding?
The knock-on impact of Australia’s record-high insolvencies will be
signifcant director bankruptcies, loss of government taxes, numerous
marriage breakdowns due to fnancial pressure, and signifcant social
impacts such as suicides and depression.
The unfortunate reality is that so many corporate collapses can be
prevented. The key issue is that the majority of the corporate world is not
aware that the turnaround management industry exists, and they are not
aware of the above best-practice techniques.
Given the signifcant economic and social benefts of reducing corporate
failure, I think we can all do more to spread the word.
BY MICHAEL FINGLAND
1 • CEO
theceomagazine.com.au
CEO • 2
theceomagazine.com.au
doc_308841913.pdf