Professional Management as a permanent Turnaround
When companies get into trouble, a more or less radical turnaround is required to get them back on track. However, professional turnaround managers don´t have a magic formula which enables them to save a company overnight! Rather, under great time pressue and in a project mode, they usually make up for what has been neglected in the past. From that perspective, a turnaround can be seen as the application of proven and professional management methods and processes in a situation of great urgency.
Consequently, a crisis can best be prevented if a company´s management continuously practices what a turnaround manager does under high pressure:
The company´s development in the past 3 - 5 years has to be analyzed in detail. The focus should be on success-critical financial metrics like, e.g., turnover, sales, cashflow, contribution margin by product line etc. The more granular this analysis is, the better the company knows where it stands and how it has got there.
In the next step the financial metrics should be compared with those of the industry´s best players. Only then can a company evaluate how well it is positioned in the competitive arena.
The product and service portfolio should be continuously scrutinized for value-creating and value-destroying items and be adapted accordingly. Organizations which get into trouble often have an excessively broad portfolio and generate losses with a part of their offering.
The company´s processes should be optimized to make them more efficient and to reduce costs. However, in this context, the challenge is not to save costs in the wrong places. E.g. outsourcing of production can lead to short-term savings, but result in quality problems and customer defection in the longterm.
Human resources managers should make sure that the company has the right people with the right qualifications in the right places. In addition, they should check whether the jobs are designed in such a way that people can really act effectively.
The company´s leaders should permanently monitor the environment to identify risks and opportunities and look for growth potentials with new products and in new markets.
- All of the above is only possible if the company has a culture of openness and honesty, exemplified by its leaders. Only then is it possible to confront the harsh reality and to react to changing conditions in realtime.
This may sound easy and is nothing new! However, it is for that very reason that the question may be allowed: Why do companies so often not do it?