The first step in any successful corporate turnaround is accepting that renewal is needed and acknowledging whether management has the energy and strength to work with a corporate advisor to make the changes necessary.
A few weeks into a turnaround process when restructure activity is well underway and lots of different things are happening simultaneously, the management team may be overcome with a sense of losing control. So how do you measure these feelings by knowing if your efforts are paying off?
It’s important to regularly sit down, take a breath and reflect on the journey to date and where you have come from. Have your turnaround plan with you and look at the following elements of a successful renewal process.
Has a review been conducted and then control been taken of the most immediate and critical areas (cash management, arranging short-term funding, review of overheads, review of assets, financial reporting, tax obligations and so on)?
Has a review been done of the senior management team, including the CEO? There are some key elements to this. For instance, if this team was the one to turn your business around, they should have done it before the advisor was engaged. Which of these people is not up to the task? Who does not have the skills or the attitude and energy required for a turnaround process? Changing management also communicates a powerful message of confidence to stakeholders and throughout the business.
Most problems in this world are because of a communication failure. Fixing this will go a long way to resolving the problem. Talking to banks, investors, suppliers, staff and customers with what you are doing, and then delivering on what you tell them will build support and confidence in the turnaround plan.
The way the business is financed is often not fit for purpose, as it was implemented at a different stage of the business journey. Are there changes needed to debt and equity, gearing of the balance sheet and refinancing with a more appropriate facility?
Have the operations of all areas of the business been reviewed with the objective of efficiency gains, and cost and time reduction? Tim Ferriss, the author of The 4-hour Workweek, said, "Never automate something that can be eliminated and never delegate something that can be automated or streamlined. Otherwise, you waste someone else’s time instead of your own, which now wastes your hard-earned cash. How’s that for incentive to be effective and efficient?" Eliminate. Simplify. Automate. Delegate.
Culture and operational changes
Reviewing what people do, how they do it, their attitude and energy, and then making changes and improvements will improve both operational performance and the culture of the staff and the business.
Once the crisis and emergency stage has begun and the business is more stable, it is then time to do a strategic review of the business and the direction it should be heading. This may include considering divestment, asset reduction, downsizing, outsourcing, investment and organic versus acquired growth.
Upon reviewing these elements and the actions within your business to date, do you feel you are on the right track, even if it seems chaotic? Turnaround is not a linear process. Developing trust with your advisor and understanding these elements of a successful corporate turnaround should provide confidence in the turnaround strategy.
Stephen Barnes is a business turnaround and recovery specialist, board advisor and the principal of management consultancy Byronvale Advisors.
Read next: How to save your business in a global crisis