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Turnaround Managers
Turnaround Managers are also called Turnaround
Practitioners in the UK, and often are interim managers who
only stay as long as it takes to achieve the turnaround.
Assignments can take anything from 3 to 24 months
depending on the size of the organization and the complexity
of the job. Turnaround management does not only apply to
distressed companies, it in fact can help in any situation
where direction, strategy or a general change of the ways of
working needs to be implemented. Therefore turnaround
management is closely related to change management,
transformation management and post-merger-integration
management. High growth situation for example are one
typical scenario where turnaround experts also help. More
and more turnaround managers are becoming a one-stopshop and provide help with corporate funding (working
closely with banks and the Private Equity community) and
with professional services firms (such as lawyers and
insolvency practitioners) to have access to a full range of
Stages
Stages in repositioning of an organization
1. The evaluation and assessment stage
2. The acute needs stage
3. The restructuring stage
4. The stabilization stage
5. The revitalization stage
The first stage is delineated as onset of decline (1).
Factors that cause this circumstance are new innovations by
competitors or a downturn in demand, which leads to a loss
of market share and revenue. But also stable companies may
find themselves in this stage, because of maladministration
or the production of goods that are not interesting for
customers. In public organisations are external shocks, like
political or economical, reasons that could cause a
destabilization of a performance.
Sometimes an onset of decline can be temporary and
through a corrective action and recovery (2) been fixed.
The reposition situation (3) is the point in the process,
where the minimally accepted performance is long-lasting
below its limits. In empirical studies a performance of
turnaround is measured through financial success indicators.
These measures ignore other performance indicators such as
impact on environment, welfare of staff, and corporate social
responsibility. The organizational leaders need to decide, if a
Techniques
There are different techniques that can be applied to cause a
repositioning. The four main techniques are known as
Retrenchment, Repositioning, Replacement and Renewal:
Retrenchment
The Retrenchment strategy of the turnaround management
describes wide-ranging short-term actions, to reduce
financial losses, to stabilize the company and to work
against the problems, that caused the poor performance. [1]
The essential content of the Retrenchment strategy is
therefore to reduce scope and the size of a business through
Shrinking Selective Strategy. This can be done by selling
assets, abandoning difficult markets, stopping unprofitable
production lines, downsizing and outsourcing. These
procedures are used to generate resources, with the
intention to utilize those for more productive activities, and
prevent financial losses. Retrenchment is therefore all about
an efficient orientation and a refocus on the core business. [2]
Despite that many companies are inhibited to perform
cutbacks, some of them manage to overcome the resistance.
As a result they are able get a better market position in spite
of the reductions they made[3] and increase productivity and
efficiency.[4] Most practitioners even mention, that a
successful turnaround without a planned retrenchment is
rarely feasible.[5]
Repositioning
The repositioning strategy, also known as "entrepreneurial
strategy", attempts to generate revenue with new
innovations and change in product portfolio and market
position. This includes development of new products,
entering new markets, exploring alternative sources of
revenue and modifying the image or the mission of a
company.[6]
Replacement
Replacement is a strategy, where top managers or the Chief
Executive Officer (CEO) are replaced by new ones. This
turnaround strategy is used, because it is theorized that new
managers bring recovery and a strategic change, as a result
of their different experience and backgrounds from their
routines
overheads
and
or
introduce
guidelines.
new
Replacement
administrative
is
especially
Renewal
With a Renewal a company pursues long-term actions, which
are supposed to end in a successful managerial
performance. The first step here is to analyze the existing
structures within the organization. This examination may end
with a closure of some divisions, a development of new
markets/ projects or an expansion in other business areas. A
Renewal may also lead to consequences within a company,
like the removal of efficient routines or resources. On the
other hand are innovative core competencies implemented,
Hurdles or Challenges
Three critical hurdles or challenges that management faces
in any repositioning program
1. Design: What type of restructuring is appropriate for
dealing with the specific challenge, problem, or opportunity
that the company faces?
2. Execution: How should the restructuring process be
managed and the many barriers to restructuring overcome
so that as much value is created as possible?
3. Marketing: How should the restructuring be explained and
portrayed to investors so that value created inside the
company is fully credited to its stock price?
Professional Organizations
There are a number of professional industry associations that
provide advice, literature and contacts to turn around
professionals and academics. Some are:
Turnaround Management Society (International / Focus on
Europe)
Institute for Turnaround (England)
Turnaround Management Association (International)
Institut fr die Standardisierung von
Unternehmenssanierungen (Germany)
REFERENCE:
en.wikipedia.org/wiki/Turnaround_management