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When is a corporate turnaround practical?

A management turnaround is feasible when both of the following requirements are fulfilled:

Circumstances and conditions are such that a management turnaround is realistically expected to succeed, based on a viable corporate turnaround concept, and the corporate turnaround is an attractive option compared to other strategic options available.

The corporate turnaround plan, strategic in nature, addresses the repositioning and the reorganization of the company. The plan is usually brief because, as a rule, it has to be created rapidly.

In addition to the strategic plan, a catalog of actions and projects that will be implemented as part of the turnaround process must be created and updated continuously. Typically this catalog comprises further reorganization and re-engineering activities. Additional actions and projects such as training of staff and management, preventive maintenance, error-proofing various activities including quality assurance, advertising, change in methods of distribution, sales promotions, and other measures, which individually are often tactical in nature but collectively are of primary strategic importance.

Together, the strategic plan for the turnaround and the catalog of other turnaround actions and projects form the turnaround concept.

Usually the turnaround leader must provide the heart of the strategic plan himself, but experience shows that when properly motivated, employees of various position can often provide very valuable ideas, particularly for the reorganization of operations.

It should be noted that it takes broad business knowledge, sharp analysis, familiarity, and a creative mind to generate a good management turnaround plan. It takes these skills to know what a viable realistic plan is and to know what priorities to follow in order to achieve a successful management turnaround.

Also, keep in mind that a turnaround is rarely easy. It takes time, though typically less time than it took to run the company down, and that a management turnaround is always hard work for management. Therefore, before a turnaround is undertaken, other alternatives should be considered.

Typically, these alternatives are the sale of the company or some of it’s assets or a liquidation, not at desperation prices. Occasionally these alternatives are reasonably attractive, for example if there is a targeted buyer to whom the distressed company or some of its assets represent a greater economic value than to the general marketplace.

When a company is in trouble and there are no other attractive options, management turnaround actions should be taken, assuming the prospects for turnaround are reasonable.


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