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Should you undertake a turnaround in your business?

The first rule in business is generally, “If it’s not broken, don't fix it”. If your company or subsidiary, for which you are contemplating changes, is not bleeding or if critical financial problems and other critical symptoms are not present then severe and rapid management turnaround actions are probably not required. But such steps definitely must be considered when the company or the relevant business unit is in trouble and when alternatives are not available or are not feasible.

While rapid and drastic repositioning and restructuring of the company and rapid and drastic changes in the way the company operates and does business will scare most people, such actions are a rational response to many crisis situations. Such actions are required to get the company out of the rut it is currently in. Management turnaround specialists are experts in the evaluation of needs in establishing whether you need us or not. Call us for a free evaluation, 877-320-4567

The business that generates losses will continue to generate losses, as long as the behavior is continued. In effect, in 80% of the cases, corporations get in a rut because of the inability or complacency of management. It is the inability and complacency of management that most often constitutes the rut.

Whatever the reason is for the company following a losing model, once the company is on that path, the choices are slim, face the reality and get out off of that path, or fail.

Our experience shows that operating a losing business model often involves following unconditionally, some strategy which was once a cognizant and acceptable choice, but which with the passage of time is no longer acceptable and due to changes in conditions is no longer viable. The most common reasons for not recognizing that the company is on this path are the following;

· The abandonment of habit to manage by numbers cost-engineering, cost accounting and
  cost-benefit analysis

· Lack of intermittent thorough comparison with broadly understood competition

· Failure to actively seek improvement

· Unwillingness to face reality.

In addition to moving the company off the wrong path, a successful corporate turnaround requires changing the culture of the company to keep the company from sliding back onto the wrong path.

The above requirements of broad business knowledge, specifically of many functions and many industries, disciplined thinking, and absolute integrity come into play from the outset of a corporate turnaround. These are paramount in formulating, and boldly asking hard-hitting questions that must be posed in order to determine if the company is merely experiencing some troubles or is failing. Troubled companies are often stuck in the losing model until the right questions are asked and processes are changed.

When the company is really failing, great changes are required, time is of the essence, and the real risk is an opportunity cost. Opportunity costs are not entered into the P&L statement, but are used in decision-making when comparing alternatives. Some people might say that for a sinking company, this opportunity cost does not even exist until the bleeding is stopped.

Are we suggesting that if a company is in decline and bleeding, there is no risk in experimenting on it? Of course not. The very reason for taking turnaround actions is the founded belief by management in the potential for recovery. But this potential must not be wasted. The point we are making is that when a company is failing, bold actions are required and the real issue is which actions to take.

This message is aimed primarily at business owners and board members of companies that are in real trouble, in a losing model or close to it. In such situations, the danger involved in enduring on the existing course is so great that the real question is not if, but what fundamental changes should be made and should they be made by a management turnaround expert or by existing management.

As a rule, if a failing company is to survive, certain drastic changes fundamental to a turnaround have to be made even though they will be regarded by part of the management and staff as rocking the boat. Typically, after a swift assessment of the situation, one of the first actions taken by the administrator leading the turnaround of a distressed company, is to give the subordinate managers, at both senior and middle levels, a clear internal message about the new direction and new rules for the company and about new the pace of getting things done.


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