Management Direction and the Turnaround

With the necessary financial and operational restructuring, plus the marketing re-positioning, it is easy to overlook a key factor that often proves to be critical to successful turnarounds: staff motivation. Reorganizing and involving not just the management team, but also the rank-and-file  are two essential tasks. The entire company must be pulling in the same direction to achieve optimal success. Involvement creates a “can-do” atmosphere that spreads to vendors, customers, and other stakeholders.

Involving Staff

It is imperative that appropriate changes be made to show that the executive team is committed to “doing whatever it takes.” Key employees should be encouraged to take an active role in the turnaround process, ensuring that they feel they are a vital part of the solution. Regularly scheduled management meetings are the new norm. In times of crisis, these meetings may need to occur daily; in profitable times biweekly should be adequate. Finding yourself and the team somewhere between crisis and optimization may be reason to vary the frequency of meetings, but they should never be more sporadic than once every two weeks.


Do not be afraid to ask employees their opinions about what motivates them to perform. These opinions can be used to develop performance measurements and incentive plans. Scrutiny of company policy manuals and benefits offered can help identify ways to enhance engagement. Also, discovering the most frequently encountered problems can reveal how managers are applying–or failing to apply–useful solutions. Project descriptions, summaries of the company’s performance in adhering to budget and time constraints, and brainstorming time to recommend better methods are good synergy building activities.


Some companies like to administer tests of ability to prospective employees. Yet, once the prospects are hired, there is very little training and development. Close supervision should yield observations about areas for improvement. It is the responsibility of management to find ways to challenge employees to grow in their capabilities–both technical and soft skills–throughout their careers. Developing professional growth plans and holding folks accountable to execute them is good for all. Tying performance measurement to the plans shows employees that you are serious about continuous improvement and results-based management.


The team is also responsible for cultivating the management team concept in hiring employees, meeting goals and objectives, and conducting individual performance reviews. In addition, management’s performance should be reviewed to locate and remove any team members who are preventing goals and objectives from being met.

Hiring people who complement one another is the first step in forming a cohesive management team. Effective hiring is accomplished through a careful planning and implementation process that parallels the general turnaround effort. Write down job requirements before the hiring process begins. Solicit qualified candidates; throw out applications/resumes that are out of scope. Referrals from suppliers and customers tend to be the best sources of candidates. Objective measurement of qualifications against standards you have developed will shorten the list to be interviewed. Personal references and one-on-one assessments with the prospect’s proposed work team will verify compatibility.

Employee participation in the decision-making process is needed–more so during a turnaround. While key employees should be encouraged to contribute actively during meetings, they may not be asked to vote on issues affecting them directly. Meetings should also be an opportunity to thank employees for a job well done. Rewarding a manager for adherence to budget and schedule without also recognizing her team detracts from the team concept.

Reorganizing Staff

Reassigning personnel and restructuring responsibilities demands management team decision-making. Decisions about incentive and performance programs require outside assistance in so far as tax and legal consequences are concerned, but the ideas and proposals should come from management team meetings.

Management should not exclude themselves from the reassignment process! It may be that the president, for instance, is most valuable to the company in a different capacity or focus area. Like all staff members, she should be prepared (especially during a turnaround) to work in a role where strengths can be put to maximum use!


Management: Information, Structure, Mission & Goals


Thorough management information systems can also aid the company in gaining a competitive advantage. By monitoring job progress, collecting data about percent complete against target, a good system can help the organization adapt more quickly to changes in either the internal or external environment. In the financial area, a proper system can eliminate much busywork, thereby allowing office staff and managers to focus on priorities, such as customer service.

Therefore, management information systems should be designed to provide the meaningful financial and operating information necessary to plan a company’s direction. The costing, pricing, and scheduling systems produce information necessary to control expenses. Similarly, work schedules, purchasing systems (purchase orders or the equivalent), and supplier files establish the framework for orderly completion of work according to budget. An accurate reporting system is required to maintain financial controls. However, many of these systems take on characteristics over time that may not aid the company in achieving optimal efficiencies. Only through review and analysis of the documented assumptions behind the systems and the logic of the systems themselves can the executive team determine whether reporting can be improved.

An illustration of one area in which management information systems can shape corporate planning is in inventory listings for a manufacturing or retail company. Inventory classifiable as old or having low margins can be highlighted for increased marketing focus to increase sales turnover. As sales increase, interest carrying costs diminish. Carrying costs include the cost of capital, insurance, theft, obsolescence, repair, financing costs, maintenance, and loss of use of capital.

Management Structure and Characteristics

The structure of a company contributes to its strengths and weaknesses. In turn, the form of management, motivation techniques, and employee job skills dictate the structure of the company. If management and employees are not motivated to perform their jobs or lack the skills to do so, the entire business suffers. Every company must be based on three essential elements:

  • mission statement
  • goals 
  • objectives

Mission Statement

Many executives carry their company’s mission statement around in their heads but fail to share it with employees in a way that encourages them to share the enthusiasm and commitment. Committing the mission statement to writing in language understandable by all interested parties lays the groundwork for the joint development of company goals and objectives. This mission statement should explain the product, the operating focus, and the distinguishing characteristics of the company’s vision. The statement should remain valid for the life of the company.

Goals and Objectives

Goals that take shape through employee input usually result in shared dreams. If the goals, objectives, and tactics needed to accomplish the mission are agreed upon by all at the outset, they become a standard against which performance can be judged. An example of a goal would be to achieve 15 percent market share in the Gen Y demographic in a certain geography within five years. An objective would be to sell X number of units in one to three years. A tactic would be to sell X number of units in a given channel in a given price range by a certain date within one year.

A review of organizational charts reveals much about the work flow in a given operation. The actual flow of work needs to be compared against planned work flow and adjusted periodically to achieve efficiency. In addition, job descriptions need to reflect reality and effectiveness. Employees should be asked to write both what they have been hired to do and, additionally, what they actually do. After receiving the employee descriptions, the executive team can draft job descriptions that promote effective work completion.


Sizing Up the Competition

Whether you are in turnaround mode, wildly profitable operations, or somewhere in between, it is imperative to know as much as you can about your competition. Competitive threats–present or forthcoming–should be well understood and strategies developed to address them.

Assessing the Competition

To assess buyer potential, knowledge of competing products is essential. Any advantage an executive team may hold over the competition needs to be studied with an eye toward exploiting that advantage fully. By developing this competitive advantage, the business creates non-financial barriers can prove difficult for the competition to overcome; financial barriers (for example, price discounts) are often more easily met.

Threats from competitors are a daily occurrence. Therefore, the competition should be monitored and key information compiled and categorized, either manually or electronically, and updated regularly. The most common forms of threat to watch are as follows:

  • the unanticipated entry of competition with extensive resources or new product offerings into the local market
  • the diversification of existing companies into new product offerings
  • the introduction of  a technology (such as a software as a service trendsetter) that exceeds currently available prototypes
  • efficiency improvements that create cost advantages not easily matched

Any slight advantage in cost savings others can gain presents a viable threat to the operation of every other participant in that niche. For example, if a company can source inputs cheaper, that competitor can control the market through pricing. While price reductions can be matched, cost efficiencies cannot. With reduced cost structures, the business could offer higher quality products for the same or cheaper prices to the same group of buyers another business is trying to attract. Some may strike lucrative deals with their vendors, who are in effect “held captive” by their need for the contract work. Streamlining staff or other reductions in overhead can also contribute directly to the bottom line and clear the way for improved price competition.

Gathering Information on the Competition

Given the possible threats, every company should study and know its competitors inside and out–not just figuratively, but objectively, analyzing competitive products in the field and the team(s) that produce them. If a competitor suddenly pulls out of a channel or wholeheartedly pursues another, the executive team should wonder and try to determine the reason. If you are playing in the same space, detailed information on the features, marketing and expected pricing of the offerings of others can be extremely valuable. More difficult to collect, but perhaps even more valuable, is information on a competitor’s cost structure. Knowledge in these areas prepares your team to position its offering in any given situation. This information can and should shape planning.

Information can be gathered from websites, especially press releases, industry publications and organizations, and word of mouth. Suppliers, services firms, and buyers are valuable sources of competitor information. Of course, such information must be considered in light of the motives of the person providing it. Proactive research in terms of surveys and interviews can also supply good background data. Most important–and easiest to obtain–is information from marketing agencies and sales organizations that serve multiple clients.

Gaining a Competitive Advantage

Companies gain an advantage when a known, unique asset is translated into a more competitive offering. Therefore, the executive team should carefully note opportunities to gain an edge throughout the information-gathering process. Capitalizing on company strengths–and opportunities to serve the market thereby–will instill the confidence necessary to withstand outside threats. Addressing buyer concerns in a positive manner, funneling their input into a constructive, sales-closing process, will enable the business  to make the most of both strengths and weaknesses. For example, by offering option packages and upgrades based on buyer demand, the company can secure more contracts. Meeting delivery schedules is also critical to enhancing competitive advantage. 

Customer service is another important area to scrutinize. Satisfied customers are a great source of new, repeat, and referral business. By carefully pre-screening potential buyers and collecting selection information, more targeted sales efforts can be made. Teams should expect prospects to respond to customer service before and after the sale as though the sale depended on it.


Turnaround Analysis Information Sources

Information for planning and analysis during a turnaround needs to be derived from both the internal and external environments. The internal environment addresses the management of the marketing, finance, and operations functions of the company. Business management controls these functions. This is primary information that should be at the fingertips of the executive team.

Sources of Internal Information

Internal information is gathered from employees, vendors, creditors, and the customers. This information generates a picture of the business, which can be compared to recognized performance standards. Marketing information requires research into demographics, psychographics, and analytics. Financial information comes from the accounting system and is augmented by other types of management information and reporting. Operations information is derived from supervisors, vendors, and subcontractors and compared against benchmarks. Benchmarking indicates relative performance; actual performance against internal standards is also necessary.

External Information

The external environment consists of economic, competitive, technological, cultural/social, legal/political, and geographic influences. Management cannot control this external environment is secondary by nature. It is essential, however, that the management team analyze this information and plan in light of predicted changes.

Strengths, Weaknesses and Opportunities

Determining a company’s strengths, weaknesses and opportunities is essential to successful implementation of the turnaround plan. Though some can freely discuss their personal and business strengths, most lack the objectivity to understand their weaknesses–and determine how to minimize those weaknesses and maximize strengths.

Many entrepreneurs have stumbled upon an opportunity and made some money. However, those who desire long term success use management information systems in the process of reorganizing their companies. Moreover, the best executive teams create a setting that enables goals and objectives to become a reality. Plans are modified through flexible strategic planning. 


Business strengths are those innate qualities that produce a competitive advantage and hold value for the end users of the product. In the case of home building, for instance, the “bells and whistles” that attract prospective buyers may be as simple as quality landscaping or as complex as multi-member molding. Some clothing designers offer an edgy look or unique fabrics; others go for utility like pockets. The object is to determine a specialty or basis for market niche, brand identification, and reputation. It is often helpful to solicit the advice of experts to identify market wants and how to fulfill them.


Despite the ingrained resistance to admitting shortcomings, those with declining businesses must be willing to discuss their personal and business weaknesses freely. The team can only restructure the business by implementing solutions to problems caused by these weaknesses. For example, outside salesmen and the marketing team are in an ideal position to obtain data about the market and the position of the company’s products in that market.

Meaningful information can be learned from these professionals if the team is patient enough to listen and hear a bit of criticism. By taking the input to heart and allowing the feedback to challenge established business practices, the team members profit from it. The purpose of this exercise is not to dampen enthusiasm for the product but rather to point out areas that need improvement. 


Understanding the local market is essential. Opportunities, particularly those for market penetration, should begin to arise out of a deep knowledge of the market. Buyer profiles by demographic and psychographic patterns can be prepared to assess the features and qualities buyers want. Such profiles can be developed with professional assistance at a minimal cost using secondary data. 

As trends in preferences for various geographic and cultural markets emerge, executive teams can predict how they can service customers by price range, features, and channel. Promoting products that meet identified needs is half the solution; the other half is to transition to offering more of what is in demand and eliminating what is not. 

Preparing to Implement a Turnaround Plan

As mentioned in yesterday’s post, recognizing that you have reached a point where a turnaround is necessary is critical to getting the most out of the effort to reposition the company. By holding out for a better day, the executive team simply prolongs the agony as the business continues to deteriorate. An inability to assess the situation accurately can render the team “unhelpable.” Lifeguards are instructed not to try to rescue a drowning man who is still flailing about in the water and attempting to save himself. Likewise, a savvy turnaround artist will not step into a company until he or she is assured that the executive team is convinced of the trouble and unable to get out of it without outside help. More importantly, the team must want to be helped and willing to accept help. Further, the business must be capable of being saved, and the team must have the ability to make the necessary changes.

Bringing in Help

Unfortunately, the warnings of bankers, attorneys, creditors and accountants are too often ignored. With bankruptcy lurking around the corner, however, the team may finally concede and call in a competent adviser–a strategic thinker with experience in assisting companies survive and prosper. In addition to possessing the right mindset and skills, the adviser can provide needed credibility so vital to stakeholders’ acceptance of the turnaround plan. 

Anyone brought into the company will need the full cooperation–and honesty–of management and key staff during the recovery. Efforts to paint too rosy a picture of the situation will undermine the adviser’s ability to turn the business around. For example, hoping that an industry networking event will suddenly generate enough new prospects to overcome a current cash crisis is another form of avoiding the real issues. Similarly, increasing the stream of revenues alone may make the company appear more profitable for a season, but only internal changes can prepare one to withstand business cycles. An effective turnaround adviser can help create and implement these changes.

Implementing the Turnaround Plan

While decline must be reversed quickly to create the positive cash flow needed to fund operations, turnarounds cannot be accomplished overnight; it took a while to get here, and will take a while to get out. Six months of intensive restructuring is usually necessary to return the business to positive cash flow. A complete turnaround can be accomplished within eighteen months if all goes according to plan.

Gathering Information

Having decided to begin the process of turning the business around, the executive team should be prepared to gather extensive information for analysis. After analysis, meaningful tactical and strategic plans will be developed for immediate implementation. Be careful not to confuse tactics and strategies. Tactics are methods employed in the short-term (six months or less) to reverse decline; they are specifically targeted at crisis-oriented problems. Strategies, on the other hand, are longer in time and scope. Strategies are aimed towards growth goals and objectives.

A turnaround plan is gleaned from information gathered in the financial, marketing, and operations fact-finding process. Like every good plan, it has four main purposes:

  • to provide a standard reference for organizational focus
  • to establish priorities for allocation of capital resources and management effort
  • to identify and quantify objectives (one to three year focus) to encourage and monitor performance
  • to set timetables and goals (three to five year horizon) for achieving objectives

There are two primary areas of information to be gathered for planning and analysis in a turnaround: the internal and the external environments.