Value of Business Turnaround Strategy  for Every Business

Business turnaround and business restructuring terms are most often used for distressed companies.  In fact, the concepts of a turnaround strategy should be used regularly in every business – preventing a true turnaround situation.  

Below I've outlined an example of a business turnaround consulting engagement I was on, what I did, and the findings.

I've been fortunate to have been given the opportunity to have been a President, COO, senior leader in a variety of companies – big and small – recognized (Amazon, GE, Oracle, etc) and not recognized.  I've also run a variety of turnaround restructuring initiatives as a business turnaround consultant.  My background in running businesses allows me to take a unique perspective into what works well and what doesn't.  And what would provide lasing business success.

Business Turnaround Example

I worked with a tech business that was having problems growing a business unit.  

Business Background: Tech company that is considered #1 in their specific niche. Financials included >$100MM revenue and sufficient EBIDTA.  PE owned business via a leveraged buyout.

The initial focus was growth was the business line that was the number 1 driver of revenue business line.  As I learned the business, financials, and processes a few things came out that were commonplace amongst the people I talked with.

• Financial
  • Cash flow was was mainly during two times of the year, while the rest of the year negligible cash came in.
  • Cash would be depleted if expenses were not cut within months.
    
    
• Product / Engineering
  • Product pricing models did not provide sufficient margin to provide a positive profit margin in contracts.  This created a large number of contracts that were in the red.
  • Engineering team was not provided sufficient funds to drive automation and simplification of internal processes.  This resulted in a culture of hiring more people to solve for systemic issues.
    
    
• People / Organization
  • Most of the management team had been with the business for 15+ years and had insufficient skills to lead and grow the business.
  • Low morale
  • Span of control insufficient -- Many managers just had one direct report
    
    
• KPIs / Process
  
  • Lack of trend metrics across the board:  operational, financial, sales and customer.
  • Substantial manual work with limited automation.
  • Systems were disconnected requiring “swivel chairing” to go between screens to get any relevant information and added to that it was not always accurate.
  • No KPI trends were reviewed at all, only point in time.

One leader I spoke to who had just been promoted to a
more expansive level of control, mentioned,
"... this place is a disaster".

Business Turnaround

As I continued to dive into the business, its people and processes I regularly updated the CEO almost daily.  But clearly identified a needed business turnaround strategy. Business success was dependent on this.

Findings and recommendations:  

Though there was not an initial thought that the business really needed any type of business turnaround.  It was very clear they did. 

• Expenses:  
  • Cut costs for cash  improvement
  • Reduce low performing managers.  
  • Increase span of control for managers – many managers just had one person reporting to them
  • Compare costs against pricing model
    
    
• Financials:
  • Understand and manage costs in pricing model and services guaranteed in contract to actual services and costs incurred.
  • Ensure pricing models support sufficient gross and net margins to enable the product and business to achieve the right profit levels.
    
    
• Measurement:
  • Establish key KPIs for operational processes, financial processes, product and customers.
  • Ensure KPIs are aligned with business goals
  • Regularly view trends (monthly or more often) in KPIs and drive action if needed
    • Many companies will use monthly business reviews for this.
      
      
• Simplification:
  • Automation for service deployment to reduce substantial manual work
  • Connect systems together to avoid swivel chairing between systems to pull data.
  • Accountability for data entry into systems versus onto personal computer.
  • And the list goes longer.
    
    

How did this happen?  What allowed this to occur ?  I will not go into this during this article but there are some key reasons.

Business Turnaround Consultant

What Steps Did I Take for the Business Turnaround?

I tend to focus on outcomes first, then solve for achieving the outcomes.  The turnaround services I offered allow me to:

Understand the business first

1. Think products, people and organization, growth strategy, operations, and how they all connect together.  Metrics including KPIs, ROI and other financial trends.  And how they're allgned with business success.
   1. Key leadership team, what do they do, their key processes and how do they measure success?
      
      
2. Understand the financials and their connection to the business … this includes both revenue generation and cost creation
   1. Reviewing balance statement, income statement, cash flow statement, and P&L are all helpful
   2. Are there opportunities, focus areas that come from this?
      
      
3. Customers!  Are there repeat customers.  Do they like the product / service?  How are we constantly innovating with the customer at the center of it all?
   
4. What is working well and needs improvement?   How is success measured?  What do customers think?
   
   
   

The Next Level Down

1. Dive deeper into each of the organizations and how they are aligned with business success. 
   
   
2. Utilize the data and hypothesis gained form the area above to help drive direction and any focus areas.
   
   
3. What is working well and needs improvement?
   
   
   

Thinking of Turnaround Management as a Part of Doing Business

Many businesses needing Turnaround Management could have prevented the crisis by looking at turnaround management as a part of doing business every day.  The concepts are standard good business practices.

How well is your business operating?