How to Manage a Turnaround

When a company gets into a tough position it can be a challenge for it to emerge intact. There is a whole field of management dedicated to corporate turnarounds. Whether the company arrived at this point because of corrupt management, inept leadership or absent planning, the past needs to be set aside. Use history as a guide, but be careful not to repeat it.

Instructions

Difficulty: Challenging

1. Take a step back. Look at the situation with an outsider's perspective. It may be helpful to bring in an actual outsider such as a consultant. If corporate consultants are out of your price range, talk it over with your spouse or someone else you trust.
2. Enable management with a mandate to change anything that will fix the situation. You can empower a turnaround expert brought in by the board, the current executive team or a certain member of the current leadership.
3. Assess the situation. Before proceeding with any changes, drastic or otherwise, get an understanding of the challenges ahead.
4. Create a plan to rectify the situation. Win support for your plan from management, the board, creditors and employees.
5. Put the plan into action. Sell or eliminate underperforming business units. Adjust the remaining business units with the short-term goal of generating a positive cash flow.
6. Reorganize the business and set goals for return on investment and increased profits. You may have to adjust the product mix or redesign employee incentives to direct them toward management's new goals.
7. Shift out of the turnaround mentality and into a profit-emphasizing growth mode.

Tips & Warnings

• Get middle managers involved and keep them informed. The corporate leadership will be ineffective without their support.
• Don't try to manage a turnaround like a stable company. You have to be more dramatic and make more significant changes because of all the unmade changes under previous management.