Turnaround and crisis management [kompatibilitätsmodus]

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comprehansive approach on how to adress corporate crisesand resolve

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Turnaround and crisis management [kompatibilitätsmodus]

  1. 1. Turnaround- and Crisis Management concepts and principles for successful resolution PM Summit 2012, Clemens FroweinHLP entwicklungspartner GbR . Voltastraße 31 . D-60486 Frankfurt . info@hlp-entwicklungspartner.deTelefon: 0049(69)43 00 820-00 . Telefax: 0049(69)43 00 820-10 . www.hlp-entwicklungspartner.de
  2. 2. Turnaround and Crisis Management "Crisis" (Greek): 1. a stage in a sequence of events at which the trend of all futureevents, especially for better or for worse, is determined; turning point. 2. a condition ofinstability or danger, as in social, economic, political, or international affairs, leading to a decisive change. 3. a dramatic emotional or circumstantial upheaval in a persons life. 4. the point in a play or story at which hostile elements are most tensely opposed to each other.In Chinese, to set the font symbol for crisis together from 2 characters: "Danger" and "opportunity" 70% !Crisis is a subjective state after a suddenly occurring, life-changing event that, where affected humans often are (temporarily) overwhelmed with the resolution. 2
  3. 3. Turnaround and Crisis Management Most common causes for corporate crisis Liquidity problems 73,9% Decrease in sales 69,6% Endangered equity 65,2% Uncompetitive cost base 60,9% Strategic reorientation 56,5% Drop in prices 43,5% Negative earnings 43,5% Earnings lower than target 8,7% Roland Berger Study, 2006 3
  4. 4. Turnaround and Crisis Management Dynamic and logic of corporate crisis Urgency Small Large INSOLVENCY LIQUIDITY Scope for Action CRISIS Need for Action EARNINGS CRISIS STRATEGIC CRISIS Large Small Time 4
  5. 5. Turnaround and Crisis Management How to tackle the challenge: The turnaround resolution cycle Get in crisis state Root-cause understanding Turnaround Resolution Learning & Cycle moving Phase 1 the tough cuts first Phase 2 new capacity building 5
  6. 6. Turnaround and Crisis Management Root cause unterstanding: External and internal causes External causes of crisis Internal causes of crisis Structural change, e.g. due to Management problems Globalization Ignoring the signs of crisis Integration Lack of ability to act Technology leaps Wrong HR policy Shareholder value orientation Wrong focus: on sales rather Cyclical problems than profit Drop in demand Change in the dynamics of Growth trap or overambitious competition cost saving efforts Sales channel switch Increasing complexity of the Unpredictable changes to the product portfolio, regions, and market/competitive framework customer segments Drop in public-sector demand Ban on certain products Insufficient transparency for corporate control 6
  7. 7. Turnaround and Crisis Management Root cause unterstanding: Challenges of diagnosis Problems are so different and situations so complex, there can be no universal remedies for corporate crisis. Knowing the strategic and operative causes is key to success and the basis for effective counter-action. Major decisions of the diagnosis must be made under extreme time pressure. Management must be self-critical and open-minded: in the final analysis, most corporate crises are down the management mistakes. The diagnosis is the success critical – all interventions build upon 7
  8. 8. Turnaround and Crisis Management Root cause unterstanding: Diagnosis in three areas 1 2 3 Financials Operations Strategy Revenue and cost Structures Product portfolio Revenue, cost and profits by Departments (structure/heads) Product mix products, markets, customers Hierarchical levels Complexity Benchmarking by cost type Regional coverage Innovation (material, operation, overhead) Holding structure (subsidiaries) Pricing model Main causes of losses/risks Key processes Market and customers Cash flow Decision-making/ reporting Market segment development Monthly develop. /forecast Value chain (in/outsourcing) Trends & key success factors Accounts receivable Sales/marketing efficiency Market access and distribution Inventory Purchasing efficiency Customer and order structure Investment/divestment Production efficiency Logistics efficiency Competitive position Capital structure Existing and potential Excessive debt/loss of equity Management/ personnel competition profiles Hidden risks in balance sheet Qualification Relative positioning (market Need for „fresh money“ Motivation share, success factors) 8
  9. 9. Turnaround and Crisis Management 1. Phase of the program: The „tough cuts“ Liquidity Profitability Sales up Reduce investments to absolute - Increase prices where possible minimum - Focus sales efforts on customers (only essential repairs/replacements) - Speed up new product launches Reduce inventories Reduce procurement costs - Lower safety stocks Survive & - Lower material/service standard - Dispose of slow movers Regain - Negotiate with suppliers - Increase quality in delivery - Change suppliers Value Reduce personnel costs Reduce accounts receivable - Intensify claim management - Layoffs/part-time employment - Speed up settlement - Reduce/waive salary - Push for faster payment terms or - Stop employment advance payments - Reduce overtime Reduce overhead costs Sell fixed assets - Cut travel budgets - Real estate - Reduce perks - Machinery - Negotiate interest relief - Holdings 9
  10. 10. Turnaround and Crisis Management 2. Phase new capabilities: The path back to value Restructure weak setup’s Identify extra sales and Focus on the profitable earnings potential elements of the value chain Reduce complexity costs - Focus on quality of - Eliminate unprofitable customer handling Develop a business model products - Enter complementary that creates value - Reduce no. of product markets variants - Introduce a modular system Optimize business units/ Choose unusual market jettison non-core business Reorganize Processes entry or exit strategy segments Involve employees Organization Target markets Business model 10
  11. 11. Turnaround and Crisis Management Use the ep Transformation Canvas: Change is critical ep Transformation Canvas 11
  12. 12. Turnaround and Crisis Management Critical success factors of turnaround management 1. MANAGEMENT COMMITMENT & LEADERSHIP The most important success factor in restructuring – implementation has room for improvement HOLISTIC CONCEPT – Strategic, Operational and Financial 2. Very important (P&L, balance sheet, cashflow, strategy, systems) – implementation has improvement potential 3. QUICK IMPLEMENTATION – Speed is of essence Rated as very important; but low rate of early warning systems implementation 4. TRANSFORMATION MANAGEMENT – without Change no results Create the energy and build new capabilities with involvement and up-skilling 12
  13. 13. Turnaround and Crisis Management Überblick: Experten in Reorganisation / Turnaround Clemens Frowein Studium des Wirtschaftingenieur-wesens und der Betriebswirtschaft an den Universitäten TH Darmstadt und JWG Frankfurt / Main. Assistent des Vorstands bei einem führenden Systemhaus. Von 2004 bis 2010 war er Gesellschafter bei HLP Hirzel Leder & Partner, seit 2011 Partner bei HLP entwicklungspartner GbR. Clemens Frowein berät mit den Schwerpunkten Unternehmens- und Geschäftsfeld- strategie, Innovationsmanagement, Projektmanagement und Organisationsentwicklung. Nach Branchen liegen die Erfahrungen in der Konsumgüterbranche, Chemische Industrie, Dienstleistungsbereich, bei ITC Diensten und auch im landwirtschaftlichen Bereich. Er unterstützt Unternehmen in der Orientierung, der Geschäfts- und Organisations- entwicklung, wobei in besonderer Weise „harte“ Faktoren (Geschäftslogik) kombiniert mit „weichen“ Faktoren (Dynamik der Menschen und Organisation) in den Blick genommen werden. Veröffentlichung zahlreicher Artikeln und Beiträgen sowie Vorträge zu den Themen Strategie und Innovation. 13
  14. 14. Thank You HLP entwicklungspartner GbR . Voltastraße 31 . D-60486 Frankfurt . info@hlp-entwicklungspartner.de Telefon: 0049(69)43 00 820-00 . Telefax: 0049(69)43 00 820-10 . www.hlp-entwicklungspartner.de

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