1.
ORGANIZATIONAL FITNESS IMPROVES BUSINESS
TURNAROUNDS AND REVENUE GROWTH
WILLIAM H. PARKER, CTP, 12-17-2018

2.
THE PROCESS OF ORGANIZATIONAL FITNESS and
the BUSINESS TURNAROUND
During a business turnaround, the first thought is to dive into the financial condition of the
business and immediately develop methodologies that improve cash flow and reduces
expenses.
I submit that a deep dive into the fitness of the organization will reveal deep fissures in
how the company is being managed; then study the leadership team, the business plan
and the goals and objectives of the company.
The business turnaround involves reviving a struggling or probably a dying business. This
implies taking steps that would turn a company’s distressed financial position into a
healthy and profitable one. It is widely believed that business turnaround is a short term
action designed to ease short term financial difficulty. A company that struggles to meet
up with its short and long obligation is obviously dying and needs a turnaround.
The article “Organizational Fitness Improves Business Turnarounds and Revenue
Growth” was developed for business owners and CEO’s that are the center of influence in
their companies.
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3.
THE McKINSEY 7-S MODEL AND THE
ORGANIZATIONAL FITNESS FRAMEWORK
• STRATEGY AND OBJECTIVES: How Competitive Advantage Will Be Achieved.
• SKILLS AND CAPABILITIES: Competence of the Organization
• STRUCTURE: Roles, Responsibilities and Reporting Relationships
• SYSTEMS: Formal Systems and Procedures {Get stuff done}
• STYLE OF LEADER: The Behavior of the Leader and the Top Team
• STAFF: People and Their Backgrounds; The DNA of the Organization
• SHARED VALUES: Habits, Beliefs and Behaviors {Culture}
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4.
McKINSEY 7 S MODEL
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5.
BUSINESS TURNAROUND PROCESS
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6.
DRIVERS FOR EBITDA IMPROVEMENT
FINANCIAL MANAGEMENT
 Drive “Good” Sales: Enter niche markets, patent new products to create barriers to
entry. Develop the gross margin matrix by customer; high volume/low margin, low
volume/low gross margin, low volume/high gross margin and high volume/high gross
margin.
 Lower Cost of Goods Sold: Develop scale economies, acquire captive access to raw
materials, increase efficiencies in processes {production, distribution, services and
labor utilization}, implement cutting edge cost control systems.
 Control Operating Expenses: Budget and monitor expenses, identify fixed versus
variable expenses, manage expenses at lowest level possible, keep track of recast
items.
 Define the Value Proposition: What does the business stand for? Identify what the
company is the “Best in the World At”. Clearly define why the company exists along
with it’s competitive advantage in the market.
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7.
REDUCE THE COST OF DOING BUSINESS
FINANCIAL AND OPERATIONAL MANAGEMENT
 Increase Economic Value/Decrease Capital Base: Invest in only positive high
growth projects. Withdraw or liquidate underperforming businesses, implement
product line profitability capabilities to determine winners and losers. Utilize
information technology to drive decision making; institute business measures and key
performance indicators that lead to outcomes {results}.
 Reduce Business Risk: Perform at a higher operating level compared to
competitors, long–term contracts, etc. Institute financial transparency, including the
retention of audited financial statements.
 Reduce Cost of Capital: Maximize use of debt to support equity, possibly use less
costly equity substitutes, such as mezzanine debt, reduce surprises {volatility of
earnings}, consistently test the market cost of debt, walk down the private capital
access line whenever possible.
 Reduce Customer Concentration: No single customer should account for more
than 20% of sales.
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8.
INCREASE EFFICIENCY AND ACQUISTION
ATTRACTIVENESS
FINANCIAL AND HUMAN CAPITAL MANAGEMENT
 Develop a Place in the Market: Always be considered a tough competitor or
roadblock, by larger players, become a company of niches.
 Obtain Critical Mass: Achieve Minimum Sales of at least $10.0M to
$50.0M with EBITDA of $3.0 to $8.0 million {multiple rises exponentially after $3.0
million in EBITDA}
 Maintain High Margins: Focus on maintaining higher gross and operating margins
than the competitor.
 Management Team and Systems Add Value: The CEO or owner is the “Orchestra
Leader” and no longer plays an instrument; the management team is considered self
sufficient and has clear roles and responsibilities.
 Create Effective Planning: Build an effective business model that links employee
performance with the operating and financial plans.
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9.
TURNAROUND STRATEGIC PLANNING CYCLE
High profits and revenue growth result when companies perform well in the
following areas:
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10.
KEY ELEMENTS OF THE TURNAROUND PLAN
 Business Sense of Urgency: Assess all elements of the company quickly.
 Review the Strategic Options: Determine why the key performance indicators are not
being met {competition, internal operating issues, customers, unclear objectives or
employee execution issues} and what needs to change to results.
 The Board: Make board members your partner {if there is no board, develop an
advisory board to as a sounding board to share ideas and thoughts about risks in the
business}.
 Stabilize Finances: Develop a series of 13 week cash flow statements to ensure
having sufficient cash on hand to keep the lights on and pay essential obligations.
 Develop a Turnaround Story: All stakeholders want to know what they are working
towards; build a communications strategy to gain buy-in and input from employees.
 Quick Wins: Rosabeth Moss Kanter of Harvard talks about “Quick Wins” during a
business turnaround which builds confidence and morale in the organization.
 Build Incentive Plans: All incentive plans should be tied to the behavior of change
that deliver specific outcomes derived from key objectives, goals and strategies.
 The Team: It may be necessary to replace top leaders in the company; someone has
to own the deteriorating performance of the company. Find top talent to replace them.
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11.
ABOUT PARKER REVENUE GROWTH STRATEGIES
Organizational Fitness Leads to Revenue Growth
•When it comes to brand development, business management and sales growth
strategies, Bill Parker is a true disciple of the authors, Ram Charan, business Guru to
Fortune 100 CEO’s and Larry Bossidy, former CEO of Allied Signal who wrote the
famous business book, “Execution, the Discipline of Getting Things Done”.
•Parker Revenue Growth is a business management and services firm that utilizes the
‘Organizational Fitness Program’ to improve operating systems and results for mid-size
companies, non-profits and private equity portfolio businesses. The company provides
business assessments to prepare privately owned companies for an exit strategy and a
maximum return on investment. Parker Revenue Growth is an outcome driven company
and develops business plans and organizational fitness strategies to maximize value and
operating results.
•On Thursday, August 9th, 2018, the Turnaround Management Association granted
Parker the Certified Turnaround Professional (CTP) designation. The Certified
Turnaround Professional (CTP) designation provides evidence of an individual’s
commitment to the turnaround and corporate renewal industry and also attests to a level
of expertise that non-certified professionals may find difficult to prove.
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12.
APPENDIX AND CREDITS
Turnaround Factors
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13.
APPENDIX AND CREDITS
 Enduring Ideas: The 7-S Framework | McKinsey
https://www.mckinsey.com/.../enduring-ideas-the-7-s-framework
 What is a Business Turnaround?
www.accountantnextdoor.com/what-is-business-turnaround-meaning-and-process/
 What is Organizational Fitness?
Michael Beer, Cahners-Rabb Professor of Business Administration, Emeritus at the
Harvard Business School, co-founder and Director of TruePoint Partners, a
management consultant firm
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