Turnaround management is a process used to renew troubled companies and return them to profitability. It involves analyzing the reasons for poor performance, conducting a SWOT analysis, and creating a long-term strategic restructuring plan. Turnaround managers stay until the turnaround is achieved. The process involves stages from initial decline to revitalization. Techniques include retrenchment through downsizing, repositioning through new products/markets, replacement of top managers, and renewal through restructuring divisions. Challenges include designing the appropriate restructuring, executing it effectively while overcoming barriers, and marketing it positively to investors.

1. Turnaround
Management

2. Understanding Turnaround
Turnaround management is a process dedicated to corporate
renewal. It uses analysis and planning to save troubled companies
and returns them to solvency, and to identify the reasons for
failing performance in the market, and rectify them.

3. Turnaround management involves:-
– management review
– root failure causes analysis
– SWOT analysis
to determine why the company is failing.
Once analysis is completed, a long term strategic plan and
restructuring plan are created.

4. Turnaround Managers are also called Turnaround Practitioners
facilitates the change.
– stay as long as it takes to achieve the turnaround
Turnaround management does not only apply to distressed
companies, it in fact can help in any situation where direction,
strategy or a general change of the ways of working needs to be
implemented

5. The
evaluation
and
assessment
stage
The acute
needs stage
The
restructuring
stage
The
stabilization
stage
The
revitalization
stage
Stages in restructuring of an organization:

6. The first stage is delineated as onset of decline.
Factors that cause this circumstance are:-
– new innovations by competitors
– downturn in demand, which leads to a loss of market share and
revenue.
But also stable companies may find themselves in this stage,
because of
– maladministration
– the production of goods that are not interesting for customers.

7. The reposition situation is the point in the process, where the
minimally accepted performance is long-lasting below its limits.
In empirical studies a performance of turnaround is measured
through financial success indicators.
These measures ignore other performance indicators such as
impact on environment, welfare of staff, and corporate social
responsibility.
The organizational leaders need to decide, if a strategy change
should happen or the current strategy be kept, which could lead
on the other hand to a company takeover or an insolvency.

8. Search for new strategies
Question that need to be asked here are, if the search for a
reposition strategy should be participative and decentralized or
secretive and centralized or intuitive and incremental or analytic
and rational.
Here, the selection must be made quickly, since a second
turnaround may not be possible after a new or existing poor
performance.
This means, that a compressed strategy process is necessary and
therefore an extensive participation and analysis may be
precluded.

9. Selection of a new strategy
Strategy typically concentrates on this one of the reposition process.
Commercial success is again possible after a failing of the company. But different
risk-averse groups, like suppliers, customers or staff may be against a change or are
sceptical about the implementation of the strategy. These circumstances could
result in a blockade of the realization.

10. The implication of the new strategy ensues in the following sixth
stage. It is a necessary determinant of organizational success and
has to be a fundamental element of a valid turnaround model.

11. The outcomes of the turnaround strategies can result in three
different ways:-
 Terminal decline:- This is possible for situations, where a bad
strategy was chosen or a good strategy might have been
implemented poorly.
 Continued failure:- Here is the restructuring plan failed, but
dominant members within the company and the environment
still believe that a repositioning is possible. If that’s the case,
they need to restart at stage four and look for a new strategy.
 Does an outcome of the new strategy turns out to be good, a
turnaround is called successful. This is achieved, when its
appropriate benchmark reaches the level of commercial
success

12. Techniques

13. Retrenchment
The Retrenchment strategy of the turnaround management describes wide-ranging
short-term actions, to reduce financial losses, to stabilize the company and to work
against the problems, that caused the poor performance. To reduce scope and the
size of a business through Shrinking Selective Strategy.
– Selling assets
– Abandoning difficult markets
– Stopping unprofitable production lines
– Downsizing
– Outsourcing.

14. Repositioning
The repositioning strategy, also known as "entrepreneurial strategy", attempts to
generate revenue with new innovations and change in product portfolio and
market position.
This includes development of new products, entering new markets, exploring
alternative sources of revenue and modifying the image or the mission of a
company

15. Replacement
Replacement is a strategy, where top managers or the Chief Executive Officer (CEO)
are replaced by new ones.
This turnaround strategy is used, because it is theorized that new managers bring
recovery and a strategic change, as a result of their different experience and
backgrounds from their previous work

16. Renewal
With a Renewal a company pursues long-term actions, which are supposed to end
in a successful managerial performance.
The first step here is to analyze the existing structures within the organization. This
examination may end with a closure of some divisions, a development of new
markets/ projects or an expansion in other business areas.

17. Hurdles or Challenges

18. – Design: What type of restructuring is appropriate for dealing with
the specific challenge, problem, or opportunity that the company
faces?
– Execution: How should the restructuring process be managed and
the many barriers to restructuring overcome so that as much value is
created as possible?
– Marketing: How should the restructuring be explained and portrayed
to investors so that value created inside the company is fully credited
to its stock price?