Business Turn-Around Management for Leaders

Companies across the globe implement strategies to maintain their viability in the industry. Sometimes, special techniques are needed to reshape the business. Businesses experiencing a period of decline, re-examine their strategies to find areas of improvement.

Turnaround management is used by businesses facing any operational issues or economic decline. The management creates an action plan for the company’s growth, preventing further decline. You can learn about turnaround management in a senior leadership program to help your business find and enhance areas of improvement. 

Let us discuss turnaround management and how you can apply it to your business. 

What is turnaround management? 

The process by which businesses can reconstruct and renew their operations and practises is called turnaround management. These changes aim to improve operational efficiency and ensure long-term business success. 

Several companies use this form of management when facing financial challenges under the belief that reconstructing the operations might allow for effective management styles, new ideas, and creative business solutions. 

This form of management allows businesses to pause their operations to reduce any further decline. Management uses this time to strategise and resolve the issues which might cause inefficiencies. 

Why do companies employ turnaround management? 

Here are some reasons why businesses might use turnaround management strategies: 

• Increase revenue: If a business is experiencing declining or stagnant revenue, it can use turnaround management strategies to identify areas of improvement within the company’s sales practises. This may boost the revenue. 
• Boost operational efficiency: The main focus of these management strategies is to improve operational efficiency. It is done by identifying and addressing issues hindering the performance of the business. This may lead to reduced costs, improved productivity, and a streamlined organisation. 
• Improve employee turnover rate: Companies that have a high employee turnover rate may employ this management technique. It is done to introduce effective management styles that might lower the turnaround rate, retaining employees for longer periods. 
• Improve stakeholder confidence: Successfully implementing turnaround management strategies can help improve the confidence of stakeholders in the ability of the organisation to recover from a period of decline. This often comes in handy to maintain relations with customers, suppliers, and investors. 
• Lower expenses: In case the company’s monthly expenses increase more than the estimated cost, leaders can choose to employ turnaround strategies. This will help in bringing down expenses and restricting from crossing the budget. 

Turnaround management features 

Every management style has its features. Here are the features of turnaround management: 

• Applied to declining companies: This type of management is especially used to turn loss-making businesses into productive ones. It is applied to business units generating loss. Business turnover is achieved by making systematic changes. It serves as the medicine to the issues of the organisation. 
• Reconstruction: Business turnaround means restructuring a declining business. Structuring an organisation involves rearranging the resources to boost efficiency and productivity. It can involve financial reconstruction, personnel reconstruction, marketing and sales reconstruction, etc. 
• Expert consultation: Turnaround needs the consultation of experts, whether internal or external. Internal experts are aware of the company's culture, history, technology standards, finances, etc. a lot better. However, the internal leaders might be biased for their benefit. 

On the other hand, external experts are more likely to be impartial. However, their recommendations might not be realistic for the company. Employees might also feel their feelings are not taken into consideration. 

• Heavy use of resources: Turnaround management strategies require an essentially significant amount of capital. Your company will need an excellent expert team to implement the strategies. 

You will also need additional assistance or advise from experts in the industry along with the skills of the internal workforce. Sufficient funds are needed for these services. Also, since the timeline of the success of the business turnaround is not fixed, the operations will require constant funds until the set objectives are achieved. 

• Requires intensive planning: Initiating the turnaround requires a detailed study of the declining company’s failed model. This starts by preparing adaptable, result-oriented strategies. 

To execute the newly developed strategies, you have to organise the previously failing model structure. Your company can achieve this with directions from the leaders in the planning authority. 

Once you have made the plan, it is tested for some time. During this time, the experts will gather and evaluate changes, improvements, or weaknesses in the performance. If any changes are required, you can tweak the process further. 

• Use of resources: Generally, a declining business is not able to make optimum use of its resources. These resources can be financial, human capital, physical resources, etc. With turnaround management, you can efficiently use your resources. 

This management technique aims to restructure the available company capital. The capital is extracted from failing projects to successful ones. 

• Requires cooperation: Complete cooperation of all the company members is necessary for the plan to be successful. This is because your employees are the people who will execute the turnaround plan. You will also require the cooperation of all the company’s stakeholders for the turnaround to be successful. 
• Permanent impact: The turnaround management techniques will leave a lasting effect on your company’s operations and structure. It will allow your business to concentrate on productive operations. 

Business turnaround will allow organisations to shift their technology from a labour-intensive one to a capital-generating one.

Steps of the turnaround management process

To successfully implement turnaround management strategies, businesses need to follow the steps listed here. 

Analyse and define

Analysing business processes and defining the issue is the first step in the process. At this stage, you can go through the financial records of your company to get an insight into the monthly revenue earned and expenses made. Don’t forget to review the employee turnover rate as well. 

Companies might have many issues that they want their turnaround manager to take care of. Most companies pause their operations before performing the analysis to achieve better numbers that aren’t declining. 

Strategise  

Now that the business operations are paused to determine the issues, you can start developing strategies for improving these issues. This strategic plan serves as a blueprint for the management goals that need to be achieved. 

Companies often perform SWOT analysis to identify the weaknesses, opportunities, strengths, and potential threats of the business. 

Review both the internal and external factors when strategising. SWOT analysis will help you to determine long-term goals for the company. It will also help you understand the practises which will lead to the overall growth of the business. 

Develop a plan 

Create an action plan to list the steps needed to achieve the goals outlined in the strategic plan. This plan of action will include daily, weekly, and monthly tasks which will help to improve the business operations. 

Often companies organise brainstorming sessions with their heads and employees to come up with ideas for the action plan. This plan has a list of tasks along with time frames that will help the company achieve its business objectives.  

Implement 

Once you have your action plan decided, now these strategies need to be implemented into the workspace. Leaders take charge at this point, educating the employees regarding the new plan objectives. Every staff member is encouraged to ask questions about their role in the plan. 

You can also discuss the new goals or mission statement of the company. This will allow employees to align their processes with the company’s new goals. Make sure you communicate with your employees daily and make the transition easy for them. 

Review 

After three to six months of implementing the new plan, review to determine the success rate of the plan. This will help you recognise any corrections that you need to make. 

Organise one-on-one meetings with your employees. Discuss with them how they like the plan now that they have been working on it and what further improvements it might need. You can also collect recommendations from the employees every month regarding management strategies. 

Enrolling in a certified senior leadership program can help you gain practical experience in the process. You will be able to understand the implications of the steps in real life.

How to implement a turnaround 

Setting goals is the easy part, executing it takes a lot of work. A turnaround in businesses is important as it signifies an upward shift for the company after experiencing a period of downfall. 

Every business turnaround is different. It caters to the company’s needs, abilities, and reaction time. One company’s successful turnaround strategy might not be fruitful for another company. With that being said, there are also some common characteristics of successful turnaround strategies. A postgraduate leadership certification can help you learn how to implement a turnaround effectively. 

Here are some steps you can follow to implement a turnaround: 

• Reevaluate budgets: Misallocation of funds is one of the primary reasons why businesses experience downfall. If a business exceeds its budget and invests all the capital in one area, it is bound to experience a downturn. 

Reevaluating its finances, income, and expenses, can help the business solve its main issue. Having a clear idea of the funds, you can effectively distribute resources. It will also allow you to decide which expense is necessary and which can be avoided for the time being.

• Redefine the management: Poor management is a situation that requires genuine reflection from the company. A company's employees will look up to their seniors for support. The leaders need to practise effective management to support the staff. 

Staying transparent with the employees, considering their feedback for improvement, and taking steps to address the structural deficiencies can boost the revenue of a company. If your employees feel that their opinions matter in the workplace, they are bound to feel more motivated to work. 

• Recovery of customer base: Often businesses experience a downfall because they lose their customers. If that is the scenario for you, understanding why your customer base no longer wants to work with you can be of great help. Identify the issue, and address it.

Investing in new PR strategies can help you attract your customers. Working on improving the quality of your products or offering deals on purchase are just some ways by which you can attract clients. 

Indicators of a successful business turnaround 

Some indicators of successful implementation of the turnaround process are as follows: 

• Boost in the sales or turnover rate. 
• Financial stability along with better loan repayment capacity. Also helps in providing financial benefits for employees, better working conditions, proper maintenance of components, etc. 
• Increase in market share of the company. 
• Higher volumes of goods are manufactured and production activities are conducted in a proper order. 
• Healthier corporate life. 
• Improve liquidity along with satisfactory cash flow. 

Tips for successful business turnaround 

Here is a list of things to remember when implementing the turnaround management: 

• Start over: The most important thing when it comes to implementing the turnaround strategies is, don't be scared to start over. A successful business turnover will need adaptability, objective analysis, and quick reaction time. If you learn something is not working for your business, you can abandon it and start over. 
• Transparency: As you navigate important conversations with your investors, leaders, and employees, try to be open and honest. Developing and implementing strategies becomes a hundred times easier when everyone understands the plan and their role in it. Being accountable can help you examine and improve your business issues. 
• Stay committed: To successfully implement your strategies, you need to stay stubborn about the changes you want. If you see old habits resurfacing, take action immediately. Turnarounds can take the wrong turn if problems are not identified and prevented as soon as possible. 

Pros and cons of implementing turnaround strategies 

The outcome of turnaround management implication can be seen from both a positive and a negative point of view. Let’s see how: 

• Positive implications: 

1. The net profit of the company improves. 
2. The market share value of the company improves. 
3. The client or customer base improves. 
4. As productivity increases, the morale of your employees increases. 
5. There is a significant change in the productivity of employees. 
6. The credit rating of the company improves.

• Negative implications: 

1. It can cause a productivity decline in some departments. 
2. Probable reduction in company workforce. 
3. Some employees may quit. 
4. The company might get amalgamated or merged. 

Who is a turnaround leader? 

These professionals initiate and lead a business transformation. Their main aim is to improve the business profitability, product performance, and customer experience. These leaders use their expertise, talents, and qualities to empower a business and the employees leading it towards success from downfall. 

Turnaround business leaders are trained to align with the unique business challenges that require drastic change, not just minor adjustments. This is why, these individuals are expected to work under immense pressure, with their leadership style being adaptable to each situation. 

A senior leadership program will help you become a successful turnaround leader. The course will make you industry-ready. 

Skills that turnaround leaders should have 

A turnaround leader should have excellent business and technical skills to be able to press the ‘reset’ button on a downfalling business performance. Some skills will help turnaround leaders to become successful. Let’s break them down: 

• Attention to detail: Reasons behind the failure of a company are most likely going to be intricate and interconnected. Attention to detail is necessary to identify these minute issues. Businesses will require more than a broad approach to solve any complicated problems. 
• People skills: The leader should have excellent people skills to communicate easily with the employees. As a leader, you should be able to navigate through people’s feelings and offer an open-door policy - without sacrificing accountability for popularity. Without these skills, you will not be able to inspire your employees which is very necessary for instigating lasting changes. 
• Humility: Leaders need to be confident, strong, and determined. However, humility is an attribute that keeps these qualities from morphing into arrogance. You need to understand or at least try to understand your employees and give importance to their opinions.
• Ability to motivate: As a leader, you are responsible for motivating both your employees and the stakeholders of the company. When the organisation is on the brink of failure, a responsible turnaround leader knows exactly how to motivate the employees to keep going. Turnaround leaders should also know how to not give in to frustration which often accompanies the struggle. 
• Drive for results: A successful turnaround leader’s goal is to achieve the results planned. You should be open to new ideas, innovations, and any strategies that might drive the desired outcomes. Moreover, you should focus on sustainable results to foster lasting changes and a constant upward trajectory. 

How do turnaround leaders work?

Every company has different challenges. A competent turnaround leader should be able to identify where the problem lies and properly deal with it. However, there are some commonalities in companies that have been able to successfully shift from near-failure with great heads at the top. Some of these characteristics are as follows: 

• Culture of respect: Successful leaders don’t believe in the blame game. They want to work towards achieving company goals by making necessary changes rather than pointing fingers. Creating a respectful work culture helps the employees build trust in the management. 
• Promote dialogue: One of the common problems that faltering companies face is the break in communication between the employees and management. A good leader helps in reconstructing the communication lines. 
• Inspire initiatives: Often employees are not considered when making decisions for the company. However, it is very important to take into account their opinions as they are the building blocks of the business. A good turnaround leader allows employees at every level to come forward with their innovations and ideas. 
• Generate collaboration: As a turnaround leader, you should work towards removing any social boundaries that might be present in your company. You should encourage your employees to think of the entire company as a big team and solve problems together. 

Conclusion

Turnaround management is a complicated and critical process for businesses facing continuous failure. It is a structured approach to analysing and addressing underlying issues impacting the performance of the organisation. A senior leadership programme can help you prepare for the role of a turnaround leader. 

Check out the Postgraduate Certificate in Senior Leadership offered by Imarticus in collaboration with XLRI. This postgraduate leadership course has been designed to help their students delve into corporate value creation, strategic thinking, conflict management, digital transformation, and developing high-performing teams. 

Enrol with Imarticus today!