SUSTAINABLE RECOVERY AND TURNAROUND MANAGEMENT

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SUSTAINABLE RECOVERY AND TURNAROUND MANAGEMENT

By Dr Stuart Slatter
Stuart Slatter Company 18 Park Place
Villas London W2 1SP Tel [phone] e-mail
stuart_at_slatter.co.uk website www.slatter.co.uk
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PRINCIPAL CAUSES OF CORPORATE DECLINE
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EXCUSES . EXCUSES
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TURNAROUND MANAGEMENT
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OBJECTIVES OF DIAGNOSTIC REVIEW

• Assess whether the business can survive in the
  short term and the need for emergency funding
• Assess long term viability
• Assess options
• Diagnose key problems and mix of strategies and
  actions needed
• Assess position of key stakeholders
• Preliminary assessment of management

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FACTORS DETERMINING THE FEASIBILITY OF RECOVERY
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TYPES OF RECOVERY SITUATION
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THE REALITY GAP
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THE REALITY GAP SCENARIOS
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THE REALITY GAP SCENARIOS
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KEY OBJECTIVES AND THEIR ESSENTIAL INGREDIENTS
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KEY INGREDIENTS AND WORKSTREAMS
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CRISIS STABILISATION
CRISIS STABILISATION
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GUIDING PRINCIPLES OF CRISIS STABILISATION

• Cash is king
• Predictability
• Communications
• Autocratic leadership

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SHORT TERM CASH GENERATION STRATEGIES

• Reduction of debtors
• Extension of creditors
• Reduction of stock
• Stopping planned expenditure
• Short term financial support

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CONTROLS

• Basic financial controls
• Cheque book controls
• Freeze on all hiring of staff
• Stop any planned salary increases and promotion

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• Ban all capital expenditure
• Purchasing controls
• Contract and order controls
• Pricing controls
• Shareholder communication controls

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BOARD / MANAGEMENT / STAFF CHANGES

• Assessing the management
• - capabilities
• - attitudes
• Symbolic importance of change
• The one-third rule
• How drastic?
• Recruitment process
• Importance of turnaround experience
• How important is industry experience?
• Problem with company doctors
• - lose interest
• - hatchet men
• - do not build organisations

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MANAGING THE STAKEHOLDERS

• Think straight - talk straight
• Communicate
• Be open
• Manage the information flow
• Manage perceptions and reality
• Negotiate effectively
• Manage the people
• Appoint a stakeholder manager (?)

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GAINING STAKEHOLDER SUPPORT
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STRATEGIC FOCUS

• Redefine core business(es)
• Divestment
• Product - market refocusing
• Downsizing
• Outsourcing
• Investment?

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ORGANISATIONAL CHANGE
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ORGANISATIONAL CHANGE (continued)

• Use structural change to
• - reduce complexity and
• confusion
• - facilitate divestment
• - gain control
• - reduce costs

• Avoid unnecessary change
• New contracts of employment
• New pay arrangements
• Training
• Improved communication

Cultural change is the result of changing
structures, systems, processes, management styles
and people
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CRITICAL PROCESS IMPROVEMENTS

• Sales and Marketing
• - Key account management
• - Salesforce
• - Pricing

• Key Operational Processes
• - quality
• - delivery
• - manufacturing systems

• Improved Information Systems

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FINANCIAL RESTRUCTURING

• Asset sales
• Spin offs
• Sale/leaseback
• Debt for equity swaps
• etc

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KEY OBJECTIVES AND THEIR ESSENTIAL INGREDIENTS
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TEN GENERIC TURNAROUND STRATEGIES

• New leadership/new management
• Strong centralised financial and management
  controls
• Asset reduction
• Cost reduction
• Product market refocusing
• Improved sales and marketing
• Improved operational processes
• Organisational change
• Refinancing
• Focused investment

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PHASING OF WORKSTREAMS THROUGHOUT THE TURNAROUND
PROCESS
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CHARACTERISTICS OF SUCCESSFUL TURNAROUNDS

• Some management changes are almost always
  necessary
• Use of multiple cash generating strategies (and
  in particular divestment)
• Improved financial control systems
• An understanding that cost reduction strategies
  are important but insufficient by themselves
• Nearly all successful strategies involve focusing
  resources on selected business units and selected
  product-market segments
• Improved operational marketing
• Significant organisational change in terms of
  organisational structure, processes and improved
  communications

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TWO KEY MESSAGES
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Legio slokt winst Dexia op
CRISIS STABILISATION
CRISIS STABILISATION
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Sustainable Recovery
Recovery Turnaround
Bron Headline News FD
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Why do middlemen exist?
? Direct marketer sees opportunity in
competitor's channel strategy ? Maximizing
shareholder value through creating the best
routes to market
Fundamental value of assortment
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Whats new about the new economy?
Our people
Your people
Your processes
Our processes
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MANAGING CORPORATE TURNAROUNDS PROGRAMME

• 3 day programme for experienced managers
• 19th 21st February 2003
• Sponsored Organised by FIM and in Cooperation
  with Nyenrode University