Business turnarounds: 4 keys for getting back on track

7/16/2020
Business turnarounds: 4 keys for getting back on track

How can businesses facing distress respond to market challenges quickly? Focus on these four success factors for quick, sustainable results.

Businesses respond to distress in various ways. Some attempt to find buyers or investors with deep pockets. Others attempt to undertake longer-term continuous improvement, which often drives results too slowly. And many, unfortunately, do little or nothing at all.

For companies that need to drive quick, substantial gains, a rigorous turnaround program might be not only optimal but necessary for the survival of the business. We have seen such programs save businesses in all kinds of situations, and four common characteristics are found in the most successful cases.

1. Speed

This is not the time for slow and steady. In this case, it won’t win the race. Organizations must move quickly to clear internally and externally imposed financial, operational, and organizational hurdles throughout the turnaround process. From the leadership team to line employees, all stakeholders should share a resolute sense of urgency and relentless appetite for digging into the challenges ahead. 

2. Alignment

Along with that sense of urgency, a unified sense of purpose is critical – particularly among organizational decision-makers. Your team needs to set aside any personal feelings and past disagreements in the interest of achieving turnaround objectives. Either get on the train or be left at the station. However, that does not mean top-down directives will succeed. Initial vetting of how the plan is expected to salvage the business and communication throughout the process are needed so that everyone is moving in the same direction.

3. Prioritization

It is important that the priorities established at the outset of the turnaround program focus on generating and preserving cash and improving the existing cost structure. Examining priorities creates an opportunity to take a fresh look at your business, identify the areas of greatest potential, and develop a target list for prioritizing improvements that will drive the greatest returns. It is also a chance to tighten up operational performance, enhance capacity utilization and rationalize footprint, scrutinize product or service offerings and pricing to confirm margin contribution, and reduce bloated selling, general, and administrative expenses.

4. Measurement

Throughout this process, it is critical to understand whether the actions you are taking are working, so you can correct course if needed along the way. Keep your eyes on the key performance indicators (KPIs) you have established, including revenues, profitability, and cash flow. You need to understand, at any given time, the progress you are making toward business sustainability. And if you find you are falling short on any of your KPIs – customer retention, time to delivery, service levels, or whatever else might be high priority for your business – you have an opportunity to figure out where and how to make adjustments to get back on track.

Strategize with specialists

Need assistance getting your business back on track? Crowe is here to help. We offer cost-effective business turnaround services backed by an evidence-based approach. We also offer remote service options. 
Ron Melcher - social
Ron Melcher
Principal, Performance Improvement Services Leader