Why we can’t talk about the best turnarounds

Author: James Groot, Corporate Advisory Partner in Yorkshire

 

It would seem it is quite a British thing, not to seek help for your business when it is needed – for fear of failure.  By contrast, in the USA a turnaround is almost viewed as a badge of honour.

The result is that the best turnarounds remain largely unknown. 

By default, this suggests more companies than we are aware of have been through a situation that required some sort of intervention and/or turnaround.

So how do companies end up needing to be turned around?

The ‘region beta paradox’ describes when we endure mild irritations for longer than we should because it’s ‘not that bad’ but this can often incrementally continue to decline until the situation is most definitely bad.  In this situation, identifying the requirement for turnaround is not easy and/or people may find themselves in denial.

The most obvious sign that you are heading for a big problem is running out of cash.  Profitability can be a false indicator of success (hence more companies typically struggle coming out of a recession than going into one.)

That said declining profits should be a red flag as should a change in the normal metrics used to measure the performance of your business.

The main difference between a company that requires transformation versus a turnaround (i.e. it is becoming stressed or even distressed) is time. So, what do you do?

  • Understand how much time you have. More time equals more options.
  • Understand how you got here – then you can try to reverse it or at least slow it down.
  • Communicate with stakeholders. Silence breeds nervousness which makes problems bigger.

Burying your head in the sand is not an option.  Get help quickly by looking for people with experience of this situation. 

Essentially, you require a business plan in crisis mode.  At the heart of this will be good old-fashioned forecasting and understanding the drivers of performance and you may need to financially restructure. 

Making sure your plan happens boils down to governance. Now is the time to hold people’s feet to the fire, allocate responsibility and track the benefits. 

Together with running the business day to day, under the additional pressure of needing to fix things, a turnaround is at best challenging, but can be incredibly stressful. Surround yourself with people that ‘can do’ and seek support from people that have been through this and can provide the additional capacity to ensure you deliver it.

 

At Cortus Advisory Group we have lots of experience of supporting and working with companies to identify the problems, intervene and improve operations. 

For more information please contact jgroot@cortusadvisory.co.uk