Every turnaround is unique, tricky, and tough. It requires
both brute force and finesse to balance many variables. If there were easy
solutions a turnaround would not be needed.
Even though every situation is different, there are common
denominators in how to approach them for the best results.
Action is normally needed in three areas: RESTRUCTURING,
RETOOLING, and REFOCUSING. We will deal
with each of these separately in describing how they were carried out in the
turn-around of Scientific Atlanta.
1. RESTRUCTURING calls for actions to return to financial
stability quickly- making the changes needed to get volume, margins, and costs
in line to reduce losses and negative cash flow. Since poor financial
performance is just a symptom of greater problems elsewhere, rebuilding
profitability and cash flow is likely to require changes in the second two
action areas.
2. RETOOLING rebuilds
the business’ foundations- putting the systems, processes and people in place
to support success. In most turnarounds,
weaknesses in the basic systems and processes for doing business have
contributed to the problems and have impeded a recovery. Poor management
accounting systems, information systems, sales management systems, product
development systems, manufacturing processes, human resource systems, and lack
of documentation can stymie a turnaround.
People are always
critical to a turnaround, especially having the right ones in the right jobs. However,
at the beginning they are usually part of the problem. Many have become
discouraged by their inability to solve the problems. Others have come to
accept poor performance as the norm, reducing the drive and commitment required
for a recovery. So a key part of Retooling is always re-building and
re-motivating the organization.
3. REFOCUSING
re-orients the business to achieve market success and profitable growth. The long term solution in a turnaround always
comes from making changes in the “where”, “how” and “with what” you compete.
