How turnaround strategies nurse sick units back to health

May 31, 2016 | Posted by admin in Faculty Talk   No Comments »

A turnaround strategy is a restructuring approach devised to make an organization profitable again by reviving a sick or loss making business unit. The aim of the strategy is to move the business organization in the right direction.

“A turnaround is a sustained positive change introduced to ensure the survival of a failing business that’s been operating much below the break-even level. A turnaround strategy unfreezes a sick business unit from its state of distress by transforming organizational culture and management practices,” says Dr. Uday Salunkhe, Group Director of Prin. L.N. Welingkar Institute of Management Research and Development (WeSchool). The head of WeSchool has a doctorate in ‘Turnaround Strategies for Sick Companies’.

A turnaround is neither simple nor can it occur overnight. The revitalization of a sick unit is a complex and long-term process which involves analyzing the problem and strategic planning, followed by execution of the strategy. Dr. Uday Salunkhe, informs, “At WeSchool, students of the MMS in Marketing Course learn about the intricacies of Strategic Management and Turnaround Strategy. Over a 13 week period, they work in teams and grapple with current, real-world challenges facing organizations. Under the guidance of participating managers, the Welingkarites frame the critical issues to analyze and develop possible alternatives to these challenges.”

Some of the common turnaround strategies include restoring lender confidence, replacing the existing management team, downsizing non-performing assets, motivating performers by rewarding them, improving product or service, and adjusting pricing. There are three essentials of an effective turnaround strategy:

1. Correctly diagnosing the reason for financial distress

Before plans for the revival process can be framed, the root cause for the failure of the business unit must be identified.  For this, a proper screening and an honest appraisal needs to be done. Also, the viability of the business unit must be evaluated to find out just how sick it is and whether the damage to the core business is actually reparable.

2. Cooperation and communication

A turnaround strategy typically requires a focused and communicative management along with a lot of capital and support from the stakeholders. Prompt communication of the complete situation is crucial to rapidly get the necessary response from the company’s shareholders, financial institutions, management, and employees, whose collective willingness to adapt and support can make the turnaround strategy a success.

3. Dedicated planning and implementation

After evaluating the viability of the sick unit, comes planning its revival. Proper planning is vital to figure out what can be done to nurse a sick unit back to health and how. It aims at optimising the physical, financial and human resources of a business. In order to get impartial expert advice, failing businesses often hire an external specialist with years of corporate turnaround experience behind them.





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