ms-25 mba assignment july dec 2010 Question 3

3. What is ‘Turnaround Management’? Describe how turnaround was used to bring change in an organization you are familiar with. Briefly describe the organization you are referring to..

TURNAROUND MANAGEMENT
            It is a process of devising, executing and managing a plan of corporate renewal. The process involves identifying the key drivers of an unstable business and implementing a sustainable recovery change strategies which rapidly improves the business. The Turnaround management involves a number of steps:

STEP 1:

INDENTIFY THE ROOT CAUSES.

·         Sales down due to weak economy.

·         Overly optimistic sales projections

·         Poor strategic choices     

·         High operating costs            

·         High fixed costs that decrease flexibility            

·         Insufficient resources                                                                  

·         Unsuccessful R&D projects                                             

·         High successful competitor                                                                              

·         Excessive debt burden

·         Inadequate financial controls.

STEP 2

            Conduct a situation   audit / analysis.

STEP 3

            Develop a strategic corporate objective.

STEP4

            Develop a   corporate   strategy

STEP 5

            Develop a corporate business restructuring plan.

Strategic restructuring:

            The focus lies on core markets and promising business segments. Corporate divisions destroying value are divested. Operational restructuring: It focuses on leaner organization and leaner processes, on the simplification of manufacturing networks and corporate structures, as well as on maximizing efficiency and effectiveness.
Financial restructuring: A combination of cost reduction, more flexible structures, and the development of a sustainable financial concept.

STEP 6

            Develop a change management program.

STEP 7

            Develop   an emergency action plan.

STEP 8

            Develop an implementation   plan.

THINGS TO REMEMBER:

            The overall financial situation is as transparent as possible and that the influence of the identified restructuring measures becomes clear, rapid analysis and concept development considering the information needs of the stakeholders are conducted, the most relevant people from the  organization are involved in order to achieve acceptance for the implementation of improvements, consistent project management and controlling are established during the implementation phase to ensure that the pursued improvements are actually achieved, all stakeholders are continuously informed and involved in order to identify risks and avoid counterproductive conflicts.

TURNAROUND MANAGEMENT – EXAMPLE

            The organization I am referring to, was facing a problem of declining sales / market share for 2 consecutive year. The organization, I am familiar with is a large manufacturer / marketer of safety products - the products  are  used  as  [personal protection safety] [industrial safety]  -the products are distributed through the distributors as well as sold directly - the  products  are  sold  to various  industries like  mining /

Fireservices/defence.                                                                                                         
Marketing
Manufacturing
Sales
Finance/administration
Humanresource
Customer service
Distribution

Warehousing/ Transportation
TQM

STEP1.

            INDENTIFY   THE  ROOT  CAUSES.
      a.Poor strategic choices
     b.High operating costs
     c.Insufficient resources

     d.High successful competitor
     e.Inadequate financial controls.

STEP 2

            Conduct   a   situation   audit / analysis.

·         the demand for the market was growing at 13%

·         the company sales was growing at 7%                          

·         the company was selling directly to the customers, using the sales force.                    

·         lack of adequate product range.                                               

·         lack of market coverage                                       

·         lack of skills among the sales force-demand for  technical  products
etc

STEP 3

            Develop a strategic corporate objective.
Go for 20% growth ---- per annum over the next 5 years. Enter new market segments. [15%additionalsalesvolume]offer newproduct[15%  additional   sales  volume ]

STEP4

            Develop a corporate  strategy

·         Restructure the marketing department [3 product group management]

·         To achieve 80% sales through distributors in 5  years  time.                

·         To conduct more marketing development for new products.

·         To train all staff in the product knowledge etc.

STEP 5

           Develop   a   corporate   business restructuring plan
Strategic restructuring:

            The focus lies on core markets and promising business segments. Corporate divisions destroying value are divested.                  

·         3 new product groups.        

·         Development of a new sales department to develop distributor sales.

Operational restructuring:

            It focuses on leaner organization and leaner processes, on the simplification of manufacturing networks and corporate structures, as well as on maximizing efficiency and effectiveness.

Financial restructuring:

            A combination of cost reduction, more flexible structures, and the development of a sustainable financial concept.                     

·         Reorganizing the sales territories.

·         Appointment of new distribtors-- geographically.

·         Payforperformancesystems.

STEP 6

           Develop  a change management program.

Implementation of the change management program over  the  6 months  period.

STEP 7

          Develop an emergency action plan, which included:

·         new product sourcing.                                          

·         new product development                                            

·         new sales policies development                                    

·         new distributors policies development                             

·         new training for sales force

·         to manage the distributors.

·         new training for customer service staff.-new order processing/ servicing systemetc

STEP 8

DEVELOPAN IMPLEMENTATION PLAN.
A  PHASED PROGRAM OF  IMPLEMENTATION.

These above mentioned steps helps lot in turnaround process