Sunday, November 19, 2017
  Search
TURNAROUND IN TODAY’S COMPANIES Minimize

TURNAROUND IN TODAY’S COMPANIES

Introduction

Many CEO and CFO of international companies and private equity, are used to coping with the problem of the tournaround.



  • Performances under the average have to be addicted to different kind of causes , but usually they comes out not always in same sequence:Uncertainty: outcomes during the year are clearly under the standard previously settled
  • Concerns: the management issue a profit warning due to the failure in reaching the new targetsFrustration: meeting are more and more frequent and they are characterized by misunderstandings and loss of faith
  • Desperation: results get worse and worse

Nevertheless, many companies, are not well equipped to face with this kind of situations.

Now we are going to explain three basic elements that are necessary in order to restore high performances.

Target

Targets should represent objectives which have to be aggressive, but at the same time achievable.  Results have to be continuously monitored and reported to the management, in order keep it informed about the progress and the real achievements of the business. At which end, it might be useful underlining the main differences between each kind of department of the firm. In particular, this can be done by filling in reports which have to be able to display the main financial results obtained by the different areas of the company. (Sells, margins, EBIT, EBITDA exc….).

You can see an example underneath:

Checkingdashboard

Product 1

Product 2

Product 3

Total

Sells

Margin

EBIT

Sells

Margin

EBIT

Sells

Margin

EBIT

Sells

Margin

EBIT

Customer Cluster A

26

10%

5%

3

20%

4%

8

40%

20%

37

17%

8%

Customer Cluster B

5

12%

8%

1

18%

2%

15

50%

35%

21

39%

27%

Customer Cluster C

4

7%

1%

16

14%

5%

2

35%

10%

22

15%

5%

Total

35

10%

5%

20

15%

5%

25

46%

28%

80

22%

12%

      Operating Plan
The Operating Plan explains how the management is supposed to achieve the financial targets. This tool can be useful only if it describes clearly who will do something and how much time he will take in order to gain a real improvement of the financial performances.

An effective way to communicate the plan must follow these guidelines:

  • A simple and clear logic has to be followed. In fact, the most managers are used to displaying too many slides before getting to the focus. In this way we run the risk of losing the attention of our listeners with the result of having wasted a lot of time without any kind of interesting outcome;
  •  Richness of the contents. Slides with few and simple bullet points are easy to write, but they are hardly able to convince someone of what we are speaking about;
  • Our behavior, while we are explaining the plan, has to show a balance between ambition and realism

      The organization
In its basic view, it deals with the ability of the management to apply an effective leadership to introduce and enforce a right way of handling the firm. These are the main points to be followed: Clearness of the role in the decision-making process

  • Executive committee composed by managers who are relevant for the decisions which have to be taken
  • Thorough and accurate preparation of the meeting
  • Effective managing of each meeting
  • Responsibility of the managers to a results – oriented policy
  • Fast and strong way of proceeding once the decisions have been taken

Application

of the Operating Plan

This step is often neglected by the managers. After having settled the objectives and shown have to reach them, the management has to asses duties and responsibilities in order to implement the strategy and to check the results. However, sometimes it comes out to be the most difficult task to put into effect due to inner resistance to the above mentioned managers. In these cases it could be useful an external allowance in order to make things looking up.

 

The profile of this external manager should have:

  • credibility
  • neutrality
  • problem-solving ability
  • team working skills

print