Interim Management: Turnaround

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Interim Management – Life at the Sharp End (Part 3)

Turnaround Management, is there a Recipe?

Ideally, what you would like to have is sort of a recipe, telling you what your ingredients are, how to stir them and finally at what temperature the oven should be set. Well, I cannot offer you quite that much and some readers might argue that we are not discussing a Jamie Oliver show but rather a more serious subject. But on the other hand, who dares to pretend cooking shows are not serious cooking? As a practitioner of interim management in financially distressed companies you do not want to spend a lot of time reading the learned opinions of academic experts on the subject. Besides, there is a plethora of books. Nevertheless, we need to spend a moment on the question “is there a generally applicable way to approach things?” Let me add a word of caution: There cannot be a universally applicable manual because legal systems are different from country to country. Hence, you will have to find the right manual for your coun-try and in your language. Helpful is a manual with lots of check-lists and practical advice, meaning feasible and doable. The good news is that there are such manuals but you will have to unearth them. For a short English introduction into the subject and a compilation of case studies see the books by Stuart Slatter.

I for my part rely on Urs Leupin’s book although he is retired now. He is a lawyer and gradu-ated from the Army General Staff School and was later head of the credit recovery department of a large full service bank. This means he knows all the aspects of the subject and writes in no uncertain terms. And most importantly, the book does not stop at “which measures” but includes “how to implement things”. The following is drawn from his book.

The Four F’s – a Battle Plan

General Norman Schwartzkopf’s summary of any campaign is straight-forward: Find – Fix – Flank – Fight. Translated into the situation of a business turnaround this reads:

Find: Find the trouble spots (causes and reasons) to be able to react systematically.
1. First measure: Acquaint the board and the existing management team with the task
2. Second measure: Timely identification of the acute crisis to guard against surprises
3. Third measure: Know the risk assessment situation of the company’s banks and their first reactions to the emerging crisis

Fix: Fixate the crisis situation (stabilise the situation so it does not get worse)
1. Fourth measure: Stabilise the starting position
2. Fifth measure: Implement the crisis management to guarantee the stabilisation and as a preparation for the handling of the crisis
3. Sixth measure: Get the principle decision by the banks to grant a moratorium based on your plan despite the breach of financial covenants (with or without a bridge loan, depending on the situation)

Filter: Identify the parts of the company worth keeping

1. Seventh measure: Implement the restructuring measures in the areas of management, products & services, finances and organisation
2. Eight measure: Identify and decide on the new strategic focusing
3. Ninth measure: Preparation of the financial restoration as the final step to overcome the crisis

Force: Push the areas of business within the new strategic focus

1. Tenth measure: Get the banks’ o.k. to the plan of financial recovery
2. Eleventh measure: Steer the course of the turnaround either alone or with a partner
3. Twelfth measure: Finalise the turnaround either in a cooperation with a partner, a merger or alone, depending on the situation.

Naturally, this is only the skeleton of the course of action and there is much more to it if you go into the details. Adaptations have to be made in specific circumstances and adjustments have to be made to cover the unpredictable happening quite often.

Company Myths

To conclude let me account for some of my favourite company myths which are also the most frequently encountered. In fact there are two legends in the first one, a special industry culture and a unique way of operating. The story goes like this. In conversations with many staff in your new company you are inevitably asked “Have you worked in our (branch of) industry before?” “Not exactly, but in similar companies and situations” “Well, you’ll see this industry is quite different from anything else and our company is unique in the way we do things.” Now, in this situation you do not l.o.l. or give the tacky answer “Yes and that is exactly the reason why you are in trouble”. After all you are a pro and keep a stiff upper lip. The ones asking do not only think their industry is special in itself but that their company is even more special because they do things their own way. From there it is only a small step to believing that general business rules do not apply to your own company.

Another frequently encountered myth is the “niche market legend”. It usually unearths when you are probing market opportunities, competitive situations and either sales expansion or con-traction, the latter due to competitors’ action. The killer argument to any serious analysis and discussion is the assertion “We operate in a niche market and hence are much less vulnerable to competition than the competitors’ products.” People tend to forget that niches may dry up or alternatively, grow and therefore attract new players; who recalls British watches or Swiss cars?

Do not be distracted by beliefs, you are the expert investigator, just plough through the thicket and dig out the facts. Interestingly, in most instances there was a reason that the company intro-duced the way they operate today. It is just that circumstances have changed, the reasons van-ished years ago and nobody questioned the situation. It is one of the most important duties of an interim manager to question all the aspects of the business. Sadly, more often than not it is be-cause the management have not asked themselves frequently enough fundamental questions about the business they’re in and how they operate. The end of the story is then the quagmire you will find. Remember, Nokia was a little known Finnish pulp and rubber company before turning into one of the leading global communication groups.

This concludes the mini-series on interim management.

1. Corporate Turnaround by Stuart Slatter, Penguin Books, 1999
2. Leading Corporate Turnaround by Stuart Slatter et al., Wiley, 2005
3. Turnaround von Unternehmen by Urs Leupin, Haupt, 1998

About the author: Peter Wolf is an interim manager, management consultant and entrepreneur. After an international career in life sciences industry working for Swiss and US multinational groups he started his own company, Management Support, in 1996 in Basel/Switzerland. Since then he had consulted with numerous clients in industry, the health care sector and services. As an interim manager he helped change organisations in difficult circumstances, optimised business processes as a project manager and consultant and co-founded companies in the biotech and service sector, with successful trade exits and an IPO. He holds a PhD in physical chemistry from the University of Berne and an MSc in Business Studies from Warwick University. This blog post has first been published on

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