A business turnaround case study is a detailed analysis of a business that has faced significant challenges and has been able to successfully recover.

The case study provides insights into the reasons behind the business’s struggles and its eventual turnaround. It also highlights the key strategies and tactics that were used to achieve business success like increased productivity or profitability, better reviews or feedback from customers, etc.

The case study can be an invaluable resource for business owners and managers who are seeking to improve their own business performance. By understanding the reasons behind a successful business turnaround, they can learn from the mistakes of others and apply those lessons to their own businesses.

Here’s one example of a business turnaround case study for a manufacturing company.

Manufacturing Company Turnaround

The Challenge:

• The business was unprofitable, cash negative, and losing customers. Management in conflict & demoralized.
• Customers were very unhappy and were reducing orders and changing suppliers.
• The manufacturing process consisted of extrusion and thermoforming, i.e. a linked batch operation.
• A disorganized and dirty factory that had been put on notice by BRC to improve in 6 months. Poor delivery lead time, weak safety, and bad maintenance.
• Order lead time was very long and OTIF very Management had therefore decided to make trays to a forecast and this had exacerbated the problem further and driven up WIP and FG. WIP and FG stocks were in excess of 6 months.
• Stock counts were uncontrolled and not carried out regularly at month-end.
• Although cash was very tight there was no effective cash forecast regime in place.
• There was an inadequate sales plan in place which was subsumed by the need to constantly deal with customer crises related to late delivery and quality problems. There was excessive dependence on two customers.
• Customers in the UK, Ireland, and Benelux.

The Solution:

• Reduced headcount from 138 to 65, dismissed all directors and two managers, and in the process eliminated two layers of management.
• Developed management team & strategic plan & implemented Lean. Reviewed sales & production through value stream analysis & drove the integration of these functions.
• Changed ‘make to forecast’ to ‘make to order. Reduced FG stock to 10 days & WIP to 5 days, eliminating a 3000 sqm store. Cut order delivery time to 24hrs on identified lines.
• Set up shop floor data collection and installed IT that provided real-time performance measurement on 2 extruders & 8 thermo-formers. Measured Availability, Speed, Quality & OEE reviewed by shift. Implemented asset care system. Improved availability & developed planned maintenance.
• Integrated the order entry and production planning processes, drastically improving service speed, flexibility, and order turnaround. OTIF 99%.
• This process together with Kaizens energized the shop floor and forged strong (e.g. T/F tool change cut from 4 hrs to 2 hrs then 15-30 mins).
• Reorganized management & segregation of rework and reduced bad waste to <0.1%.
• Implemented a safety improvement plan with monthly meetings. Guarding, ASIs, Risk assessments, changed material flow, implemented safe WIP roll handling. Removed FLTs from production areas.
• Reduced NPD lead times from months to 4 weeks through a key alliance with a toolmaker.
• Worked closely with sales team & key customers. Weekly reviews of existing customers and new business development.
• Established detailed monthly financial reporting & 12-month rolling cash flow updated daily.

Results:

• Reduced breakeven from £13m to £7m, brought the company to profit in 12 months and reduced stock by 80% in 8 months. Improved OEE by 73% in 18 months.
• Cash positive in 18 months.
• Direct labor reduced from £2.4m to £1m pa, and material cost decreased by 22% in 12 months.
• Reduced low margin business, grew sales profitably to £9m in 2 years.

In business, there are always ups and downs. Companies that can weather the storm and come out stronger on the other side are the ones that are leaders in their industry.

When a company is in trouble, it can be tempting to give up and liquidate assets. However, sometimes the best course of action is to go through a business turnaround.

This involves making changes to the way the business is run in order to get it back on track. Sometimes this means making cutbacks and reducing expenses. Other times, it might mean investing in new technology or expanding into new markets.

Whatever the case may be, a business turnaround can be a difficult but necessary process. If done correctly, it can help a company to come out of a difficult situation even stronger than before.

Written by Mike Stewart, BSc Chem Eng, MBA: Strong practical experience at MD level. International experience includes being ‘parachuted in’ on a number of occasions to turn around troubled companies, as well as entering new markets and growing businesses.

Led 3 turnarounds in 7 years at £40 -£60 m pa businesses (330-500 people). All were complex multi-site manufacturing businesses with very demanding JIT customer service requirements.

The background of this article are two French firms in trouble, with around one hundred employees and twenty million in revenue each, hiring an Interim Manager. These two manufacturers of industrial equipment are subsidiaries of two international Groups of about 1,000 employees and € 200 million in revenue. Each local company suddenly loses his top manager, for different reasons, but that lead the Groups in both cases to assign an Executive Interim Manager. This aims to take control of the French subsidiary to drive organizational change and allow time to set up a sustainable solution for the management of the company.

This is not a fiction, both cases were experienced by the same Interim Manager 1 year apart

In parallel to the operational takeover of his organization, the Interim Manager begins each assignment with an “integral audit”(1) of the company per four dimensions: functional, operational, communication and value system. Regarding the functional dimension, he analyzes the quality system, procedures, rules, flows, … At the operational level, he evaluates each key person, implementation and impacts of processes, and staff involvement. He also analyzes the quality of communication between people. Finally, using Spiral Dynamics method, he studies the culture of the organization and its environment and ways of thinking and behaving of key people.

He concludes from these detailed analyzes that the two organizations, at the Group level as at the French entity level, have in common a pyramidal organization, dominated by a traditional and autocratic management style, sometimes even repressive. Search for optimization of financial profit and cash management takes over social considerations. The competitive environment is very harsh and exacerbated by several large accounts very demanding in terms of price, quality and reliability of delivery.

Based on these diagnosis, in both cases, the Interim Manager establishes an action plan to reorganize the local company

The difference in freedom of action of the Interim Manager between the two situations is accentuated by the contrast between the levels of independence of the two subsidiaries

Obviously, the impact of these differences is visible in the results of the two assignments

The chemistry necessary for the success of an Interim Management assignment is complex

Among its ingredients, such as for a conventional Manager or an employee, the degree of autonomy and freedom of action given to the Interim Manager are key success factors.

(1) : The “Integral Diagnosis” is part of the tool box to optimize organizations entitled “Management 21”, used by the Executive Interim Manager who performed these two jobs. Management 21 consists of 5 steps: Needs, Integral Diagnosis, Choice, Change and Perpetuation. Some of the “tools” used by Management 21 : The Work, Process Communication, Lean Management, Appreciative Inquiry, Spiral Dynamics, …

(2) : PSE = Redundancy and restructuring plan according to the French law

Companies cannot afford to waste time to achieve its strategic goals, such as correcting an existing problem, proceeding with a M&A or a project that impacts the whole company. When they delay their decision to hire a competent manager, many companies get into trouble, loose their competitive advantage or fall behind on their market.

The following case studies show how some companies, for different reasons, hired a transition manager to get out of difficult situations.

A) Case N# 1

Field of activities: Consulting

Problematic

his company suffered from permanent underinvestment in their IT system, resulting in an instable IT environment which did not meet the company’s needs. Finally aware of this problem, the company first invested heavily, recruited an IT Manager and hired consultants, though without the anticipated result. After 18 months, the company totally changed tactics and decided to work with subcontractors. In the end, this decision created new problems, such as increasing IT related staff threefold, because the subcontractor had to increase staff dedicated to the company in order to compensate system inefficiency while trying to ensure a high reactivity. One year later, the company hired a restructuring manager to solve the problem. The first five appointed managers, who have been recruited without the appropriate diligence, failed to find an efficient solution … until the arrival of the sixth.

Solution

Within 18 months, the transition manager, aware that IT difficulties can prove very complex, adopted a methodical approach. He first corrected the network hardware (cabling, router, hubs, etc.) before dealing with the network management and security. He then operated a revision of the servers and the applications (optimization of the installation on the individual systems, analysis of the interfaces, optimization of the data bases, etc.). The goal was to create an efficient and customer service oriented organisation, based on a clear hierarchical structure of the interventions and a reduction of the number of problems through prevention (instead of intervention). By quickly solving critical demands and pushing back non critical demands, customers could be satisfied with less resource. Today, the required IT staff has been reduced from 55 to 23, while improving the system efficiency.

Key points to remember

The company underestimated the problem and tried to solve it by making investments and hiring consultants. Then it hired subcontractors, but without satisfactory results. A strategic correction cannot be carried out just theoretically or operationally, but by using a rare blend of expertise, operation and people leadership.

It is difficult to select the right transition manager, and only the sixth was able to perform the requested assignment.

The company lost 36 months before finding the right solution to its problem, and then it took another 18 months to create a healthy environment.

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Reactivity: with its pool of selected and certified profiles, CEO Worldwide is able to qualify, interview and present a first selection of candidates within only a few days.

B) Case N# 2

Field of activities: Software editor for a niche market

Problematic

This young company was encountered massive financial and technical problems and was very close to liquidation. The shareholders decided to fire the former managers and to call upon two experienced transition managers, a CFO and an IT manager to rescue their failing subsidiary.

Solution

In less than 48 hours, the two leaders succeeded in negotiating with the banks the continuity of the company. After 5 days, the disastrous internal organization was completely revised. At the end of the first month, they decided to transform the company’s BtoC approach into an indirect distribution model (thus B2B). The two transition managers needed 16 months to perform this transformation with, at the end, the opening of 500 points of sale and the sale through 40 Internet sites. This company now has good chances to survive, but the heavy loss before acting weakened it financially, impacting its development for the next 5 to 7 years. Indeed, the losses were “converted” into capital cost over 10 years, representing 30% of the operational expenditure. However, with a 45% market share and healthy margins, the company now benefits from a good repositioning.

Key points to remember

The decision to call upon experienced leaders was belatedly made. The subsidiary was put in a very difficult financial situation.

The two transition managers confirmed their adaptability by learning in less than two weeks how this market niche operated.

The managers successfully repositioned the company on its market.

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Experience: By certifying only profiles with a minimum of 15 years experience, CEO Worldwide offers transition managers that already have been successfully dealt with the problems met by its customers.

C) Case N# 3

Field of activities: Training platform

Problematic

After years of growth, this company realised that the European market was too limited for its market and decided to expand its operations to Asia and the USA. The existing management wanted to manage this critical project internally. But they did not have the necessary experience to lead that kind of project and they underestimated the budget and the completion time. Thus the estimated budget was quickly exceeded and the start of the project was delayed. To solve the problems, the company decided to hire a transition manager for a 18 months assignment. Moreover, this project would change the internal organization and no director wanted to be responsible for such significant changes.

Solution

In less than 14 months, the transition manager successfully transformed the European structure in a worldwide acting company, providing services in the USA, Singapore, Japan, Australia, Brasil and Saudi Arabia. To achieve this, he created a new offer, which corresponded to a global market and created a convincing Internet infrastructure offering the complete product range via a simple Internet connection. Today, the company grows very fast and is able to deliver its services offered on any site worldwide in less than 3 days.

Key points to remember

The company very quickly made the decision to recruit a transition manager and gave him the necessary means to succeed.

The transition manager worked with each director to transform the company in a global mode and made every one of them feeling personally committed.

After the end of the project, the transition manager accompanied the directors for 2 months to ensure the smooth transition of the new operational mode.

CEO Worldwide’s +

International: with more than 16,880 iCEO certified managers available in 180 countries, CEO Worldwide offers profiles with a strong international knowledge.

D) Case N# 4

Field of activities: Internet SSII

Problematic

One year after the merger of two subsidiaries of two different groups, the new company did not reach the expected results. Internal conflicts increased and the development of new products and services almost stopped. After nine months of internal conflicts, both groups still had not come to a compromise how to run this subsidiary and it was decided to engage an external expert taking up the position of transition CEO.

Recommendation

The transition CEO very quickly took control of the company and got the sales and the development of new products started again. He set the solution of the conflicts as a priority in order to create a healthy environment with motivated and active employees. Sales staff once again attacked the markets, the IT department worked with the marketing department to launch new products. In-house, the transition CEO took
complete control of the commercial/marketing department, the R&D, and then of the financial department. His strong involvement enabled the company to obtain a 50 % growth and a 20 % net profit. At the same time, the number of employees increased by 42 %. After the departure of the transition CEO, the company still enjoys great success in its market.

Key points to remember

Over nine months of conflict before the transition CEO arrived, made the company lose important customers and created a feeling of failure regarding the merger.

The recruitment of an experienced CEO made it possible to solve internal conflicts and to industrialize whole departments. At the same time, the launch of new products and services boosted sales again.

The transition CEO also recruited successfully (and within the deadlines) his successor.

CEO Worldwide’s +

Professionalism: By proposing interim managers, CEO Worldwide offers its customers external managers, neutral to the internal conflicts of companies, which enables them to just attack the pressing problems.

E) Companies in Jeopardy: Conclusion

Many companies get themselves into trouble by delaying an obvious decision. These four cases confirm that a good transition manager can make all the difference, by restructuring a company, opening new markets or defining a winning strategy. CEO Worldwide commits itself in this process to facilitate the selection and to find the best suited manager with the right set of competences within a very short time span.

About the author: Erik Van Rompay

Executive (CEO/COO) specialized in the developing of high volume Internet companies by making them financially secure through the development of new innovative services.

View Erik’s short bio

CEO Worldwide offers companies the experience of seasoned top managers who have a successful track record in the carrying out of several restructuring programs for heavy loss-generating business entities. And in this field, like in a number of others, experience is a (probably even the) major success factor.

No one wants to talk about it, but there are numerous instances where a company or a group come to realise one day that a given business unit, a subsidiary, or worse, a group of subsidiaries, has become a source of recurrent, permanent losses, and does not respond to the efforts made to turn its situation around, or, at least, bring it under effective control.

This kind of situation appears very often when the money-loosing entity is located in a foreign country, where language problems as well as different ways of doing business add to the usual difficulties of finding the appropriate solutions and restructuring measures to cope with an ailing business entity.

A) Identifying the problem

When a business unit has lost money for some time and does not seem to react positively to whatever corrective actions have been decided upon and implemented, the usual reaction is to question the measures and/or the management team responsible for their implementation. However, when this line of thought does not lead to some fairly obvious explanation, it is necessary to look closer into the matter.

The requisite in-depth study of what is actually happening is very often postponed if the losses generated by the business unit remain limited in comparison to the consolidated result of the shareholding entity, and/or if, in addition, the reasons for the poor performance of the business unit seem obscure and difficult to identify. The problem then remains unsolved, losses keep accumulating, and conventional wisdom, within both the ailing business unit and its shareholding entity, soon begins to vehicle the idea that there is no good solution whatsoever.

B) Where to start

The first decisive step must be the decision by the top management of the shareholding structure to put an end, one way or the other, to the never-ending losses of the business unit, and to follow up on that decision. The top manager in charge must clearly be backed by the CEO. He should be chosen amongst the top collaborators who have had no responsibility in connection with the ailing unit, his final objective(s) should be clearly expressed and the corresponding deadline to achieve his objective(s) clearly defined.

C) The key factors for a successful solution through restructuring

Considering the fact that the situation at hand has remained unattended or at least unresolved despite various attempts to deal with it, or at least to mitigate its consequences, it must be obvious to all that the problem is indeed serious and that the main reasons for its occurrence have not been properly identified and fully understood.

Consequently, the top manager in charge will first select and appoint a chief operating officer (COO) who will work full-time to solve the problem(s) of the ailing business unit, or to dispose of the unit through sale(s) or closure(s). Under the direct supervision of the top manager in charge, the COO should be given all powers to instruct and direct the ailing entity as he deems appropriate to carry out his assignment within the imposed time frame, in the best interest of the shareholding structure.

The COO will be given a limited but adequate amount of time to study the situation in depth and propose a strategy as well as an action plan to solve the problem(s) in due time. The top manager in charge will review the strategy and the action plan, make whatever changes and modifications deemed necessary (in liaison with the COO), and obtain the green light and full support of the CEO (or the Executive Committee as the case may be). He will then formally send to the COO the precise objectives, constraints, and levels of financial and human resources corresponding to the implementation phase of his assignment.

C1) Sponsorship

To ensure success of the action plan to be carried out by the COO, it must be clear to all, within the ailing unit but also within the shareholding entity, that the restructuring process is fully supported (and monitored) by the top management at the highest level. It is essential to have all collaborators involved be aware of the fact that the COO’s assignment has high priority for top management, that the necessary resources will be made available in due time, and that the key collaborators involved in the process will be accountable and rewarded for performance.

C2) Decision-making at the shareholder’s level

A key factor to the success or failure of the process is the ability of the manager in charge to swiftly make the decisions which must be made at the shareholder’s level in response to the questions and requests coming from the COO. All too often, because of insufficient availability, delayed access to the CEO, other priorities and so on, the top manager in charge is in no position to give the answers which the COO requests and which he needs to move on. As a result, the whole process is at best slowed down, its credibility damaged and its outcome jeopardised. No matter how competent and diligent the COO is, he can only succeed if the top management is prepared and organised to react and decide promptly.

C3) Communication

As the restructuring/cleaning up action plan often implies carrying out social plans, reductions of the labour force, closure of some plants, disposal of assets, etc…, it generates strong emotional reactions at all levels within the company and around it. It is therefore necessary to communicate and explain both internally and externally what is happening and what is coming and why, in order to give to all stakeholders a fair, even though often simplified, understanding of the process and to reduce inasmuch as possible all sources of anxiety. Communication is therefore of the utmost importance and should be handled very carefully with a strong involvement of the COO and the top manager in charge.

D) To conclude: nothing replaces experience

If there are any rules to successfully carry out a restructuring process of an ailing business unit, experience is the crucial factor. There are so many variables involved that no business administration operating manual can give all the answers; besides, the human factor plays a major role (either in a positive or in a negative way or both at the same time) in the response of the business entity to the restructuring process itself. This is why experience is so very important.

About the author: Click to view Thierry Potok’s short bio

CEO Worldwide provides a number of top managers who have succeeded in completing clean up/restructuring of heavy loss-generating business units. They can intervene in an autonomous way or assist you directly in this vital step for your company or group.

There is no company that did not face or survived a time of crisis. Of course, there are many specialists to turn around a crisis, but wouldn’t you rather want to prevent the situation from turning into a crisis in the first place? You want to know how? https://www.female-executive-search.com/meet-our-women-leaders/short-bio/?cntc_id=58934#video

Of the world’s 500 largest family businesses, 32 (7,6%) are located in Latin America according to the 2016 Global Family Business Index.

Over 70% of these businesses are publicly listed companies with average 78 years old.

On the other hand, Latin America and the Caribbean Region (LACAR) are home to upwards 57 million small-and-medium-sized enterprises (SMEs) with fewer than 100 employees.  These companies account for over half of the region´s net job creation.

Nevertheless, SME´s in LACAR are far less competitive than their counterparts in wealthier countries and have enormous untapped potential.

One has to remember that, among other challenges, the region is in urgent need to create more and better economic opportunities for its workers.

Family businesses have to face the passing of the reins to the next generation

Speaking of challenges, all family owned businesses (FOB) have to face, one day or another, the passing of the reins to the next generation.  This is a delicate moment in the life of any family-run organization.  At that point, SMEs that have planned (and developed) in advance family protocols and succession agreements, will be in a much better position to achieve a generational transition without compromising the future and the continuity of the company itself.

Several models have been developed to describe and analyse the different stages that family business go through during their existence. To make it simple and as an overview, I will refer in this paper to the basic 3-stage model that summarizes the business lifecycle:

• Founder(s) Stage
• Sibling partnership
• Family dynasty

Stage 1: this is the initial step of the FOBs

The company is entirely owned and managed by the founder(s). There is a strong commitment of these individuals to their success of the company and a relatively simple governance structure. The control and ownership rely on the hands of the same person, but the most important issue to be addressed during the life of the founder is succession planning.

Stage 2: management and ownership have been transferred to the children of the founder(s)

Governance issues tend to become relatively more complex than those observed during Stage 1. A new share of issues arise, like: maintaining family harmony, formalizing business processes and procedures, establishing efficient communication channels between family members and ensuring succession planning for  key management positions.

Stage 3: more family members are directly or indirectly involved in the business

Many of these members belong to different generations  and different branches of the family.  Therefore, many diverse ideas on how the company should be run and how the overall strategy should be set appear. By far, this stage involves numerous family governance issues. Some of the most common, are: family member employment, family shareholding rights, dividend policy, family conflict resolution and family vision and mission.

In a typical non-family business, any involved individual can be an employee, a manager, an owner, a director or some combination of these roles.

However, in FOBs environments, matters become more complex as an individual may have multiple roles and responsibilities.  Among other family governance institutions that a FOB might develop, are: family assembly (i.e. “family forum”); family council (“family executive committee”), family office (investment and administrative center); just to name the most relevant and common.

Key aspects of family governance institutions

Mexico has the second largest economy in Latin America.  It is a nation where affluence, poverty, natural splendor urban blight rub shoulders.

Like with many other industries, the pharmaceutical sector faces global and local challenges.  To put it on perspective, Mexico is the eleventh global market for pharma with a net worth of 13.2B USD. The country has extensive Healthcare needs, particularly those related to chronic diseases (cardiovascular, diabetes, cancer, etc.).

Still considered as an “emerging market” by many global companies, Mexico is perceived as having enormous potential and multinational companies hold high expectations for their local subsidiaries.

Therefore, when a SME-FOB like Quimica Farmaceutica Esteroidal (QUIFAEST) requested consultation services, prior context, as described, needed to come together for effectively analysis, development and implementation of their own Family Protocol for this pharmaceutical enterprise.

It has only taken a few weeks, to assemble a comprehensive business diagnosis for this company.  To the owner, soon to be identified as Board President, and one of his siblings -operating General Manager- the insights provided about their company stage, the global and local industry perspectives outlined, the painful -but necessary- actions that need to take place within the organization (like removing family members from key areas/positions, due to poor results) have been both eye openers and rewarding guidelines to establish the foundations for succession planning and formalizing business processes and procedures.

Work lies ahead, both for QUIFAEST and my consulting services.  At present, this company is consolidating presence with branch offices in  3 major US cities, as well as operation partnerships with Indian counterparts.

In the words of the company founder and operating general manager: “We have found a very knowledgeable and practical Business Consultant. But more importantly: now a friend”.

About the author: Armando Camarillo is Founder & Managing Director of Achieve Consulting Mex – LatAm, a business consultant firm focused to entrepreneurs and SME but with 3 decades of professional experience to serve large corporations in specific projects.  Specialties: business start ups, increase sales, consolidate market expansion, install world class management practices, provide mentoring. Spanish & English spoken. Intermediate Portuguese (reading and writing business communications)

View Armando’s short bio