Has turnaround become business as usual?

18 August 2017

A common trigger for a restructuring or turnaround within a deals process is crisis. “Never let a good crisis go to waste” goes the maxim. But is it only when a company is in the midst of crisis that management are able to radically and rapidly transform their business?

The noun crisis comes from the Greek word krisis, meaning "turning point in a disease." At such a moment, the person with the disease could get better or worse: it's a critical moment.

Having supported many businesses rapidly turn around performance during periods of stress within a deals process, we have asked ourselves how businesses can identify their own “critical moment”, achieving the same sense of urgency and appetite for change.

There are four key rules businesses in turnaround or restructuring in a deals process must obey that we have introduced at a number of organisations experiencing pressure on their margins, to execute their plans, to rapidly address underperformance and return to sustainable profits and value.

Set a time boundary -  In a typical turnaround or restructuring situation the most pressing question is “How much time does the company have before management need to call in the administrator?”, driven by how much cash the business has. For companies that are on a steady downward trajectory yet to feel the pressure, they must ask, “How much time does the company have before its business model becomes unsustainable?” Reframing the question provides a sense of urgency that is normally lacking during BAU, as management get bogged down on the day-to-day, and lose sight of the bigger picture.

Ruthlessly focus on value - In a turnaround or restructuring, non-value adding activities (waste) and costs are immediately addressed to stop the haemorrhaging of cash. It often surprises management in these situations how much ‘waste’ in their operations and costs they have accumulated. Regularly critically reviewing activities, focusing on value add cost allows management to remain informed and take those tough decisions early, cutting the waste and reassigning resource to the most profitable activities.

Do not respect silos - The greatest value can be created through organisation wide initiatives, yet this is where most companies fall short. A crisis brings together people from across the business; personal agendas are set aside and thinking coalesces behind issues that really matter. This is not easy to replicate, but through creating the right culture, businesses can unlock this value within the deal. This requires an environment where people across the business are consistently brought together to run the business and co-develop new solutions. Teams need to be incentivised to work together, and must feel able to do so. 

Stay agile – In a turnaround or restructuring, continuous prioritisation is paramount as the plan changes on an hourly, daily and weekly basis. Agility is required as management ruthlessly focus on the commercial end goal. It is important to have clear sight of the commercial value and top level plan, whilst allowing teams on the ground the autonomy and trust to achieve the end goal, holding business units to account against this alone.

In the modern business landscape of disruptive market entrants, and more frequent and painful macro shocks, companies must continuously evolve and reinvent themselves to remain relevant. Now more than ever, a turnaround mind-set needs to be embedded into the DNA of the organisation so you can spot your own critical moments.

Within the Deals Strategy & Operations team at PwC we are relentless in the focus on value. Protecting and securing value in this way, for example, navigating successfully through a turnaround scenario, not only achieves results for the short term, but can be a vital pre-cursor to a longer value creation / re-build strategy (see our previous blog here). We work with businesses to achieve lasting results, from a diversity of starting points. 

Get in touch to discuss your situation in confidence or to share your thoughts below.

DSO blog

Tim Allen | Deal Value Architect
Profile | Email | +44 (0)20 7212 2635

More articles by Tim Allen

Mike Moffett | Deal Value Architect
 Profile | Email | +44 (0)20 7212 5843

More articles by Mike Moffett

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