A corporate turnaround is the set of actions and strategies applied in order to reverse a company’s trajectory from free fall back to profitability and growth.1 Turnarounds are reserved for companies in need of decisive, immediate action to ensure survival for the following 12 months.2 While I agree with this definition for the most part, it is necessary to clarify that sustainable turnarounds are undertaken to ensure the survival of a firm in the long term, not just for 12 months. However, there are occasions when turnarounds are carried out to ensure short-term survival, such as the proposed sale of a business.

Barker and Duhaime found in their 1997 study that a turnaround occurs when a company has fully recovered to normal operations and sustained profitability after a threat to its survival.3

Turnaround studies have variously defined decline and turnaround.4 Both can be linked to a firm’s profitability relative to historical company levels.5 Decline and turnaround in profitability can also be linked to an objective financial benchmark, such as ten percent return on investment.6 A firm with more than ten percent return on investment would be considered to have been turned around, and one with less than ten percent profitability would be considered in decline. Decline and turnaround can also be based on a company’s proximity to bankruptcy.7 A firm that faces a decreased risk of bankruptcy is in turnaround,8 and a company that faces an increased risk of bankruptcy is in decline.9

At the same time, decline10 and turnaround11 can be based on a company’s level of financial resources12 or be defined from the stakeholder perspective.13

The lack of a general definition makes it difficult to compare successful past turnarounds. Turnarounds are often measured in unique, case-by-case ways, and success depends on the definition of performance.14 Performance can be defined in terms of the company’s stock price and its own historical record,15 in terms of its survival,16 the normalized net income to reflect industry trends,17 or a wider standard.18 Measures can be inflation corrected19 or historical.20

The literature has little to say about the time span of a turnaround and varies between three to eight years21 22 including a base year, as a reasonable time span for turnarounds in the banking industry.

There are five different types of turnaround: management-component turnaround; economic turnaround; government-related turnaround; product-breakthrough turnaround; and competitive-environment turnaround.23

Management turnarounds are used in 68 percent of successful turnarounds.24

Even now, there is no generally accepted definition of the term „turnaround“ in the business literature. Some use the term to describe the necessary measures and processes used to increase a company’s profitability or to give it a new strategic position,25 while others use it to signal that a crisis has been successfully mastered and the company has been turned around. A

corporate turnaround can be described as a substantial and sustained positive change in the performance of a business,26 therefore the following Turnaround Management Society definition is used in the International Turnaround Management Standard:

A turnaround transforms a company that has a general lack of resources and/or strategic disposition and/or is in an abnormal period to be profitable enough to support its own operations and to have a strategic chance to survive in its environment on a stable platform for renewed growth27

Schendel, Patton, and Rigges define a turnaround as a decline and recovery in performance.28 However, this definition does not make clear at what point in the development of the crisis the turnaround begins. Following the TMS definition, the turnaround can start as soon as a strategic disposition is recognized, which does not mean that there must also be financial distress.


1 (Roman, 2010, p. 5)

2 (Roman, 2010, p. 5)

3 (Barker & Duhaime, 1997)

4 (Lohrke, Bedeian, & Palmer, 2004), (Hambrick & D’Aveni, 1992), (Melin, 1985), (Pearce & Robbins, 1993), (Zimmermann F.), (O’Neill H. , 1986)

5 (Chakravarthy, 1986), (Venkatraman & Ramanujam, 1986)

6 (Shepherd, 1970), (Hansen & Wernerfelt, 1989), (Barker & Duhaime, 1997), (Ramanujam, 1984), (Graham & Richards, 1978), (Hambrick & Schecter, 1983), (Robbins & Pearce, 1992)

7 (Altman E., 1983)

8 (Barker & Duhaime, 1997), (Robbins & Pearce, 1992), (Stanwick, 1992)

9 (Ferrier, Fhionnlaoich, Smith, & Grimm, 2002), (Hambrick & D’Aveni, 1988)

10 (Hambrick & D’Aveni, 1988)

11 (Lohrke & Bedeian, 1996)

12 (Bourgeois L. , 1981), (Singh, 1986), (Cyert & March, 1963)

13 (Chen, Farh, & MacMillan, 1993), (Sousa deVasconcellos e Sa & Hambrick, 1989)

14 compare (O’Neill H. M., 1986)

15 (Bibeault, Corporate Turnaround: How Managers Turn Losers into Winners, 1981)

16 (Altman E. , 1968)

17 (Schendel, Patton, & Riggs, 1976)

18 (Schendel & Patton, 1976)

19 (Schendel & Patton, 1976)

20 (Hofer, 1980)

21 (Hambrick & Schecter, 1983)

22 (O’Neill H. M., 1986, p. 177)

23 (Bibeault, Corporate Turnaround: How Managers Turn Losers into Winners, 1981)

24 (O’Neill H. M., 1986)

25 (Bibeault, 1981)

26 (Bibeault, 1981, p. 81)

27 (Lymbersky C. , 2011)

28 (Schendel, Patton, & Riggs, 1976, p. 3)