Mike

Welcome to the real business world where troubled businesses abound. Distressed business owners and executives need to understand turnarounds and transformations in order to face the challenges in this competitive global market. Corporate turnarounds and transformations are no longer ad hoc. Instead they have become an integral part of daily corporate life with dynamic changes in the economic, political and technological arenas. Business turbulence is here to stay. Yet, there are many myths pertaining to turnaround and transformation.

Myth 1: One common myth held by companies is that they are not vulnerable to financial crisis: „My company is doing well. It will not fall sick.“ Akin to getting AIDS, some patients previously adopted the attitude: „This will not happen to me.“ But when it does happen, be prepared to hear this from the doctor. „Sorry, we cannot help you.“ Many companies have annual medical examinations and health screenings for their employees but are negligent when it comes to their own check-ups. Companies should go for regular health check-up. The key to successful turnaround is early intervention and understand the early warning signs of a sick company.

Myth 2: Management of troubled companies often goes into a state of self-denial. „We have seen this before. This is a little hiccup in the economy and our business is seasonal. Nothing has gone wrong.“ This is a myth. The situation frequently gets worse before it gets better. Such denial is insidious, resulting in delays in the necessary remedial actions during the early stage of under-performance. This is why oftentimes by the time the companies‘ woes are publicly known, they are already basket cases. Proper treatment can only be administered after the acknowledgement that there is pain.

Myth 3: „Our creditors and banks are chasing for payments, we have a credit squeeze and firing of our staff must continue till cash flow improves.“ Yes, troubled companies need to cut cost to the bones without injuring the muscles and the vital organs. However, it is a myth that the primary role of a turnaround manager is merely to be ruthless and fire people in order to reduce overheads. Downsizing is like amputation which has negative side effects and can further worsen the staff morale.

Myth 4: You may be the lucky one as your company is not in the critical life-and-death situation but merely seeking market expansion. „China, India and SE Asia are high-growth markets and they appear a safe bet for us to expand and invest the business there.“ For instance, many companies in the West face intense competition and shrinking domestic market and surmise that a way to turn around their fortunes is to venture into high growth regions in Asia. It is a myth that it is a safe route to success doing business in Asia. Though the business opportunities are great, there are many pitfalls and differences in business practices that these companies ought to be mindful about in venturing into high growth Asia.

Myth 5: Yet, it is unfortunate that business schools today rarely teach the subject of „Corporate Turnaround“. Many of these business graduates eventually work for troubled companies and are inadequate to handle the real-life corporate situations. It is a myth that textbook knowledge will suffice in helping these executives manage a corporate turnaround situation which is much more esoteric and complicated. The turnaround executive has to be a dictator, crisis manager, visionary, entrepreneur, coach, spiritual leader all roll into one.

Myth 6: „Firing shall continue till morale improves“ The media have fuelled this myth by portraying the turnaround manager as Rambo, the macho man in the movies of the same name, who destroyed everything blocking his way. For example, the media nicknamed turnaround leaders like Jack Welch, the former chairman of General Electric (GE) as Neutron Jack; Al Dunlap, the former chairman of Sunbeam Corporation, the Chainsaw Al; and Magaret Thatcher, the former Prime Minister of United Kingdom, the Iron Lady. Both Welch and Dunlap fired thousands of employees in their turnaround endeavours. Magaret Thatcher privatized Britain Inc, the state-owned enterprise, resulting in loss of thousands of jobs.

Myth 7: The theories on change management are fairly straightforward and a lot of common sense. Yes, it is true that turnaround and transformation go back to basic principles. However, sometimes common sense is not too common. If it is, there will not be so many business failures today. Be mindful that in a turnaround environment, often times, the manager is put into a difficult position and he has little time to think clearly or refer to business books for guidance. Making the right timely decision and executing the decision are what matter.

Successful change management using transformation and turnaround should be holistic and based on addressing both strategic and operational issues in the short and long term. Comprehensive turnaround plans should seek not only to cut costs but to grow revenues and change the corporate well-being in order to facilitate and manage changes.

Also, there is no single right style of leadership in a change management environment. Turnaround executives have to be benevolent dictators, crisis managers, visionaries, entrepreneurs, coaches, spiritual leaders all roll into one. With so many hats to wear, a turnaround executive may appear schizophrenic exhibiting multiple and at times contradictory qualities. In some tough turnaround situations, the turnaround executives may even need to possess the supernatural skills such as selling a stethoscope to a tree surgeon or resurrecting the dead. As a result, business schools are often relegated to producing textbook executives who are unable to cope with the realities in the marketplace where many sick and troubled companies abound.

About the Author:

Mike TengDr Mike Teng (DBA, MBA, BEng, FIMechE, FIEE, CEng, PEng, FCMI, FCIM, SMCS) is the author of the best-selling business book “Corporate Turnaround: Nursing a sick company back to health”, in 2002. In 2006, he authored another book entitled, “Corporate Wellness: 101 Principles in Turnaround and Transformation.” Dr Teng is widely recognized as a turnaround CEO in Asia by the news media. He has 27 years of experience in corporate responsibilities in the Asia Pacific region. Of these, he held Chief Executive Officer’s positions for 17 years in multi-national, local and publicly listed companies. He led in the successful turnaround of several troubled companies. He is currently the Managing Director of a business advisory firm, Corporate Turnaround Centre Pte Ltd, which assists companies on a fast track to financial performance. Dr Teng was the President of the Marketing Institute of Singapore (2000 – 2004), the national body representing some 5000 individual and corporate marketing professionals in Singapore. Dr. Mike Teng is a member of the Turnaround Management Society and regularly publishes in the Turnaround Management Journal.

 

Der Internationale Turnaround Management Standard (ITMS) – ein unter der Leitung von Dr. Christoph Lymbersky entwickeltes und abgeschlossenes Forschungsprojekt liegt nun als Buch vor. Grundlage und Leitwerk für alle Experten, Fachleute und Manager die sich mit der Restrukturierung von Unternehmen befassen.

Krisenmanagement, Restrukturierung, Sanierungsmethode oder Turnaround Management sind sehr oft gebrauchte Worte im Zusammenhang mit der Bewältigung einer Unternehmensrestrukturierung. Turnarounds sind eine sehr häufige Situation, die statistisch 30% der börsennotierten Unternehmen innerhalb von zehn Jahren erleben. Viele Unternehmen versuchen in dieser Situation ein eigenes Sanierungsmanagement oder Restrukturierungsmethoden zu etablieren und nutzen keine professionelle Hilfe. Es scheint, diese Unternehmen folgen eher einem unstrukturierten Ansatz, um ihre Probleme zu überwinden.

Fakt ist, dass nur eine von acht Firmen erfolgreich einen Restrukturierungsprozess organisiert und gesichert in die Zukunft geht. Auch die meisten Sanierungsprozesse scheitern und wenn sie „erfolgreich“ waren, dann gehen etwa 80% wieder innerhalb von 5 Jahren in eine unternehmensweite Krisensituation. In den Studien zum ITMS wurde festgestellt, dass die meisten Turnarounds sich nur auf bestimmte Bereiche konzentrieren und somit die Symptome anstatt Ursachen behandelt werden. Das Restrukturierungsmanagement sehr oft aus reinen Finanzexperten oder juristische Experten besteht.

Bis jetzt gab es keine wirkliche Restrukturierungsmethode oder einen Standard, wie eine Trendwende zu führen ist. Auf der Basis von mehr als 1500 Referenzen unzähligen Interviews und 150 untersuchten Turnaround Fallstudien wurde jetzt das ITMS-Handbuch veröffentlicht. Es bildet die Grundlage und ist das Standardwerk der international zertifizierten Turnaround Manager – dem Krisenmanagement. Die Qualifikation der Mitarbeiter für das Restrukturierungsmanagement ist sehr wichtig. Viele Universitäten haben diese Notwendigkeit erkannt und bauen Sanierungsmanagement und Unternehmenssanierung in den Lehrplan mit ein. Der Kurs „Krisenmanagement“ beschäftigt sich mit dem Restrukturierungsprozess, dem Sanierungsmanagement und derRestrukturierungsmethode, er wird immer mehr an den Unis unterrichtet.

Der ITMS ist ein Bündel von Anleitungen und Verfahren, wobei dem Krisenmanagement Lösungen und Handlungsweisen aufgezeigt werden, um einen erfolgreichen und nachhaltigen Sanierungsprozess zu führen. Es existieren viele unterschiedliche Möglichkeiten für eine Restrukturierung, der ITMS ist jedoch die effektivste und praktikabelste für einen Restrukturierungsprozess. Der Standard bietet für die Unternehmenssanierung ein großes Potential und kann mit einfachen Strukturen umgesetzt werden. Ein Sanierungsprozess ist nur dann sinnvoll, wenn auch für die Zukunft geplant wird und die Sanierungsmethode Bestand hat.

Ein großer Vorteil vom ITMS ist es, dass er von betriebseigenen Kräften gelernt und geleitet werden kann. Dies spart nicht nur Kosten bei der Unternehmensrestrukturierung, sondern hat noch viele weitere Vorteile. Die Mitarbeiter kennen das Unternehmen und können Chancen am Besten einschätzen.

Die Turnaround Management Society bietet zusätzlich viele unabhängige Informationen für ein Krisenmanagement an. Damit Kann ein Turnaround Management vermieden und eine Unternehmenssanierung, ein Restrukturierungsmanagement gar nicht erst notwendig werden.

Der International Turnaround Management Standard kann bei Amazon oder in jedem Buchladen in Deutschland, Östereich und der Schweiz erworben werden.

The main objective of the Turnaround Management Society (TMS) is to promote best practice in turnaround processes. Only turnaround professionals are members of the TMS and these include: Distressed debt investors, and academics.

Mar. 6, 2014 – HAMBURG, Germany — The TMS aims to combine all of the research that turnaround academics have, with the experience of turnaround professionals. The Turnaround Management Society provides support to academics and professionals from all over the world and gives them access to a forum where they can exchange research information, knowledge, skills and ideas with each other. TMS also carries out research of its own and has two current projects, one involves setting standards for turnaround processes, and the other is a database containing turnaround cases and strategies.

Services from the Turnaround Management Society

The International Turnaround Management Standard (ITMS) provides industry standards for those involved in the turnaround process. These standards enable professionals to achieve sustainable turnarounds through aturnaround framework. This also contains a restructuring framework in order that any restructuring processis effective and fairly implemented. The specific turnaround and restructuring standard will include proven techniques and strategies that can be implemented during a corporate turnaround process or corporate restructuring. This includes, project management, financial engineering, change management, quality management and risk management especially when dealing with corporate failure / failing companies, etc.
The Turnaround Management Strategies Database is extremely useful as it contains data regarding previously successful turnaround strategies that can be applied to a specific type of corporate crisis situation. TMS members are able to have access to the database and receive all the information contained within it at any time.

The TMS also publishes a journal twice a year. The journal contains up-to-date information and articles regarding turnaround standards and management, and is available to all TMS members. It is also distributed to universities, private equity firms and financial institutions. The journal is also available at the TMS website.

The Turnaround Management Society runs a certification process too, which involves independently assessing the knowledge and skills of turnaround professionals. This provides professionals with accreditation over less qualified professionals, as well as assurance from their customers that they work to set standards and processes and employ best practice.

For more information on the Certified International Turnaround Manager program or the Turnaround Management Society please visit:

http://turnaround-society.com/certifications/self-study-course-packages/

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Turnaround Management Society
Saab

A short drive through the landscape of turnaround efforts conducted by Saab’s top management in order to face the challenges of a troubled economy, mysterious strategies and a secret balance sheet.

The once so proud Swedish company Saab filed for bankruptcy this month and is faced with very little support from its stakeholders. That was once different, in Saab’s early years, the automobile producer was able to gain and maintain a loyal customer base of clients looking for a car that is special, a car that one cannot see on every street corner and a car that distinguishes itself from its competitors, not only by a unique design, but also by innovation and love to detail. Originating out of a company that has produced airplanes, Saab was the only company that had a speedometer counting in 10 – 30 – 50 – 70 increments and not like every other car manufacturer in 20 – 40 – 60 – 80. Furthermore they were the first to introduce a coupé shaped car with a glass hedge. The Saab 99 and its successor the 900 model turned into icons of the automobile industry, starting a wave of often high priced coupés that today nearly every car company is offering.
Saab was the first to introduce headlight wipers, front seat heaters, and a car with dual brake circuits. The list of inventive contributions to the car industry is long and includes highlight such as side-collision protection in 1972 and the first turbo engine in mass market cars in 1977.
But its success is not only due to its improvements but also to its … how should I call it … “courage to be different”. In 1986 when convertibles where getting rare on the worlds’ highways, Saab introduced its own convertible and sold more than it hoped for. Saab’s customers were people that wanted a car that is different, innovative and always a bit ahead of the trend, or maybe even setting it. Driving a Saab was something special, and owning one, made one special himself.
The pioneer company that was almost a bit rebellious quickly lost its shine when General Motors (GM) took over Saab with first just 50 per cent in 1989, and later a 100 per cent in 2000 (Pander, 21.02.2009). The last own innovation of the Swedish manufacturer was the Night Panel Cockpit (a system that automatically turns off the interior lights of unimportant instruments at night, thus the driver can focus on the speedometer), which originated from the companies roots in the airplane industry.
Once GM took over power, they rationalized away every competitive advantage Saab had. Clearly not understanding Saabs customer base GM replaced the base of the once successful Saab 900 with the same base as the Opel Vectra, built in Germany (Pander, 21.02.2009). At that time Opel had a different positioning in the market and the last thing Saab customers wanted was a car that shares its base with a mass market car which is perceived as a cheap family wagon. The introduction of a V6 engine for Saab models (which rarely sold) further highlights GM’s fatal approach to produce alongside the customer’s needs and GM’s strategy to sit still without innovating. This GM strategy, which only now becomes really clear to most people, certainly arrived in Saab’s headquarters when the decision was made to produce the Saab 9-5 Model for 12 years, without major updates.
GM’s plan to profit off Saab’s special positioning and image by replacing its uniqueness with mass market parts, and saving on its independent technical and design evolution failed. The question is now, what to do with a former successful company that was led by a management that thought it could change its customers by not adapting themselves. Nobody will argue with me if I say that we need a close look into Saab’s books to make a professional decision, either to agree with the Swedish government to let Saab die, if that is its course, or if we should support Saab’s Managing Director’s turnaround plan to run Saab as an independent entity (wires, 20.02.2009).
But what we can already say is that Saab will have to engage into a strategic as well as an operational turnaround. Last year Saab sold about 94.000 cars, which is about half as much as the company could produce in its facilities in Trollhättan, Sweden.
When I go through Saab’s press releases and the media reporting on Saab’s turnaround efforts, then there are a couple things that make me worry about the success of the planned restructuring process. Haven’t we, as turnaround managers, learned that one of the first things a turnaround leader should do, is to reevaluate all operations that cost money and put on hold what is not directly related to generating income in the short term, especially as long as no turnaround plan is prepared? (Slatter & Lovett, 1999, S. 141) Also, haven’t we learned that strict cash-flow management is essential to a successful turnaround? Keeping this in mind, I am very surprised to read that Saab is continuing its operations as usual (Saab Corp., 2009), while other car companies worldwide put their production on hold. Again, we don’t have enough insight into the company’s books, but reading this I am lead to think, that Saab is still selling their cars very well in these times that are so hard for other companies to sell their cars. VW, BMW and Porsche are just some companies that have been successful in recent years, and still need to put their production on hold. Saab’s self appointed crisis management however does not see the urgency and possibility to cut at least some of its costs.
I went again through a couple of my old books and found that Slatter and Lovett told me in “Corporate Recovery” from 1999 that during the crisis stabilization phase a key area for the turnaround manager is to concentrate on the realization of obsolete and slow moving stock. (Slatter & Lovett, 1999, S. 140) Hence, to put a hold on the production, and to get rid of some stock in the meantime to free up some money, and invest it for example into the badly needed final research and development of Saab’s new products lines, does not seem to appear to Saab’s top management.
When I dug a bit deeper into my old notes, that I have taken over the last couple years, I found one thing that made me curious. A company that apparently suddenly finds itself in distress, and only now has come to realize the whole amount of dept that it has collected over the last years, should not make any long term strategic decisions before a formal turnaround plan is prepared. Even more confusion rises in my head when I read that Saab’s management decided to withdraw from its planned production of Saab’s promising 9.5 model line, in order to produce it in “high-labor-costs Sweden”. The model was supposed to be produced in collaboration with Opel. The Opel factory is unlike the Swedish one already prepared for the production. (wal/AFP/dpa, 20.02.2009) According to an Opel spokesman, they could have started the production in April 2009 (wal/AFP/dpa, 20.02.2009) which is a deadline very unlikely to be kept by the Swedish especially at such short notice and without major investments. Now the decision to move the production site two month before the planed start of the production, could have been understandable if the Swedish government would have made it a prerequisite to support Saab financially in its turnaround efforts. However, the Swedish government has always been refusing future involvement in Saab.
Again, I don’t know the real reasons behind these decisions, that are for me, as a stakeholder, so hard to understand. But wouldn’t it be clear and unbiased communication (Slatter & Lovett, 1999, S. 82) that could make a stakeholder support the restructuring process? Isn’t it also a characteristic of a distressed company to suffer from poor relations with their stakeholders? Well, I am still hoping for the best, and after all, I am just a turnaround professional that is afraid of not being able to find enough spare parts for his car in the years to come.
So, maybe Saab should try to convince me to support its turnaround strategy instead of shutting the public out. After all, if there is one thing that Slatter and Lovett did not anticipate in their market orientated thinking, and that becomes clearly obvious in these troubled times, is, that not only Joint Venture partners, stakeholders and banks are sources of short term financial support. No, the biggest source nowadays, are governments and through them, us, the taxpayers.
Christoph Lymbersky Master of Accounting, MBA,PhD-Candidate in Turnaround Management, PRINCE2™ Certified Project Manager – Practitioner, CFMP™ Certfied Financial Markets Professional – Practitioner Level
Management Laboratory Christoph Lymbersky Luetkensallee 41 22041 Hamburg Germany E-Mail: C.Lymbersky@Management-Laboratory.com
Works Cited:
Pander, J. (21.02.2009). Zu Tode angepasst. Spiegel Online.
Saab Corp. (2009, 02). Saab. Retrieved 02 2009, from Saab Press Releases:
http://www.saab.de/de/de/start#/world/news-and-events/press-releases/whats-happening/pressrelease/carrousel:all/
Slatter, S., & Lovett, D. (1999). Corporate Recovery. Washington D.C.: Beard Books.
wal/AFP/dpa. (20.02.2009). Saab zieht Produktion aus Deutschland ab. Spiegel Online.
wires, c. w. (20.02.2009). A Common Future for Saab and Opel? Spiegel Online.