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A corporate turnaround strategy is a plan for those times when things aren’t going to plan. When an organization experiences financial distress, the management puts in place a strategy to get things back on track.
There are different types of turnaround strategies and each organization must choose its path based on its situation.
Let’s explore the importance of turnaround strategy.
What Is A Turnaround Strategy?
We often hear of organizations forced into deciding between remaining in business or closing. This is because they lack a turnaround strategy. Most examples of turnaround strategy have the following stages:
1. Diagnosis
An organization in financial distress must conduct a diagnosis on the current state of the business, which is the first stage of turnaround strategy development. Once it has figured out what’s wrong, it can put a stop to the parts of the process that aren’t working.
2. Strategy
With the diagnosis of the immediate problem in hand, management must dig deeper to understand what the strengths of the organization are. It’s from here that a plan can be built for future action. At the same time, it must consider any threats it hasn’t already addressed in its diagnosis.
3. Action
With the plan in place, it’s time to look at the granular detail of recovery. The action stage involves implementing strategies on a day-to-day basis so the organization can restore itself to its competitive position.
4. Reorganization
The next phase in a turnaround strategy is focused on reorganizing to make changes that will boost efficiency and productivity. Once this phase has taken place, it’s important to look for ways of increasing returns on investments through cost reductions and value additions. This will lead to greater profitability.
5. New environment
Once the organization is stable again, it can look for ways to boost competitiveness in a new environment. It must look at spreading awareness about its products and services so it can grow popularity among consumers in new markets and revitalize the business.
Performance will improve once all these stages are complete. Through periodic review and recalibration, turnaround is possible. But there are no shortcuts, and that’s the importance of turnaround strategy.
Examples Of Turnaround Strategy
There are many factors to consider for a successful turnaround strategy. A few of the common reasons for corporate failure might be market dominance by a competitor, a changing marketplace or poor marketing practices. Accordingly, there are many types of turnaround strategies. Here are two:
- Marvel, the entertainment giant best known for the Avengers franchise, was facing bankruptcy not so long ago. Through a combination of long-term and short-term moves that centered on licensing its intellectual property, Disney eventually bought it in 2009 for $4.3 billion!
- Apple might be one of the world’s largest technology corporations today, but there was a time when it was struggling to stay afloat. When founder Steve Jobs returned to the organization in 1997, it began focusing on its core strengths. Through a series of innovations such as the iMac, the iPod and iPhone, it built its business back one step at a time.
There are many examples of turnaround strategy to learn from. No success story is linear—even the biggest businesses in the world have had their share of difficulties. (ctlsites.uga.edu)
What A Leader Needs To Succeed
The skills a leader needs to implement a turnaround strategy are exceptional vision, leadership and communication skills. A leader must motivate the team by keeping promises to them and giving them the opportunity to grow even amidst the crisis. A leader’s key role is to:
- Deploy the turnaround process effectively
- Pinpoint weaknesses in the organization and take advantage of opportunities
- Consider financial viability in their strategy
- Harness the power of teamwork and effective delegation
- Stay calm and composed in communication, even when the message delivered is unpleasant
A successful turnaround usually requires the implementation of a multi-faceted plan that includes a combination of communication, staffing and structural changes. A change in management is also important because they can make or break any turnaround effort. None of this is easy.
When leaders face a crisis, they can’t take time to wonder, “which is the first stage of turnaround strategy?” They need to start strongly and lead from the front. Leading through a crisis is one of the hardest challenges a manager can face, and that’s where Harappa’s High Performing Leaders Program comes in. In this powerful blended program, managers will learn how to lead by example, delegate authority and hold employees accountable. They’ll learn how to coach and mentor teams through crises, make sure lines of communication are always open and build trust that can falter during a time of restructuring. Whether the business is going well or facing trouble, managers can step up to the challenge with Harappa’s transformative program.
Explore Harappa Diaries to learn more about topics such as What are the Steps Of Strategy Formulation, What is the Importance Of A Corporate Strategy, Components of Corporate Strategy and How to Build an effective Business Strategy that will help organizations tap into employee potential.
