The Essence Of A Turnaround

OK, we all get in trouble at one time or another, not just because of  the current financial crisis that is melting down our business community. This is a problem of greater magnitude requiring different evaluations and responses, however, the same principles remain relevant.

There are the everyday business issues that we all confront where we sometimes miss the mark, allowing our businesses to slip into a downward spiral. In these situations we require some guidelines to work ourselves back out. It can be done if we act decisively and with focus.

Here are the three rules controlling a successful turnaround:

1. Cut overhead as much as is necessary to achieve objectives (usually payroll).

2. Improve quality.

3. Manage more effectively. (Key indicators and financial reporting.)

Simple and direct, the essential elements of a successful turnaround.

To expand on these concepts…

1. Cut overhead: It’s a very natural evolution as over time you add personnel to reach goals, to clean up bottlenecks, to “do more”. However, you should be increasing productivity, not adding people. Yet, many do not do this. In a turnaround situation, you MUST reduce payroll and increase productivity. It can be done. If you cannot figure this out, get help; it’s the first and most effective adjustment you can make.

Decrease the number of employees and increase productivity, simultaneously!! Install key indicators, monitor production in every department and establish successful parameters and pay incentives for exceeding the objective. Train, train and train. It works!

2. Improve quality: This goes to the heart of what you do. If you satisfy your customer base they will return and others will follow. If you do not, you will permanently and continuously lose share of market until you have no one to sell anything to.

Simply look at the auto industry to see a perfect example of this issue play itself out.  Honda and Toyota absorb the market with quality cars while Detroit fails to deliver what the consumer wants, i.e., a quality product.

3. Manage more effectively: If you fail to manage effectively, your businesses will not survive let alone turn a profit. Track, monitor and control are the holy words of successful management. Then, train, plan and review. You must know what you are doing at all times, what you should be achieving and if you are not meeting the goal you must make the adjustments to yield the desired results.

The problems typically happens when we do not know what we must do to turn a profit and we are not monitoring our operations to make certain we are achieving the appropriate objectives, thus we have no real idea what we are doing and how to improve it if it is not working. We typically manage by intuition as opposed to the careful analysis of key indicators and financial reports. Numbers are the language of business.

Follow this simple guideline, add what is missing to support management, make the adjustments required and you will turn your business around.