International Turnaround Management: From Crisis To Revival And Long-term Profitability (macmillan Business)

The role of a turnaround manager is to save companies from a seriously unprofitable situation. This may follow a merger, take-over, restructure or as a result of adverse market conditions or mismanagement. A "first class" turnaround manager is more than a short-term "company doctor", he or she redefines the company's business mission and restructures it for long-term survival. This book shows how to do this. It includes practical advice from experienced turnaround managers, real life examples of best practice and an objective guide to the principles involved in this increasingly important role. Cover......Page 1 Contents......Page 8 Preface......Page 20 Acknowledgements......Page 24 Part I: On the Driving Range: Principles and Techniques......Page 26 1.1 What is 'turnaround management'?......Page 28 1.2 Turnaround-like activities triggered by acquisitions, mergers and privatizations......Page 31 1.3 Domestic turnarounds versus international turnarounds......Page 32 1.4 Main thrust and boundaries of this book......Page 39 1.5 The book's primary target groups......Page 40 1.6 Painting the turnaround stage: 22 common symptoms......Page 41 1.7 Preventive medicine, radical surgery or voluntary death......Page 46 1.8 Desirable changes indicated by the listed symptoms......Page 48 1.9 The disposition: two main parts, fourteen chapters of which six represent in-depth cases......Page 52 2.1 Purpose of chapter......Page 57 2.2.2 When there is simply no time for extensive homework......Page 59 2.2.3 Asset disposal to raise cash......Page 61 2.2.4 Summary as to urgency......Page 62 2.3 The unprofitable subsidiary (with headquarters functioning as the rather friendly and patient banker)......Page 63 2.4.1 Cost cutting is not the only way to improved profits......Page 65 2.4.3 'One Step Up' – a new profit improvement method......Page 66 2.4.4 Where to place the emphasis......Page 69 2.5 The leadership difference......Page 70 2.6 The importance of the country in which the turnaround takes place......Page 74 3.1 Purpose of chapter......Page 79 3.2 Discussions before accepting the turnaround assignment......Page 80 3.3 'Homework' before arriving on company premises......Page 82 3.5 Four types of cash-flow calculation......Page 85 3.6 Taking charge and confronting the troops while sending symbolic signals......Page 87 3.7 Establishing a tighter set of cost and payment controls......Page 90 3.8 Liquidifying the balance sheet, also by asset sales......Page 92 3.10 Defining the Business Mission and the Blueprint for the Future Company......Page 93 3.11 Gaining acceptance and formal approval of the turnaround plan......Page 95 3.12 Implementing the plan with ruthless determination......Page 96 3.13 Chronology of actions and the overall time-frame......Page 98 3.14 Chapter summary and the links to subsequent chapters......Page 101 4.1 Top priority: cash, manpower reduction or profit improvement?......Page 104 4.2 Selling different kinds of assets on a fire sale basis......Page 107 4.3 The selling of a complete SBU......Page 109 4.4 Five examples of activities spun off in major turnaround situations......Page 113 4.5 The 'selling' of Societe Generate de Belgique, Belgium's largest industrial holding......Page 115 4.6 Freeing up cash tied up in receivables overdue......Page 118 4.7.1 Cash tied up in purchased goods or WIP......Page 121 4.7.2 Cash through improved inventory turns of finished goods......Page 122 4.7.3 Other positive spin-offs from bringing down inventory levels......Page 123 4.8 Stretching vendor credits, whenever possible......Page 124 4.9 Freeing up cash by renegotiation of loans and repayment schemes......Page 125 4.10 Quantifying the cash needs and the urgency......Page 126 4.11 Creditors watching the debt ratio and coverage ratio......Page 131 5.1 Purpose, contents and structure of this chapter......Page 133 5.2 Meaning and function of the Blueprint for the Future Company......Page 134 5.3 Blueprint compared to Business Mission, and other terms and concepts......Page 136 5.4 Current status, key trends and benchmarked goals......Page 140 5.5 Four more aspects of the Blueprint, needing a reality check......Page 143 5.6.1 The relation between productivity and value......Page 146 5.6.2 Productivity benchmarking......Page 148 5.6.3 Examples of profitability benchmarks for selected industries......Page 151 5.6.4 Value benchmarking: two real-life examples......Page 155 5.7 Cross-border 'value' benchmarking to aid the choice of strategy......Page 156 5.8 'Distinctiveness', seen as an alternative to ruthless cost-cutting or lower unit costs through acquisition of more critical mass......Page 158 5.9 More on 'cost leadership' versus 'superior value' companies......Page 160 5.10 How to avoid being a 'me-too', 'stuck-in-the-middle' company......Page 162 5.11 Company size and strategic emphasis......Page 164 5.12 Implementation planning, including the allocation of responsibilities......Page 166 6.1 Purpose of chapter......Page 168 6.2 'Movers and shakers', 'empty sacks' and 'snails gaining speed'......Page 170 6.3 Who to fire early on, why and how......Page 171 6.4 Early actions with high 'symbolic value'......Page 173 6.5 Building the new management team: what is meant by 'new'?......Page 175 6.6 Motivating the new management team......Page 178 6.7 Evaluating the interim management team......Page 181 Six pieces of post-merger advice......Page 183 6.9 Advice to a turnaround manager running a recently acquired company......Page 186 6.10 Enjoy the turnaround, but leave when the job is concluded!......Page 190 7.1 Purpose and contents of this chapter......Page 192 7.2 The most obvious in-house sources......Page 194 7.2.1 Internal accounting data......Page 195 7.2.2 The controller: a reliable source, or part of the problem?......Page 197 7.2.3 The business plan and other strategic documents......Page 199 7.2.4 Acting as cross-functional trail-blazer and detective......Page 201 7.3.1 One-on-one interviews......Page 202 7.3.2 Group discussions......Page 206 7.3.3 The individual assignment......Page 209 7.3.4 The group assignment......Page 210 7.3.6 Learning from 'management by walking around'......Page 211 7.4 External information sources: an introduction......Page 212 7.4.2 Purchase of existing market research studies......Page 214 7.4.3 Using charge-free Internet information versus more professional databases......Page 223 7.4.4 Market and competitive information available on CD-ROM......Page 227 7.5 Other data-gathering sources and techniques......Page 230 8.1 'Capacity demands' put on the company......Page 236 8.2 A definition of activity-based costing......Page 237 8.3 A more complex analytical model accommodating many product/market segments and multiple profit contribution levels......Page 238 8.4 Advantages of 'bottom up' costing instead of 'top down' costing......Page 245 8.5 ABC techniques applied to a national warehouse operator for metal products......Page 247 8.6 Using ABC analysis to evaluate managerial performance in a turnaround......Page 250 8.7 Application of ABC-based simulation techniques to the automotive aftermarket......Page 252 8.7.1 Piecing together an excessively fragmented cost/revenue puzzle......Page 253 8.7.2 Pinpointing and measuring 'organizational tension' within a distribution chain......Page 254 8.8 Complete computer simulation of a troubled company, all its distribution channels and product lines......Page 258 8.9 A marine satellite communication case......Page 260 8.10 Summary of the practical usefulness of ABC-related techniques......Page 262 8.11 Are ABC analyses worthwhile in a typical turnaround situation?......Page 263 8.12 Do the time pressures allow ABC studies?......Page 265 8.13 Living happily without consultants and advanced analytical techniques?......Page 266 Part II: 'Taking it to the Course': Six Complete Turnaround Cases......Page 270 List of Contents......Page 271 Introduction......Page 272 9.1 The company's development up to 1990......Page 273 9.2.1 The Orbitel debacle......Page 274 9.2.3 Friction with the part-owners of a jointly owned German sales company......Page 275 9.2.4 The 1991 situation: a summary......Page 276 9.3.2 Management and organization......Page 277 9.3.4 Market contacts and market know-how......Page 278 9.3.5 Product programme evaluation......Page 279 9.4.1 The old president's viewpoint......Page 280 9.4.3 The board's view......Page 281 9.5.3 Appointing a new head of the systems division......Page 282 9.6.1 Clarification of responsibilities and performance evaluation criteria......Page 283 9.6.3 Analysis and paralysis versus decisive actions......Page 284 9.7 Marketing and customer contacts......Page 285 9.9 More rapid decision-making......Page 286 9.10 Performance diagrams showing this turnaround's impact on sales, profits, and so on......Page 287 Notes......Page 288 List of Contents......Page 290 Background......Page 292 10.1 Industry-wide overcapacity in a not particularly price-sensitive market......Page 293 10.2 The four phases of the turnaround, using Igor Ansoff's growth matrix......Page 294 10.3.1 Step 1: 'Kill all lingering hopes'......Page 296 10.3.2 Step 2: 'Cleaning up ESAB's own act': radical changes in ESAB's production structure......Page 297 10.3.3 Step 3: 'The industrial clean-up statement'......Page 298 10.3.4 Step 4: ESAB's systematic elimination of industrial overcapacity......Page 299 10.3.5 Step 5: Rationalization of product ranges without disturbing markets......Page 300 10.3.6 Step 6: Establishing a short-term brand strategy......Page 301 10.3.7 Step 7: Establishing a medium- and long-term brand portfolio strategy......Page 302 10.3.8 Step 8: Revising the pricing strategy......Page 304 10.3.9 Step 9: Introducing a 'parallel' sales force strategy......Page 305 10.3.10 Step 10: Matching the countries, brands, product portfolios and strategies......Page 306 10.3.11 Step 11: Organizing for change......Page 307 10.3.12 Step 12: Heavier customer orientation and a new distribution structure......Page 309 10.4 Looking closer at two of the cells in Igor Ansoff's 'growth matrix'......Page 310 10.4.1 Introducing old products in new markets (1986–88)......Page 311 10.4.2 Expansion mainly based on new products sold in new markets, or new market segments (1986–90)......Page 312 10.5 On management style and the importance of the ESAB board......Page 313 Score Cards: Performance charts for this turnaround......Page 315 Notes......Page 318 List of Contents......Page 320 Introduction to the Atlas Copco Tools case......Page 321 11.2.1 The board's perception of the tools division's general viability......Page 322 11.2.3 Divisional morale and motivation......Page 323 11.2.5 Excessive cost levels......Page 324 1 1.2.6 Summary as to the root causes......Page 325 11.3.1 Appointment of a new president......Page 326 11.3.3 Clarification of the future business concept......Page 327 11.3.4 Improving the cost efficiency of the sales organization......Page 330 11.3.5 Production structure and production overcapacity......Page 331 11.3.7 Product development finally guided by profitability criteria......Page 332 11.3.8 Summary with performance graphs......Page 333 Score Cards: Performance charts for this turnaround......Page 334 List of Contents......Page 338 Introduction......Page 339 12.1.2 The managerial situation in 1984......Page 340 12.1.4 Two specific projects, two major problems......Page 341 12.2.2 Profitability measurements and allocation principles for common costs......Page 342 12.2.3 Speeding up and cost reducing the robot rig project......Page 344 12.2.4 Closing down the Cleveland (tunnel boring) unit......Page 345 12.2.5 Strategic customer satisfaction research kills misconceptions......Page 346 Note......Page 348 Score Cards: Performance charts for this turnaround......Page 349 List of Contents......Page 352 13.1 Excellent products, but unsatisfactory profits......Page 353 13.1.2 More on Almex cost levels, prices and profitability......Page 354 13.2.1 Reinforcing the sales organization......Page 355 13.2.2 The new pricing policy......Page 356 13.3 Results achieved during this turnaround......Page 357 Score Cards: Performance charts for this turnaround......Page 358 List of Contents......Page 360 Introduction......Page 361 14.1 Key stepping stones in Tarkett's development from 1900 to 1987......Page 362 14.3 The introduction of badly adapted organizational and strategic concepts......Page 365 14.4 The turbulent 1987 to 1989 years, including ownership change......Page 368 14.5 1990: The urgent need to once again find a new owner while restructuring......Page 369 14.6 1991 to 1993: An even sharper strategic focus and further divestments radically improve profits......Page 370 14.8 1997: The merger 'with Sommer introduces a French owner......Page 372 14.9 Strategic keys to success: core business concentration, internationalization, and two-way cross-border learning......Page 376 14.10 Simple top management principles might be the most useful ones......Page 377 14.11 Cross-border cultural shock sets in and the CEO leaves......Page 379 Notes......Page 384 Score Cards: Performance charts for this turnaround......Page 385 Index......Page 388 "Managers and students dealing with cross-border problems, globabilization, international mega-mergers and how to deal with the ensuing disarray, are well-advised to pick up this pace-setting turnaround book."--Professor Hans B. Thorelli, Indiana University, USA 'In a time of cross-border mega-mergers, this is a highly relevant and useful book ... The authors are to be congratulated and the readers to be enthralled.' - Bengt Karlof, Karlof Consulting, Stockholm 'This is an authoritative, well-structured and thought-provoking book providing a wealth of examples and useful advice unquestionably based on real life experience. I strongly recommend it to anyone who accepts the challenge of turning around a company.' - Tom Wachtmeister, formerly Chairman of Altas Copro Group 'A good deal of thought provoking material to be had ... for those interested in the thoughts, ideas and tips of two men who have spent a great deal of their professional lives bringing faltering companies back to profitability.' - Strategy