Emphasis is on speed of change and rapid cost reduction and/or revenue generation. Managers must prioritise things that give quick and significant improvements. Although used interchangeably, restructure is different from turnaround.
Operational Turnaround The focus is on ways of improving the operation of the business and designed to halt the decline.
Strategic Turnaround The focus is on adjusting the strategic focus of the business in terms of its Product/Market profile and halt the decline.
Cost Reduction Strategies
Asset Reduction Strategies
Financial Restructuring Strategies Management and Cultural Change Strategies Revenue Increasing Strategies Product/Market Redefinition Strategies
• Restructure is a course before failure to avoid failure An unsuccessful restructure may be followed by a turnaround.
Turnaround is a course after failure
7 steps of Turnaround:
Crises Stabilization Management Changes Gaining stakeholder support Clarifying the target market Re-focusing Financial Restructuring Prioritization of critical improvement areas
Aim: Regain control over the deteriorating position
Focus: At this time focus remains Cost Reduction Revenue Increase Turnaround requires proper alignment of causes of decline and the solutions.
Changes at top level management is required
Old management may be seen as the cause of the problem by the stakeholder
Management with experience in turnaround is required
Different approaches and fresh perspectives may be brought
In a situation of turnaround it is vital that key stakeholders are kept well informed and a clear picture is sent. The main stakeholders involve employees, bank of the organisation, shareholder group Assessment of power of different stakeholder groups is of vital importance.
While turnaround it is very important to clearly segment the target market. This step gains importance due to the following reasons:
Not identifying & targeting the right target market may itself be the reason for turnaround.
Leads to revenue generation
A more focused approach from the management would lead to discontinue of products and services not suitable for the target market. This will lead to discontinue of products returning lower revenues. This will lead to utilizing opportunities more profitable.
It is the reorganizing of a business' assets and liabilities. Although companies can restructure for any reason, in most cases it is done when there are serious problems with the business, and to avoid bankruptcy liquidation. Financial restructuring would typically involve:
Changing existing capital structure
Raising additional finance
Renegotiating agreements with creditors
Managers need to identify critical improvement areas & prioritize them. They need to prioritize things that give immediate and effective improvement.
TURNAROUND OF INDIAN BANK IN 2000 Known as the queen of turnaround management, Ms Ranajana Kumar, Chairman & Managing director took a bleeding public bank out of successive losses.
Situation prior of Ms Kumar:
Losses from consecutive 8 years High NPAs Negative Capital adequacy ratio Negative net worth Non compliance with statutory requirements Low morale of employees Negative publicity due to RBI & CII reports on bank
STEPS TAKEN Management changes In 2000 Ms Ranjana Kumar assumed the post of Chairman of Indian Bank which was lying vacant for some time.
Crises Stabilization The first task she accomplished was to come up with a clear cut, detailed and comprehensive restructuring plan, covering a period of three years.
Critical Improvement Areas Focus on the average aggregate growth of deposits, advances and investments...