I had made an attempt to write a few research papers some time back. Some were presented, published and appreciated; some didn’t either due to me not meeting the required deadlines or my boss not being interested. I take the opportunity to share some of the abstracts with my readers here.
Imagine a situation like this in a company. The creditors are absolutely restless. Cases are being filed demanding payment. The key sales manager has left. Credit cards have been cancelled. Advertisements placed months ago can’t be paid for. The accounts payable personnel can no more bear the stress of taking so many calls every day not having a new story to tell the creditors. The production department lacks raw material to produce saleable finished goods.
A lot of questions come into the mind of the company’s management. But mostly of unproductive thoughts starting from regret like why did it get into this mess, right up to thoughts of fear and shame like the company having failed everybody.
The Disaster and the Liquidation
There is a process for saving the troubled company. It starts with drawing a line between the crisis and the company’s not having liquid assets. Crisis is the result of pressure that builds on itself until it becomes anguish and explodes into uncontained anarchy.
Not having liquid assets is definitely the indication, but not the cause, of the company’s disaster. There are organizational problems within the company that have diminished its cash, with its liabilities exceeding its assets. The causes are many but most workout and turnaround specialists agree that the major reasons are as follows:
1. Managers are not prepared for the trouble.
2. They tread softly around constant worries till they become crises
3. They do not know where and how to reduce expenses and raise cash.
4. They think sales growth can cover up problems within their organizations.
5. Companies are undercapitalized.
6. They do not succeed to respond to the market by continually reviewing products or services.
7. They do not stay in contact with their customers and ask what they want.
8. Lack of talented people in the middle management.
9. Emotional involvement of the owners and managers with the company.
Earlier, these would be indications for an owner to put a company into liquidation. But with society becoming increasingly credit driven now, the modern way of dealing with crisis would be to revive the company so that creditors will receive more than what they would get in liquidation.
Today, the owner or manager of a troubled company has a number of choices to make.
The Rise in Business Collapses
Most managers know how much debt their companies can put up with and they function within their comfort zones. Businesses fail simply because their owners or managers are unprepared for crises. Fast expansion, taking on losing customers, acquisition of secondary businesses take companies to this position. They have too many things to worry about because their businesses are too complicated. Many of them no longer can locate the core – the business that they need to get back to.
The Role of the Crisis Managers
Crisis managers know to right size their companies, to get rid of secondary businesses, to operate with minimum overheads, to maximize cash and to develop multiple cash flow channels for the core product or service. They know what all to do while the company works itself out of its crisis. Success or failure in a turnaround usually is determined by how effective the crisis manager is. They are skilled at carrot-and-stick negotiating.
The Turnaround process
There are a few steps in this process. They follow each other in sequence in a systematic manner for the company to be revived.
1. Analyzing the Crisis
2. Diminishing the Crisis
3. Generating Cash
4. Preparing a Turnaround Plan
5. Negotiating the Plan
6. Executing the Plan
People who have successfully turned around Companies
There will be a discussion in this research paper of people who have successfully turned around companies in India and abroad.
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