THE TURNAROUND

PROCESS
Shubham Agarwal
Decision
Effective Improvement of the situation
Ineffective Worsening of the situation (Dissolving of company)
4 types of turnaround processes(Khandwalla):
Surgical-reconstructive
Surgical-innovative
Non-surgical-innovative
Non-surgical-transformational
Two strategic options(Robbins and Pearce):
Efficiency driven with belt tightening and streamlining of operations
Competitive strategy oriented with changes in technology, products or markets
Major turnaround actions:
Change in leadership
Forming the team at the top
Change in strategy
Retrenchment of assets and people
Upgrading technology
Financial restructuring
Organizational change
Support of the parent company
1. Change in leadership
Organizational decline causes loss of credibility at the top Difficult to ensure discipline
To eliminate escalated commitment
However, if decline is due to regular economic cycle, retaining the head might boost the
confindence
2. Forming the Team at the top
During decline, many leave organization Reason: Compensation issues
Solutions: Hire retired senior managers / managers on deputation from parent company /
get managers from outside banking on reputation of parent company
3. Change in Strategy
Identification of problems by conducting series of meetings with managers
Solutions:
Change in product domain scooters to bikes
Diversification is less effective
Shrinking operations concentrating on most important segment
4. Retrenchment of Assets and People
Many companies suffer from cash flows
Caution: Making employees to leave with dignity/helping them find jobs/avoiding
appearance of inequities in layoff process
VRS or redeployment & training
5. Upgrading technology
Though involves huge initial investment, can be cost saving in the long term
6. Financial restructuring
Help from banks, financial institutions or parent company
7. Organizational change
Reallocation of people and structural changes
8. Explicit support of parent company
Softens the hostility of stakeholders and dilutes employee fears
ACTION CHOICE : Framework of Organizational Decline and Turnaround Management
In crisis situation, decline can happen due to
inaction or faulty action.
Faulty action can be a genuine mistake or
intentional
Genuine errors can be avoided by adopting
multiple mechanisms like environment scanning,
competitive profiling and strategic action
choice making.

Action choice making is promoted by reward
mechanisms, team-based decision making,
auditing and corporate governance. Agency
theory also helps
Decline in
crisis
situation
Inaction
Faulty
action
Intentional
due to
managers
subjective
reasons
Genuine
mistake
Environment
scanning
Competitive
profiling
Strategic
action choice
making
Reward
mechanism
Team-based
decision
making
Corporate
governance
Agency
theory
Influencers of action choice
Environmental factors
Instability - Can be
recovered by
changing product-
market domain as per
changes in the
environment
Stakeholders response
(hostility)
Extent of decline
determines degree of
hostility
Change in leadership
establishes credibility
to all the stakeholders
When people leave,
parting ceremonies
can be conducted for
member motivation,
information
dissemination, external
stakeholder
acceptance,
impression
management and
guilt management
Performance Decline (
Severity or Longevity)
In severe situation,
management is more
likely to act (no action,
closure or turn around)
Longevity of the
decline is more
positively associated
with action (closure or
turn around)
Organizational factors:
Government owned
organizations (esp. in
developing countries)
prone to inaction
Private conglomerate
immediate action (so
that it doesnt affect
other relevant entities)
Private organization
delay in action
Equity holding
companies push for
action
Highly formalized and
documented system
reduced willingness to
take risk
Relation between
union and
management good
better chances of
revival