WHEN a company goes into crisis, the first and most typical response is dismissing employees, even before considering other measures that can be taken. It should be known that downsizing is not the only possibility to ending corporate crisis. Economic shifts in today’s business world are occurring with greater frequency and that is affecting organisations undesirably. With this being the case, many companies might quickly see themselves facing a possible company crisis. As an alternative response to the times of crisis, coming up with turnaround strategies can be the panacea as it enhances a firm’s chances of ending the threat and achieving sustainable performance recovery.
The need for a turnaround strategy arises because of the changes in the external environment, for example the change in government policies, saturated demand for the product or service, unforeseen threats from the substitute products, changes in the tastes and preferences of the customers, among others is key. When organisations enter the state of declining, there will be declining market share, negative profit, falling gross and net margins increasing cost and declining performance. The solution to all that is cutting costs and unnecessary expenses to reverse poor performance and try to maintain or achieve a specific level of profitability.
To me, turnaround strategy simply means “turning around” from the decision wrongly made earlier and transforming from a loss-making company to a profit-making company. It tries to reverse the position from declining sales to increasing sales, from weakness to strength and from an instability to stability company. Every business around the world needs a combination of several factors and ingredients to come out of crisis and be counted under successful companies. Against a backdrop of continued weak economic conditions and with many firms experiencing declining financial performance to be discussed below are turnaround strategies that can help companies out of a crisis.
Predicting and preventing crisis
The first step in a crisis turnaround is predicting and recognising the crisis. If sales are dropping, there may be a crisis related to pricing, quality, or satisfaction. What it means is that you can recognise the signs and develop crises management plans. Prevention during the early detection phase of a crisis is very crucial and achievable, by the unanimous effort from employees and management in coming up with solutions.
Cost cutting simply refers to measures implemented by a company to reduce its expenses and improve profitability and is normally used when the company is relatively close to its break-even point. This strategy is implemented with the goal of improving the business via decreasing all the unnecessary costs that can be decreased or fully avoided. There are quite a number of ways that can be done to cut costs and these are through decreasing salaries, decreasing the number of employees, decreasing marketing costs, closure of unnecessary branches or outlets, substituting suppliers by cheaper ones and eliminating non-profitable activities.
Adopt revenue-increasing strategies
A revenue strategy is a plan that focuses on increasing company income by maximising both short- and long-term sales potential. There are many options available in achieving higher sales revenue and these include introducing new products, improving features of existing products by bundling products, running promotions to increase sales and introducing additional services to the customers. All that is done with the goal of increasing money inflows in the short run, but also helps the company out of crisis. In actual fact, to grow revenue in times of crises organisations should look at these key elements, which are strategy, structure, people and process and ask themselves how well they are doing across each.
Process and product improvements
In times of crisis, businesses should focus on trying to improve its processes so they become effective and efficient. For any company to see positive growth and profit, the business processes it should come up with have to be effective and efficient. During the time of crisis, it should be the onus of the management and the board to redesign process or improve the processes as well as improving the products. Without regular improvements and innovation of products and services, customers soon tend to lose interest, and this could be the reason for your collapse. In other words, when re-designing products to enable the company to come out of a crisis ,make sure you are offering your consumers something that they cannot find anywhere else.
Employee retention strategies
A turnaround strategy is also a real opportunity to find the next level of talent in your organisation. Normally, during a corporate turnaround, you cannot ignore the people because it is the employees who run a business and no matter your strategy. During this time, there are a rare types of employees that organisations should look at and these are those that have the institutional knowledge. It should be noted that these may not be your top performers, but they know all the ins and outs of the company to an extend that they will remain with the company even in crisis.
Contain your crisis and don’t let the company go into panic mode
It is imperative for management in organisations under crises to make sure that their employees do not go under panic mode during a crisis as this can affect productivity and performance. During this time, everyone should refrain from blaming others. If there is a blame game with others, then there will be no chance to correct your shortcomings.
While not all companies can return from a crisis, most can be saved with the right strategy and people working together. It should also be noted that successful turnaround and crisis solutions do not occur spontaneously, they are triggered by corporate management, its creativity and courage to implement radical changes. If you really want to learn about strategising and deciding so that your business will not sink, chess is the game to play as it helps you to make radical, but beneficial decisions as well as being proactive in everything.