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Outline what you understand as "the process of turnaround" from their comments and indicate the issues you see as critical to a successful recovery for an enterprise (Slatter and Lovett, "Corporate Turnaround").


Slatter and Lovett in their book 'Corporate Turnaround' indicated that good leadership, improved stakeholder management, and the development and implementation of a recovery/business plan were the critical factors in a successful turnaround.

Outline what you understand as "the process of turnaround" from their comments and indicate the issues you see as critical to a successful recovery for an enterprise.

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The critical factors for the successful turnaround of a failing company are threefold: good leadership, support from the stakeholders in the company and a cohesive business plan. These are essentially the ingredients of good management and should always apply to the running of any organisation. It can be argued that a strong management team (and good leadership) can make a mediocre (failing) company succeed, but a mediocre (failing) management team will almost certainly ensure company failure. In their book "Corporate Turnaround" (Slatter & Lovett) present seven essential ingredients for a successful turnaround plan. All seven ingredients are encompassed by the three critical success factors outlined above. We will now go on to look at 'the process of turnaround' and assess what issues are critical to the recovery of an enterprise.

The process of turnaround depends on the development of a recovery strategy and its effective implementation. The recovery plan must address the fundamental problems of the organisation, tackle the underlying causes of those problems "and be broad and deep enough in scope to resolve all of the key issues ." It is essential that the recovery be built on a straightforward, sensible, robust plan and that any problems the organisation has are prioritised with the most critical being tackled first.

Turnaround management requires radical rather than incremental change. The essential ingredients of such a turnaround plan (as suggested by Slatter & Lovett) include:
1. Crisis stabilisation
2. Leadership
3. Stakeholder support
4. Strategic focus
5. Organisational change
6. Critical Process improvement
7. Financial restructuring

For the first ingredient of the plan to be effectively implemented it is essential that management control is regained and that the short-term positive cash situation is maximised. Aggressive and immediate cash management is essential if the business is to avoid running out of cash in the short-term. Successful achievement of this then provides an opportunity for the development of the turnaround plan and also provides a crucial 'time-window' for its implementation. At this stage the generation of short-term cash becomes increasingly important. In addition, it is crucial to rebuild stakeholders' confidence. Failure to do so could rapidly lead to a company failure situation as stakeholders could potentially remove their stake if they are not informed and encouraged to stay with the company. Regular progress reports indicating that targets are being achieved are essential if stakeholders confidence is to be improved. This requires that the turnaround manager create predictability in the operations of the business and that this is clearly communicated to the stakeholders. Regaining management control will require further tough decisions and decisive action to be taken: liquidating excess assets, extending credit arrangements and tightening 'debtors days to payment' together with postponing any significant capital expenditure. These will all act as short-term cash generators and aid in the crisis stabilisation process.

In order to successfully stabilise the crisis the company needs good leadership and good management practice from the turnaround manager. It follows then, that the turnaround manager must rebuild ...

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