turnaround and crisis management [kompatibilitätsmodus]

HLP entwicklungspartner GbR . Voltastraße 31 . D-60486 Frankfurt . [email protected]

Telefon: 0049(69)43 00 820-00 . Telefax: 0049(69)43 00 820-10 . www.hlp-entwicklungspartner.de

concepts and principles for successful resolution

PM Summit 2012, Clemens Frowein

Turnaround - and CrisisManagement

Turnaround and Crisis Management

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70% !

"Crisis" (Greek): 1. a stage in a sequence of event s at which the trend of all future events, especially for better or for worse, is dete rmined; turning point. 2. a condition of instability or danger, as in social, economic, poli tical, or international affairs, leading to

a decisive change. 3. a dramatic emotional or circu mstantial upheaval in a person's life. 4. the point in a play or story at which host ile elements are most tensely opposed

to each other.

In Chinese, to set the font symbol for crisis toget her from 2 characters:"Danger" and "opportunity"

Crisis is a subjective state after a suddenly occur ring, life-changing event that, where affected humans often are (temporarily) overwhelmed with the resolution.


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Liquidity problems

Decrease in sales

Endangered equity

Uncompetitive cost base

Strategic reorientation

Drop in prices

Negative earnings

Earnings lower than target

73,9%

69,6%

65,2%

60,9%

56,5%

43,5%

43,5%

8,7%

Roland Berger Study, 2006

Most common causes for corporate crisis


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Sco

pe fo

r Act

ion

Small

Large

Nee

d fo

r Act

ion

Large

Small

Urgency

Time

STRATEGIC

CRISIS

EARNINGS

CRISIS

LIQUIDITY

CRISIS

INSOLVENCY

Dynamic and logic of corporate crisis


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How to tackle the challenge: The turnaround resolut ion cycle

Get in crisis state

Root-causeunderstanding

Phase 1the tough cuts

first Phase 2new capacity

building

Learning & moving

Turnaround Turnaround Turnaround Turnaround Resolution Resolution Resolution Resolution

CycleCycleCycleCycle


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Structural change, e.g. due to� Globalization� Integration� Technology leaps� Shareholder value orientation

Cyclical problems� Drop in demand� Change in the dynamics of

competition� Sales channel switch

Unpredictable changes to themarket/competitive framework� Drop in public-sector demand � Ban on certain products

� Management problems� Ignoring the signs of crisis� Lack of ability to act� Wrong HR policy

� Wrong focus: on sales rather than profit

� Growth trap or overambitious cost saving efforts

� Increasing complexity of the product portfolio, regions, and customer segments

� Insufficient transparency for corporate control

External causes of crisis Internal causes of crisis

Root cause unterstanding: External and internal cau ses


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� Problems are so different and situations so complex, there can be no universal remedies for corporate crisis.

� Knowing the strategic and operative causes is key to success and the basis for effective counter-action.

� Major decisions of the diagnosis must be made under extreme time pressure.

� Management must be self-critical and open-minded: in the final analysis, most corporate crises are down the management mistakes.

� The diagnosis is the success critical – all interventions build upon

Root cause unterstanding: Challenges of diagnosis


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Financials Operations Strategy

Revenue and cost� Revenue, cost and profits by

products, markets, customers� Benchmarking by cost type

(material, operation, overhead)� Main causes of losses/risks

Cash flow� Monthly develop. /forecast� Accounts receivable� Inventory� Investment/divestment

Capital structure� Excessive debt/loss of equity� Hidden risks in balance sheet� Need for „fresh money“

Structures� Departments (structure/heads)� Hierarchical levels� Regional coverage� Holding structure (subsidiaries)

Key processes� Decision-making/ reporting� Value chain (in/outsourcing)� Sales/marketing efficiency� Purchasing efficiency� Production efficiency� Logistics efficiency

Management/ personnel� Qualification� Motivation

Product portfolio� Product mix� Complexity� Innovation� Pricing model

Market and customers� Market segment development� Trends & key success factors� Market access and distribution� Customer and order structure

Competitive position� Existing and potential

competition profiles� Relative positioning (market

share, success factors)

1 2 3

Root cause unterstanding: Diagnosis in three areas


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Liquidity

� Reduce investments to absolute minimum(only essential repairs/replacements)

� Reduce inventories- Lower safety stocks- Dispose of slow movers- Increase quality in delivery

� Reduce accounts receivable- Intensify claim management- Speed up settlement- Push for faster payment terms or

advance payments

� Sell fixed assets- Real estate- Machinery- Holdings

Profitability

� Sales up- Increase prices where possible- Focus sales efforts on customers- Speed up new product launches

� Reduce procurement costs- Lower material/service standard- Negotiate with suppliers- Change suppliers

� Reduce personnel costs- Layoffs/part-time employment- Reduce/waive salary- Stop employment- Reduce overtime

� Reduce overhead costs- Cut travel budgets- Reduce perks- Negotiate interest relief

Survive & Regain Value

1. Phase of the program : The „tough cuts“


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� Restructure weak setup’s

� Reduce complexity costs- Eliminate unprofitable products- Reduce no. of product

variants- Introduce a modular system

� Reorganize Processes

� Involve employees

� Identify extra sales and earnings potential- Focus on quality of

customer handling- Enter complementary

markets

� Choose unusual market entry or exit strategy

� Focus on the profitable elements of the value chain

� Develop a business model that creates value

� Optimize business units/ jettison non-core business segments

Organization Target markets Business model

2. Phase new capabilities: The path back to value


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Use the ep Transformation Canvas: Change is critical

ep Transformation ep Transformation ep Transformation ep Transformation CanvasCanvasCanvasCanvas


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1. MANAGEMENT COMMITMENT & LEADERSHIPThe most important success factor in restructuring – implementation has room for improvement

2. HOLISTIC CONCEPT – Strategic, Operational and FinancialVery important (P&L, balance sheet, cashflow, strategy, systems) – implementation has improvement potential

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QUICK IMPLEMENTATION – Speed is of essenceRated as very important; but low rate of early warning systems implementation

Critical success factors of turnaround management

3.

TRANSFORMATION MANAGEMENT – without Change no results Create the energy and build new capabilities with involvement and up-skilling


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Überblick: Experten in Reorganisation / Turnaround

Clemens Frowein

Studium des Wirtschaftingenieur-wesens und der Betriebswirtschaft anden Universitäten TH Darmstadt und JWG Frankfurt / Main. Assistent desVorstands bei einem führenden Systemhaus.

Von 2004 bis 2010 war er Gesellschafter bei HLP Hirzel Leder & Partner,seit 2011 Partner bei HLP entwicklungspartner GbR.

Clemens Frowein berät mit den Schwerpunkten Unternehmens- und Geschäftsfeld-strategie, Innovationsmanagement, Projektmanagement und Organisationsentwicklung. Nach Branchen liegen die Erfahrungen in der Konsumgüterbranche, Chemische Industrie, Dienstleistungsbereich, bei ITC Diensten und auch im landwirtschaftlichen Bereich. Er unterstützt Unternehmen in der Orientierung, der Geschäfts- und Organisations-entwicklung, wobei in besonderer Weise „harte“ Faktoren (Geschäftslogik) kombiniert mit „weichen“ Faktoren (Dynamik der Menschen und Organisation) in den Blick genommen werden. Veröffentlichung zahlreicher Artikeln und Beiträgen sowie Vorträge zu den Themen Strategie und Innovation.

HLP entwicklungspartner GbR . Voltastraße 31 . D-60486 Frankfurt . [email protected]

Telefon: 0049(69)43 00 820-00 . Telefax: 0049(69)43 00 820-10 . www.hlp-entwicklungspartner.de

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