You can manage projects in some tough environments – and one of the toughest is a turnaround environment. This post asks what is a turnaround strategy, outlines structured approaches to turnarounds, and reviews implementing through a focused and well-structured portfolio of programs and projects.
What Is a Turnaround Strategy?
Turnarounds are needed when an organization is under duress. The situation is deteriorating or is so dire that the organization’s very survival is at stake.
To better understand, let’s look at the idea of a turnaround vs a transformation, which is closely related. Many companies undertake a transformation to remake the company, but that may or may not mean that the company’s survival is at stake.
Here are five considerations and how they shake out related to turnaround vs transformation considerations:
- Financial crisis – requires a turnaround, probably followed by a transformation
- Threat from a disruptive competitor – requires a transformation to better to compete and avoid a turnaround later
- Growth just hits a wall – not a survival crisis, but if growth is the goal, a transformation may be needed
- Opportunity to ride a global megatrend – driven by an opportunity, not a crisis, so may require a transformation
- Systematic planning for the future – again not driven by crisis, but by alignment around opportunity
This list shows that turnarounds and transformations are closely related, but only a financial crisis is a clear turnaround situation. However, dealing with both requires similar approaches.
Transformations usually require cultural and operational alignment, which can benefit by such approaches as the McKinsey 7S Framework and the Nadler Tushman Congruence Model. Transformation is more about reorganizing for future success, whereas turnaround is about stop gap measures to effect near term change. Transformation often follows a turnaround.
Take a Close Look at the Value Chain
The need for a turnaround strategy is typically the result of something that is not working well in the value chain. It could be that a previously unique advantage has eroded. In that case, a reconfiguration of the value chain is needed in order to regain a unique position.
The following is one approach for taking a fresh look at the value chain when faced with a turnaround.
- Immediate efficiencies needed – What are the benchmarks in the industry? Is there a need for any upgrades?
- Reworking – Do some processes need to be reworked? Do less, or do more?
- Segment into major program areas – Once areas for change are identified, they need to be organized around broad programs to implement them. Most important is to set SMART criteria goals for each change.
- Prioritize and create high level timeline for programs – In turnaround situations, quick results are needed. Use 80:20 thinking to prioritize at the program level.
- Create and prioritize projects within programs – Use 80:20 thinking again to prioritize the projects within the programs to get the most rapid results.
What you look at for a turnaround vs a transformation is very similar. The difference is that the tactics for a turnaround need to be the most immediate. Many initiatives required for a transformation are longer term and require patience, while turnarounds require impatience and near immediate results.
Strategic Approaches to Turnarounds
We have looked at the differences between turnarounds and transformations, and at some initial approaches to take in a turnaround situation. Now let’s turn, from a strategic perspective, to what is a good formal structure for these approaches.
The following list provides four primary turnaround strategies to consider.
- Cost efficiency – Sorting among expenses for some that add questionable value is a top priority and can bring near immediate results. Some expenses may be eliminated, and some may even be increased if they bring justifiable value.
- Asset retrenchment – Underperforming assets signal areas to be de-emphasized. They can also provide opportunities to sell and raise badly needed cash.
- Focus on core activities – Over time, the organization may have drifted in focus, adding an accumulation of activities that add little or no value. Eliminate those activities and emphasize the focus on core value-added activities.
- Change of leadership – The problem in turnaround situations is often that leaders are not adapting or are not up to the new set of tasks demanded. Changes in those situations are needed.
There certainly are other things to look at for a turnaround, but these are the primary ones. The important thing is to have some structure in order to focus efforts most efficiently. Quick results are required.
Turnaround Implications for Project Managers
Implementation is where the results will be achieved, and that means projects. Projects will be fast and furious, and will be extremely results focused.
The following are five implementation considerations that are especially important for projects in a turnaround environment.
- Criticality of timing – What results need to happen, and when? Are there short cuts to achieving partial results more quickly? Prioritize accordingly. Be realistic with stakeholders as to when results can be achieved. It is especially important to build credibility early on.
- Criticality of budget and results – What depends on this project? Is it the financial results? Improved competitiveness? Something to precede another initiative? Is there an ‘acceptable range’ for the budget and results?
- Relationship to other projects – Does the project depend on other projects? Is there a blend of results across several projects that need to be coordinated. Setting up the appropriate communication structure among the managers of these projects will be an important part of stakeholder management.
- Priority related to other projects – You need to recognize the priority of your project in this environment. Realistically, it may be less – or more – important to the turnaround that other projects. You need to carry on with this in mind, and be ready to deliver when expected within that broader prioritization scheme.
- Corresponding program initiative – What program is the project a part of? Be sure to gain that perspective up front. A turnaround situation is not ‘business as usual’, and understanding the big picture will be assumed.
Managing projects within a turnaround environment is not for the faint of heart! Some actions may seem drastic and unreasonable – and probably would be under more stable conditions. But the very nature of a turnaround situation means that conditions are not stable, and need to be stabilized. Performing near term risk management, and providing support in a stressed environment are what it is all about on such projects.
Summary and Further Information
Turnaround strategies and implementation of projects and programs within a turnaround environment are not for the faint of heart! These are difficult situations, but can be very rewarding. The following resources can help you in the journey (includes paid links).
At flevy templates and best practices, see Team turnaround strategies and M & A turnaround strategy.
I also recommend the MPMM Professional best practices and the Method123 project management templates.
2 thoughts on “What Is a Turnaround Strategy? Tough Times, Tough Projects.”
The other day, my brother talked about investing in a company and is interested in learning more about turnaround strategies since he thinks it’d be wise to be prepared for any situation. It’s interesting to know how turnarounds and transformations work close together to aid a company that’s going through a crisis, so I’ll make sure my brother gets your insight now. Thank you for the tips on handling a financial crisis with a turnaround strategy.
Good luck to you and your brother, Eli. I am glad the post provided some value.