Diagnosing an ailing company for a turnaround

To rescue poor performing companies, some corrective measures should be done at an early stage instead of waiting until it becomes too late or costs too much to get them back to normal. For example, when a company needs to fix negative performance, laying-off employees usually becomes one of the preferred alternatives for cost cutting. 

It is necessary for responsible people to be able to identify the need to rejuvenate the company at the right time. But how do you know when the company needs urgent turnaround treatment? The following are some signs to be considered.

Sudden significant sales drop for a period of time: When there is a big drop in sales revenue for a continued period of time, it is worth investigating the real causes. When the whole market declines, a company’s sales may proportionately decline while still maintaining its market share rank. However, once the drop is too much, this may show some serious hidden problem(s) which pose a danger to the future of the company.

Increasing unhappy and low-morale employees: It is important for the management to understand the level of satisfaction of employees at work. An increasing number of complaints at a workplace can be a bad sign that could relate to the performance of individuals and the total company. A higher attrition rate compared to the past needs attention from the management to find the real causes. Exit interviews may need to be performed for leaving employees to uncover the real reasons. 

High risk-taking on investments: Normally capital investment involves a lot of money and needs to be studied extensively before a decision can be made to ensure a project will give the expected return to the company. When most of the approved projects are made at a high level of risk, it is a bad sign for the company and the whole business may be at risk. It is time for the management to rethink carefully before it falls into a high debt or a high-loss situation. 

 No new innovation for a long period of time: In a market with many players, it is necessary for a company to maintain its growth rate by introducing new products or services. However, if a company depends on the same products for a long time, it can endanger the future stability of the revenue stream, especially when the competition is higher. Without timely innovation, the company’s future may be considered at risk. 

Businesses are looking for ways to maintain competitiveness and sustain operations successfully in the long term. It is advisable for the management to perform a self-evaluation of the corporate health. Once some unfavourable signs are detected, appropriate counter-measures should be proposed to tackle the issues before it is too late. It is less costly to deal with a problem at an early stage, and could prevent a company from unnecessary collapse. 

 

Dr Yanyong Thammatucharee is Head of International Finance and Operation at Central Marketing Group. He can be reached at [email protected]