The Key To Successful Corporate Turnaround Is Early Detection
By Mike Teng
Most diseases including cancer and heart problems are easier to cure if detected early. Similarly, most sick companies can be turned around if the problems are discovered early. Sick companies need to be placed urgently into the intensive care units as the normal treatment regime is ineffective.
Unfortunately, owing to denial, ego or pure ignorance, many sick companies do not seek help till it is very late. Troubled businesses usually try to conceal their problems from others for obvious reasons: the creditors may stop their loans, suppliers may stop supplies, employees may jump ship etc. However, like sick people, sick company need to seek urgent help. They need to engage specialists to facilitate the restructuring programmes and to face the new harsh realities before it is too late.
Much like human health, more businesses are also destroyed by neglect than any other causes. This is why regular health check is vital to prevent any unexpected health problems, detect them early so that appropriate remedies can be administered. The traditional accounting methods such as balance sheets and profit and loss statements only capture the measurable financial aspects of the company at a certain point in time. Furthermore, the real financial health of the company can be masked by deliberate accounting irregularities as in cases at Enron and Worldcom.
By the time the sickness is visibly evident in the company's accounts, it may already be too late to take corrective action to reverse the situation. Oftentimes, when the accounts show red, the company is extremely sick or suffering from haemorrhage. There are many other non-quantifiable financial factors that may impinge upon the health of the company. These may include high staff attrition, low morale or an incompetent CEO.Usually, there are ample warning signs or symptoms of impending trouble.
However, these warning signals are often ignored or suppressed; hence the onset of a crisis comes as a surprise. Thus corporate turnaround, change management or restructuring program is needed to be executed.
Early detection of business problems is vital to sustaining a company's growth, manage the crisis effectively and to contain the economic distress as well as launch a successful corporate turnaround.
Business problems rarely occur suddenly. Most problems develop over a long period of time due to a series of financial, legal, operational and strategic errors or miscalculations that went largely ignored or undetected by management.
Some obvious examples that a company is heading down the wrong course include persistent operating losses, high key staff attrition, loss of morale and market share.
It is important to pre-empt any problems from arising by looking out for warning signals. Therefore, a proverb that says: "The superior doctor prevents sickness. The mediocre doctor attends to impending sickness. The inferior doctor treats the actual sickness." Similarly, early diagnosis and intervention are necessary for corporate turnaround.
About the author
Dr Mike Teng (DBA, MBA, BEng) is the author of best-selling book, "Corporate Turnaround: Nursing a Sick Company back to Health." He is known as the "Turnaround CEO in Asia" by the media.
http://www.corporateturnaroundexpert.com
http://www.corporateturnaroundcentre.com from http://www.FreeArticlesAndContent.com
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