During the annual conference of the Turnaround Management Association (TMA) which was held the last week in October, I attended two sessions about “turnarounds” and was truly taken aback by what I heard.
An underlying theme, articulated by panelists in both sessions was, “We’ve been focusing on fixing the balance sheet. Now we need to learn how to fix the income statement.” Really? What have these people been doing? And does this explain why TMA sessions and publications in recent years have focused on “restructuring” instead of “turnarounds?” (My article which was attached to my last blog post explores this topic.)
Fixing the balance sheet is relatively easy: collecting receivables, reducing inventory, selling unneeded assets, renegotiating debt. Fixing operations is generally more difficult and, in many respects, requires a different skill set. For companies to survive over the longer term, they need to have carefully conceived plans, the right people in place, and effective management control systems. In addition, they must deliver their products and services in ways that are both cost-effective and customer-centric. To me, ensuring that those pieces are in place is a vital role of the turnaround expert. Evidently, not everyone agrees with my view.
To me, the word “turnaround” means fixing the balance sheet AND fixing operations. What does it mean to you?