In a previous post, HERE, we linked to an article on tips for a successful business turnaround.

One of the reasons we liked the article is point number 2:

“Ineffective management teams often say they need greater funding to correct the sagging business, but throwing money at a problem does not work. Those who created the problem in the first place will not know how to fix it, so providing them greater resources is a mistake: it wastes money and degrades employee morale.”

Well said.

Every troubled business is troubled because existing management was ineffective.  This is not necessarily an indictment of the individual people but, rather, the team and the circumstance.

The causes of management’s ineffectiveness are always unique and complicated.  Perhaps existing management focused on a flawed strategy; poorly executed because of inexperience or insufficient competence; or, simply bet the farm and lost.  Regardless, the business would not be troubled if its management had developed and executed a winning strategy.

Yet every management sponsored turnaround plan we have ever seen essentially boils down to: i) tweaking the existing business plan; and, ii) getting more money.

A successful turnaround requires fresh thinking.  This is one of the important reasons why troubled companies and their stakeholders hire firms such as Range Corporate Advisors to provide advice and manage the turnaround process.

Money is never the only answer.  Shareholders, Directors, Stakeholders and their professionals should accept that existing management has failed.  They should independently review historical financial trends to find out what has gone wrong. They should independently develop a new business strategy based on facts.  They should augment or replace some or all of existing management to execute the new plan.

Existing management is too vested in their mistakes to see the answer.

Posted by Scott Sinclair

Range Corporate Advisors provides multidisciplinary solutions to medium and small businesses requiring transitional, transactional or management assistance.