Reversing the Slide E-Book

James B. Shein

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 582

Veröffentlichungsjahr: 2011

Beschreibung

A just-in-time guide for revamping distressed companies Drawn from the author's decades of experience advising, purchasing, and reviving distressed companies across industries, geographies, and sizes, Reversing the Slide is designed to help executives, managers, and employees revitalize downtrodden companies. It shows how to: select the tactics appropriate for each stage of distress; understand the use of entrepreneurial concepts; avoid pitfalls common to turnarounds; determine the legal, financial, strategic, and operational steps in the process; discover why the principal of "ready, fire, aim" should guide the decision-making process in situations with time pressure and significant uncertainty; and uncover the secrets of effective leadership and governance. * Contains step-by-step instructions for helping troubled organizations bounce back with vigor * Often quoted in the Wall Street Journal, the author is an authority on restructuring and downsizing * Offers a handbook for implementing a successful corporate turnaround James Shein's Reversing the Slide is full of insightful advice on what works, what does not, and why it will prove invaluable to executives, managers, and employees in helping troubled companies before it's too late.

Leseprobe

Table of Contents

Cover

Table of Contents

Halftitle page

Join Us at Josseybass.com

Title page

Copyright page

Dedication

Introduction: Conditions and Causes of Distress

Chapter One: The Phases of Decline and Early Warning Signs

The Phases of Decline

Early Warning Signs

The Turnaround at EDS

Causes and Warning Signs Under Les Alberthal

Causes and Warning Signs Under Brown

Conclusion

Chapter Two: The Turnaround Tripod

Strategic Restructuring

Operational Restructuring

Financial Restructuring

Solo Cup: A Three-Pronged Turnaround

Conclusion

Chapter Three: Leadership in a Crisis

Captains Courageous

Decisiveness: Ready, Fire, Aim!

Credibility

Communication in a Turnaround

Chainsaw Al

Board Accountability and Fiduciary Duties

Leadership Examples

Leadership in Crisis: A Case Study

Conclusion

Chapter Four: Cash Not GAAP

GAAP’s Shortcomings

The 13-Week Cash Flow Model

Constructing a 13WCFM

Conclusion

Chapter Five: Downsizing Is a Tool, Not a Goal

Business Process Reengineering

Downsizing: Pros and Cons

Short-Term Versus Long-Term Strategy

Reversal of Fortunes

Managing Morale During Layoffs

The Xerox Turnaround: Credibility Changes Everything

Conclusion

Chapter Six: The Bankruptcy Process as Sword and Shield

The U.S. Bankruptcy Code

The Absolute Priority Rule

The Bankruptcy Process

Plan Confirmation

Cleanup on Aisle 11: Winn-Dixie’s Bankruptcy Filing

Valuations Are Critical

Conclusion

Chapter Seven: Managing International Turnarounds

A Word on Fraud

Elan Corporation

Financial Issues

LEGO Group

Chapter Eight: Turnarounds at (Intentionally) Nonprofit Organizations

Nonprofit Organizations: A Brief Definition and Primer

Similarities to For-Profit Turnarounds

Turnarounds Are Similar

Unique Challenges with Nonprofit Turnarounds

Politics and Nonprofits

Nonprofit Turnarounds in Action: A Perfect Storm in the Big Easy

Chapter Nine: Turning Duds into Dreams

Why Buy a Distressed Company?

Searching

Assessing

Valuation

Structuring

Managing the Turnaround: “Uh Oh!”

Exiting

Chapter Ten: A Different Fresh Start

Acknowledgments

About the Author

Index

Reversing the Slide

Copyright © 2011 by John Wiley and Sons. All rights reserved.

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Library of Congress Cataloging-in-Publication Data

Shein, James B., 1942-

 Reversing the slide : a strategic guide to turnarounds and corporate renewal / James B. Shein. — 1st ed.

p. cm.

 Includes index.

 ISBN 978-0-470-93324-4 (hardback), 978-1-118-00845-4 (ebk), 978-1-118-00846-1 (ebk), 978-1-118-00847-8 (ebk)

 1. Corporate turnarounds—United States–Management. 2. Corporate turnarounds— United States—Case studies. 3. Working capital—United States. 4. Strategic planning– United States. I. Title.

 HD58.8.S4798 2011

 658.4’06—dc22

2010050247

Dedicated to my wonderful sons, Justin and Jered, for their encouragement, their senses of humor, and for teaching me what’s important in life

Chapter One

The Phases of Decline and Early Warning Signs

In December of 2009, six partners in the accounting firm Ernst & Young paid $8.5 million to settle long-standing charges that they failed to see problems at Bally Total Fitness. Bally had overstated its stockholders’ equity by $1.8 billion and had understated net losses in its business by approximately $100 million in each of several years. The company had recognized revenue it never actually received from initiation fees and prepaid dues. The partners were charged with failure to spot the warning signs at Bally as it slid from profitability to bankruptcy, but the firm itself paid an even higher price.

The longer such problems go unsolved, the harder it is to turn around a company. To determine the effort needed to turn around any organization, one must understand the degree of trouble and how quickly time is running out; an organizational distress curve illustrates this concept. To help determine where an organization is on the curve, there are early warning signs that signal to a board of directors, investors, and management that action is needed.

The Phases of Decline

Regardless of the cause or nature of a distressed company’s struggles, it will invariably find itself somewhere on the curve in Figure 1.1, which demonstrates how companies slide down a slippery slope through five phases: the blinded, inaction, faulty action, crisis, and dissolution phases.1 If the company cannot fix its problems in any one phase, they will eventually fall to the next one, with less time to repair the damage and greater effort required to do so.

Figure 1.1. The Phases of Organizational Distress Curve

Companies typically begin in the blinded phase. Revenues may have stagnated or even fallen off slightly, but in general, the company has not yet recognized the crisis. Management often writes off one bad quarter—or even two or more—as a blip, only too happy to assume that business will recover in the coming weeks or months. They attribute decreases in sales or profits to seasonal or cyclical variations or temporary customer fickleness, blissfully ignorant of the potentially impending catastrophe. Our examination of Electronic Data Systems in this chapter shows that EDS lay in the blinded phase for years when it overlooked the explosion in popularity of the client/server architecture that would undermine its core competency in the traditional mainframe architectures it served.

Companies in the blinded phase can languish there for months or even for years, as represented by the smooth slope of the curve there. If management fails to take corrective action, however, the company will eventually enter the inaction phase when growth continues to stagnate, competitors steal market share, or cash reserves begin to run low. The company is likely to remain fundamentally sound, and may even be profitable, but its problems have grown to the point at which they cannot be denied. Despite the clear need for action, however, companies often linger in the inaction phase, their inertial resistance to change inspiring irrational hope that things will turn around on their own. For example, Pier 1 took years to react to price competition from Wal-Mart and Target. Such managers often invoke images of past recessions weathered, crying, “This company has suffered through far worse than this,” hoping that their previous run of luck continues. The examination of the Middleby Corporation in Chapter Four will demonstrate a company in the inaction phase, as the manufacturer of diversified food equipment remained passive throughout the late 1990s despite excessive concentration of sales to a few very large customers and four years of investment in an expensive, unsuccessful product line.

Other examples of inaction include Schwinn management ignoring the growing consumer preference for lighter mountain bikes, insisting that “people want to ride bikes, not carry them.”2 IBM exhibited comparable denial, saying for years that the Internet was “a university thing.”3

Sometimes those companies do rebound, but they just as often do not, and instead slide further down the organizational distress curve into the faulty action phase. At this point, the company’s problems have grown in severity to the point that management is spurred to action, but due either to inaccurate information or incompetent leaders, these proposed remedies only make the situation worse.

It is not always easy to distinguish inaction from faulty action. A young friend and fellow turnaround professional who prided himself on fast action, once found himself on a new engagement as a chief restructuring officer (CRO) for a struggling company, and decided to take matters into his own hands. Convinced that employees at one of the plants had gotten lazy, he showed up unannounced during the night shift, determined to ferret out the malingerers. He was convinced his actions that night would solve all the company’s personnel problems.

He arrived just before the official break time and saw one young man leaning against the wall, daydreaming while everyone else worked arduously. Furious, the CRO demanded the plant manager stop all work and gather the employees together.

In his anger, he emptied his wallet, taking more than $400 in travel money and jamming it into the hands of the young man. “That,” he exclaimed, “is all you’ll get in severance pay. You wanna sue me? Go ahead! You’ll just lose all your legal bills. Get out. Now!”