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Corporate Recovery: Managing Companies in Distress
Written by:
Stuart Slatter
David Lovett
(Beard Books, 2004)
In Corporate Recovery: Managing Companies in Distress, authors Stuart Slatter and David Lovett, drawing upon decades of experience in Great Britain and abroad,1 sketch a roadmap for the successful rehabilitation of companies in "turnaround situations." As defined by the authors, a turnaround situation presents itself whenever a firm's "financial performance indicates that [it] will fail in the foreseeable future unless short-term corrective action is taken."2 This definition is broad enough to include firms that do not have a current cash crisis, which is appropriate because firms often exhibit symptoms of failure long before any crisis begins:
Such firms are often stagnant businesses with underutilized assets and ineffective management. Many such firms have survived over the years in spite of their poor management. If a stagnant business is not turned around, a crisis situation will eventually ensue because the management is unlikely to be taking the necessary steps to adapt to the changing productmarket environment in which the firm is operating... By adopting turnaround strategies early enough, recovery can take place without the traumas usually associated with a turnaround situation... If no corrective management action is taken in a turnaround situation, the firm becomes insolvent, since external events can only postpone insolvency, not avert it.1
Because a turnaround situation may present itself at almost any stage of the corporate life cycle (excepting the startup and early-growth stages), the authors note, the book should be of as much interest to the everyday manger as to the turnaround professional. After all, "turnaround management is everyday management."4
The authors seek to dispel the myth, often fueled by the media, that the turnaround manager is "some sort of corporate commando on a 'seek-anddestroy' mission" to achieve short-term cost reduction.5 To respond meaningfully to a turnaround situation, the authors argue, management must adopt a "holistic" strategy that looks beyond mere short-term crisis stabilization and toward long-term strategic change that will harness the firm's sources of competitive advantage with a view toward future growth -i.e., sustainable recovery. The key elements of such a strategy, though they may differ in their particulars, are in essence the same for every firm in every industry, namely: (1) crisis stabilization,...