A successful turnaround campaign involves much more than merely increasing sales, eliminating inefficiencies or restructuring operations or debts. And yet it's important to keep things simple in a distressed scenario. Often what's needed may be summed up in a single statement:

The company must take affirmative steps to avoid doing the wrong things (question of strategy) in order to set free the resources, the energy and the vision necessary to do the right things well (question of tactics).

Once the productive forces in an organization have been set free from the constraints that invariably have accrued from a past of neglect or unintended consequences, the positive effect can be dramatic. With this deceptively simple notion in mind, we have prepared this overview to illustrate how a turnaround works. It helps to first understand the Common Traits of Financial Distress, which in turn serves as a conceptual foundation for our structured process. We call it:

Anatomy of a Turnaround

CCo originally developed the following step-by-step process as a tool for coordination and communication among the key members of a turnaround team. Since then, it has served as a roadmap for several successful turnaround campaigns, providing leadership assistance for a variety of troubled businesses.

1. Initial Assessment. The first step is a blunt analysis of the company's business model, assumptions underlying it, current conditions, and top management's effectiveness. An IA defines the problems and serves as a benchmark for future corrective action. The primary goals of this phase are to determine whether management is able to articulate a clear, well-conceived business strategy that works for the company on a regular basis, and to answer the threshold question: Can the company survive? This step typically takes two to four weeks.
2. Planning. If the threshold analysis concludes that the company has a fighting chance for survival, develop a detailed corrective action plan based on the IA findings and form a turnaround team to oversee its implementation. Keep plans simple to establish a clear sense of direction and begin to restore confidence in leadership. This step typically takes one to three months.
3. Execution. This phase employs two distinct concepts each focused on regaining internal control:
   1. Divide-and-Conquer, accomplished by outsourcing extraordinary problem resolution so management can concentrate on controlling ordinary ongoing operations. The goal is to restore internal confidence by overcoming the critical shortage of management's time and assuring that things don't get worse;
   2. Before-and-After, meaning that the bottom line must be sacrificed to improve the company's cash position (the "before") in order to reach the targets established during the planning phase (the "after"). This allows the company to walk a tightrope from short-term survival to long-term viability without reaching the tipping point, by overcoming the other critical shortage (cash).

   Careful execution is always the key to an effective turnaround campaign. Overall this step typically takes at least 12 months.

4. Stabilization. This phase demonstrates that progress must be steady and sustainable. The primary goal is to restore confidence of external stakeholders, which means that internal stakeholders shouldn't attempt to undertake growth strategies before stability has been established. A turnaround takes time, and bankers won't believe it until they've seen it twice. This step typically takes one to two years.
5. Fresh Start. This phase recognizes that money follows solutions. A turnaround is about retrenchment, not growth, because it's hard for a business to grow its way out of trouble. Once the turnaround is complete and confidence is restored internally and externally, revisit business strategy based on lessons learned from the past. This step is typically reached after about two years.