Eroding margins, consistently declining sales, steadily worsening earnings performance, dwindling cash flow, critical liquidity, pressure from lenders – this is how a corporate crisis often unfolds. Quick action is now required and restructuring is imperative.
Anyone who hesitates now will quickly see the end of the company. Values are destroyed, owners and employees lose their livelihoods. But what to do? The situation is new, there is a lack of experience in solving this situation, but the pressure is increasing daily. Waiting is therefore out of the question, but neither is hectic actionism.
An experienced restructurer knows how to lead a company out of this situation. He knows the key levers for recovering the company. And he knows that he must take the following principles to heart:
- Act quickly.
Every day that passes, the company loses substance and therefore room for maneuver. At the same time, however, the pressure increases. Liquidity must therefore be created above all to „keep the company afloat“ and gain time. Otherwise, there is also a risk of insolvency and criminal proceedings. - Decide consistently.
A difficult situation is not hidden from anyone. Doubts are quickly sown about the company’s ability to survive, and the urgently needed trust is gone. Those who allow themselves to be distracted have already lost. And there is plenty of disruptive fire: from employees, competitors, investors, suppliers and customers. Many decisions are made with a heavy heart and against resistance, but there is no alternative.
Consistent decisions require a concept that serves as a framework and orientation aid. Intended and achieved effects of measures must be constantly compared. Necessary adjustments and concept changes ensure the success of the restructuring, even if the framework conditions change. - Act comprehensively instead of selectively.
Those who only extinguish fires in partial areas overlook the fact that improvements in one area often come at the price of sometimes considerable disadvantages in other areas, which are not immediately apparent. At best, partial solutions will result in a flash in the pan that quickly fizzles out. Restructuring must therefore encompass all decision-making areas of the company.
Moreover, no restructuring succeeds with „the one, big shot“. Rather, restructuring success is made up of a wealth of building blocks that are coordinated with one another. - Saving and building prospects.
Restructuring always means one thing above all: saving money. However, the company’s future potential must also be recognized and developed. Purely operational restructuring runs the risk of „saving the company to death“. Only those who also keep an eye on the markets and opportunities of the future and align the company in the long term, i.e. strategically, will achieve its sustainable recovery. - With the employees instead of past them.
It is the employees who implement the measures. Instead of stoking their fears and anxieties by passing on the pressure, they need to be taken on board and committed to the tough course. This not only prevents resistance, but also leads to a new culture of change in which employees become shapers of change. Those who act correctly here will also emerge from the crisis internally stronger.
Restructuring takes between 7 and 30 months, depending on the complexity and environment. The process is divided into three phases:
- Up to four weeks for the rough concept, which essentially answers the question of whether the company is capable of being restructured,
- the development of the comprehensive detailed concept, which serves as a roadmap for implementation (approximately one to two months) and
- the actual implementation (six months to two years).
In the first phase, the focus is on stabilizing liquidity and developing a rough concept.
The first immediate measures are taken. Strategic options are also identified and roughly evaluated. Cultural characteristics of the corporate culture and values are recorded and initial internal communication activities (e.g. support at works meetings and in discussions with the works council and trade union(s)) take effect.
The focus of the second phase is the development of a detailed concept in which the possible measures are identified and their planned earnings and liquidity effect is evaluated. These calculations are incorporated into an integrated, detailed, medium- term plan of results and liquidity flows as part of the detailed concept. The coordinated implementation of all activities is also outlined. During this section, the focus of the measures taken shifts increasingly from the liquidity side to the earnings side. The corporate culture, possible fears, sensitivities and resistance are identified and countered with immediate measures.
The most difficult work is done in the implementation phase. This is where measures based on the constantly adapted and detailed concept take effect in the medium and long term. In this phase, comprehensive change management activities are used to secure and anchor the success of the implementation internally.
Throughout the entire restructuring process, it is ensured that the company’s lost trust is regained step by step through a suitable internal and external communication policy and that this is documented through concessions where possible and necessary. Furthermore, all targets and intended effects of measures are monitored for their impact, the reasons for deviations are analyzed and countermeasures are initiated (liquidity and implementation controlling).