Problem
The client is a British group offering training services to the corporate market. It is going through a period of severe crisis. The Italian affiliate has made losses for several years, despite their excellent reputation and market recognition. The company is oversized, costs are out of control, efficiency is poor and it is failing to promote its services adequately.
As a result, the financial situation is under stress. Before recapitalizing the affiliate, the parent company needs to know if the conditions exist for a turnaround. The president asks a manager of the Contract Manager team to carry out an audit, with a view to a possible assignment. The audit is conducted by a team of three and confirms that a turnaround is feasible.
The Solution
The contract manager is assigned to the company and appointed CEO and tasked with specific goals. The parent company is asked to cover the accumulated losses and to provide fresh capital. The company’s mission is redefined, positioning it in a specific market segment. This provides the company with a new, coherent strategy, targeting a high quality/premium price position.
The Board is reshuffled, with a reduced number of members. Personnel is downsized and new managers are appointed to take charge of the sales and marketing and administration areas. The interim manager establishes new procedures for invoicing, sales, resource planning and cost control at all levels. The administration and sales departments previously made little use of modern information systems. They are encouraged to do so with the installation of new Mac systems.
A credit management system is set up along with a budget and management accounts, in order to have a better understanding of the business situation, actual position versus objectives and foreseen results.
To bolster liquidity, it is decided to sell off bonds held by the company. New conditions are negotiated with the banks and unsecured overdraft facilities are agreed with a new bank which recognizes the validity of the turnaround project.
All outstanding debts are paid off. The financial situation is kept under control, thanks to a cash-flow budget which allows the company to monitor movements and the bank position on a daily basis. Turnover is maintained thanks to a new promotional push aided by revamped tools such as brochure, mailshots and a more aggressive approach to the market.
The range of services on offer is renewed and expanded to be more appealing to market demand. The company moves its premises from the outskirts of Milan to the center.
The hardest problem to tackle, however, is that of the personnel. The new objectives of the company have to be clearly explained and people motivated, so that they can understand that the actions being taken are the only way forward.
Accepting change after many years of consolidated habits can be hard. This is especially true at first, when the new manager has yet to have time to win people’s trust. In this case, the team was highly qualified, and some decided to not to stay aboard a ship facing such troubled waters.