Turnaround Plan
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Sorting out departmental profitability and pulling together as a team
Ian and his brother operated a motor dealership group involving three franchises and several locations. These were all under-performing to varying degrees but could not work together as a team. Ian simply was not comfortable that costs were under control. Stock and debtor levels were all over the place; indeed the only aspect that was managed in line were the prompt payments to suppliers but this did not do much for cash flow. Unsurprisingly, profitability was meagre and the overdraft was heavily drawn down.
Ian was determined to run the business tightly and get the bank off his back but he lacked the initial independent evidence with which to address the departmental managers and the time to do it himself. So he asked for our help. We suggested that we conducted a detailed review of departmental profitability and working capital against industry norms and enlisted the help of the business support function of the manufacturers so we had accurate information against which to gauge performance. This also served to buy-in the support of major stakeholders.
As a result of our work, we were able to identify good and bad areas of performance in each department and secure the acceptance of each manager to improvement steps. The involvement of an outsider also served as a catalyst to pulling the management team together. This was recorded in individual written plans for each one. Having done this we were able to collate the key financial data centrally so that Ian could monitor progress, once we were able to make improvements to the accounting system so that it to produce reliable information. The bank manager was impressed by the professionalism of the approach and started to ease the pressure.
Six months later, Ian was pleased to see that there had been real progress. It had not all been plain sailing - some managers had moved on and Ian decided to close a department. But at least Ian felt that he was in control of this business and was able to be proactive. More to the point, he began to look forward to going to work again.
"Using outside consultants can give you the insight into what really happens in your business. Using them to prepare a turnaround plan can galvanise your management team and the professional approach can win over doubting stakeholders"
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