Four Cs for Restructuring: Communication, Concentration, Cost Cutting and Cash
Restructuring is not a slash-and-burn exercise, but one that calls for the surgeons skills.
It does not require the use of a parang or long knife but the surgeons lancet. The
restructuring process may involve re-engineering, downsizing, rightsizing and delayering.
These all require the use of the same basic techniques and approaches.
During the restructuring exercise, remember to use the 4 Cs.
Communication: The manager needs to communicate personally the restructuring plans
truthfully to the staff. Similarly, a doctor does not delegate to a nurse the task of briefing
the patient about his ailment and treatment. You need to communicate the restructuring
plans personally. Regular communication with all the staff, shareholders, board members,
customers and business associates is necessary to get their buy-in and support for the
restructuring plan. It is also very important that whatever you promise, you need to
implement and deliver. There are many anxious and impatient people waiting to know
the progress and outcome of the restructuring programme. You need to keep them duly
informed. You need to walk the talk, otherwise it is like shouting at a dead body to
leave. The dead body will not leave but your friends may.
Concentration: The surgeon operates on only one patient at a time. Similarly, the sick
company needs to concentrate on its core competence. During bad times, you need to
concentrate even more as resources are scarce. If possible, sell away all non-core
businesses. In desperate turnaround situations, your focus should be as sharp as laser.
You cannot afford to be hazy, sloppy or uncertain as these will impinge on your limited
resources. Divest away non-core businesses so as to concentrate on the focused areas.
Cost cutting: It is an important antidote or effective remedy to administer especially in
desperate situations. Cut costs to the bones without injuring the muscles and organs. If
circumstances permit, amputate non-profitable businesses rather than try to bandage and
apply stitches. Investigate into cutting your fixed and variable overheads by outsourcing,
downsizing, delayering and across-the-board salary cut. Every cent saved or cut goes
right into the bottom line.
Cash flow improvement: Cash flow is your lifeblood. Slipping into losses may give you a
migraine but a sudden shortfall in cash flow will cause immediate massive heart attack.
Try to reduce your inventory, purchases, perks, credits to customers, outstanding debts
and related items without hurting the company further. Ensure that your receivables are
promptly collected. Negotiate with your creditors for extension of the credit limits or
source for more credit lines or more time to pay back the debts. You need to do whatever
you can during the financially tight situations to quickly improve the cash flow position.
Typically in a major restructuring exercise, the timing is extremely short for you to
deliver the positive results. There are many things to do and remember. However, you
need to prioritise and remember these four Cs.
http://www.corporateturnaroundexpert.com
Dr Mike Teng (DBA, MBA, BEng, FIMechE, FIEE, CEng, PEng, FCMI, FCIM, SMCS) is the author of the best-selling business book Corporate Turnaround: Nursing a sick company back to health, in 2002. In 2006, he authored another book entitled, Corporate Wellness: 101 Principles in Turnaround and Transformation. Dr Teng is widely recognized as a turnaround CEO in Asia by the news media. He has 27 years of experience in corporate responsibilities in the Asia Pacific region. Of these, he held Chief Executive Officers positions for 17 years in multi-national, local and publicly listed companies. He led in the successful turnaround of several troubled companies. He is currently the Managing Director of a business advisory firm, Corporate Turnaround Centre Pte Ltd, which assists companies on a fast track to financial performance. Dr Teng was the President of the Marketing Institute of Singapore (2000 2004), the national body representing some 5000 individual and corporate marketing professionals in Singapore
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