Operational Turnaround Strategies: Transforming Underperforming Assets into Value Drivers

September 10, 2024 | by Keith Yeater

Imagine walking into a once-thriving company now teetering on the brink of failure. Desks are empty, morale is low, and the future looks uncertain. For private equity partners, this scene is a call to action. Turning around underperforming assets isn’t just about tweaking a few processes; it’s about a complete transformation. It’s about taking strategic, decisive actions to breathe new life into a failing business and turning it into a value driver.

Understanding the Turnaround Imperative

When a company is underperforming, it’s clear that business as usual is no longer an option. A turnaround implies that the business is not just struggling but on the path to failure unless immediate changes are made. These changes often come with casualties—tough decisions about people, processes, and priorities.

1. People: The Heart of the Turnaround

The first step in any successful turnaround is assessing the team, especially those in key management roles. The right people can lead a company out of the darkness; the wrong people can drag it further down. Here’s how to categorize and manage the team:

• Capable Leaders: These individuals understand the improvement roadmap and are willing to lead the necessary changes. They should be placed in critical roles where their influence can drive the most impact.
• Guidance-Seekers: The majority of the team will fall into this category. These people can lead some changes and, with basic guidance, will take the initiative as far as they can. They need support and direction to succeed.
• Institutional Knowledge Holders: These employees carry a wealth of company knowledge and are well-trusted by their peers. They’re not resistant to change but may not know how to implement it. With proper support, they can become valuable allies in the turnaround process.
• Resistors: Those who are resistant to change and likely to undermine the process must be dealt with decisively. They should either be removed from the team or placed in roles where they can’t obstruct progress.

2. Clear Messaging and Communication

For a turnaround to succeed, it’s crucial to align messaging and statusing organization-wide. This means clearly communicating the goals, strategies, and expected outcomes. Everyone in the company needs to understand the urgency and be on the same page. This alignment helps build a united front, essential for driving change.

3. Culture of Accountability and Ownership

Creating a culture of accountability and ownership is another cornerstone of a successful turnaround. This involves setting clear expectations and holding people accountable for their actions. Employees need to do what they say they will, and in the cases that they cannot meet the expectations they must proactively communicate this with clear countermeasures to get back on track.  If they continue to fail to deliver, then there must be consequences. Encouraging open communication is also vital—team members should feel comfortable asking for help and reporting if they can’t meet their commitments.

4. Leveraging Data and Analytics

In today’s business environment, data is an invaluable asset. Using data to identify issues within the business allows for targeted improvements. This involves digging deep into the numbers to uncover the root causes of problems, not just the symptoms. By understanding the real issues, private equity partners can develop effective strategies to address them.

Four Crucial Strategies

Turning around an underperforming company is no small feat. It requires a strategic approach, focusing on the right people, clear communication, a culture of accountability, and leveraging data to drive improvements. For private equity partners–and business leaders in general–these strategies can transform failing businesses into valuable assets, ensuring long-term success and profitability. By taking decisive actions and fostering a united effort, a troubled company can be turned into a thriving entity once again.