The White Magic

THE WHITE MAGIC OF
CORPORATE TURNAROUND
 MANY COMPANIES FALL TO THE GRANADES OF
COMPETITION, OR ECONOMIC RECESSION, OR
UNFRIENDLY ACTION, OR ADVERSE
TECHNOLOGICAL OR SOCIAL CHANGE
 MANY FALL DUE TO INTERNAL WEAKNESSES
 SHOULD WE LET SICK COMPANIES DIE AND
SHOULD SOCIETY SUFFER CONSEQUENCES?
 AT STAKE ARE THOUSANDS OF JOBS, HUGE
CAPITAL, USEFUL PRODUCTS & RARE SKILLS
TURNING AROUND COMPANIES
 TURNING ORGANIZATIONS AROUND CAN BE

LIVELY, CREATIVE
 PEOPLE CAN BE VERY INTENSELY INVOLVED
 PEOPLE CAN BE CREATIVE, HEROIC, FRIENDLY,

GENEROUS, CARING AS ALSO NASTY
THREE EXAMPLES FROM
THREE CONTINENTS
TRAVANCORE COCHIN CHEMICALS
 SINGLE-LOCATION COMPANY IN KERALA WITH 10%
MARKET SHARE
 TO PRODUCE CAUSTIC SODA AND OTHER CHEMICALS
 PRIVATE COMPANY TAKEN OVER BY STATE GOVERNMENT
 FELL SICK IN 1970s
 SHORT-TERM CHIEF EXECUTIVE OFFICERS (CEOs)
PROBLEMS
 POOR PLANT MAINTENANCE
 DELAYS IN COMMISSIONING PLANTS – LARGE COST
ESCALATIONS
 LABOUR INDISCIPLINE/DEMORALIZED STAFF
 INDUSTRIAL STAGNATION CREATING BUYERS/ MARKET
TURNAROUND OF TCC
 MR MENON TOOK OVER AS CMD ON UNDERSTANDING OF
NO POLITICAL OR GOVERNMENT INTERFERENCE IN DAY-
TO-DAY OPERATIONS. HOWEVER, HE AGREED TO
SCRUPULOUSLY ADHERE TO STATE GOVT POLICIES
 NEW CMD INITIATED SERIES OF COMMUNICATION ON
POLICIES AND SUGGESTIONS FOR PERFORMANCE
IMPROVEMENT
 RESORTED TO QUICK SWOT ANALYSIS – IDENTIFIED KEY
RESULT AREAS (KRAs)
 MANAGEMENT DEVELOPMENT/TRAINING
 IMPROVEMENT OF PLANT OPERATIONS
 MAINTENANCE MANAGEMENT
 FINANCIAL DISCIPLINE/COST CONTROL
 IMPROVEMENT IN INDUSTRIAL RELATIONS
 MATERIALS MANAGEMENT
AFFIRMATIVE ACTION
 A CORRUPT SENIOR MANAGER WAS FIRED AND ACTION
SUCCESSFULLY DEFENDED LEGALLY
 STRESSED ON COMPETENCE & TIMELY PERFORMANCE
 CUT DOWN NUMBER OF RECOGNIZED UNIONS
 PUNCTUALITY/PROMPT DECISION-MAKING/FAIR & QUICK
REDRESSAL OF GRIEVANCES; SERIOUS AND BUSINESS-
LIKE MEETINGS; FIXING INDIVIDUAL RESPONSIBILITY
 EDUCATIONAL CIRCULARS TO MANAGERS
 JOB ENRICHMENT OF MIDDLE & JUNIOR LEVELS
 OPEN MEETINGS ON COMPANY’S STRATEGIC PLANS;
MOVING EMPLOYEES AROUND
 MODERNIZATION OF THE PLANT WITH INTERNALLY
GENERATED FUNDS
 TRIPARTITE AGREEMENT WITH FINANCIAL INSTITUTIONS
AND BANKS WITH HUGE CONCESSIONS
 STREAMLINED MATERIALS MANAGEMENT; BUDGETING
& COST CONTROL SYSTEMS; & PRODUCTION INCENTIVE
SCHEME
 PROACTIVE MARKETING EFFORT AND CUSTOMER
ORIENTATION
RESULT: FROM LOSSES OF 45% ON SALES IN 1076 & 1977,

TCC BROKE EVEN IN 1070 AND IN 1981 EARNED 17% ON
REVENUES. SALES WAS NEARLY 300% OVER 1977 LEVEL
TURNING AROUND LUFTHANSA
 SUCCESSIVE LOSSES IN 1991 TO 1993
 INTENSIVE PRICE WAR IN AIRLINE INDUSTRY
 EXCESSIVE FOCUS ON TECHNICAL EXCELLENCE
 UNCOMPETITIVE WAGE COSTS (30%^)
 JURAN WEBER TAKES OVER AS CEO IN 1993
 HIS INITIATIVES WERE:
 HIGHLY PARTICIPATIVE
 CASE FOR LUFTHANSA’S RESTRUCTURING
 123 KEY ACTIONS AIMED AT CUTTING COSTS AND RAISING
REVENUE
 REDUCE LOSSES BY DM 1,300 MILLION
 NEW AGENDA LAID STRESS ON ENTREPRENEURIAL
VALUES, CUSTOMER ORIENTATION AND HIGHER
PRODUCTIVITY
 AMBASSADOR OF CHANGE
 BOARD MEMBERS HELD ‘TOWN MEETINGS’
 MANY-SIDED DIGNOSTIC-CUM-MOBILIZATION EFFORT
RESULTED IN WIDE RANGE OF TURNAROUND ACTIONS
RESULT: A 1991 LOSS OF DM 426 MILLION ON REVENUES OF

DM 16 BILLION WAS TURNED INTO A DM 312 MILLION PROFIT
IN 1994 AND DM 2,155 MILLION PROFIT IN 1995 ON REVENUE
OF DM 28 BILLION
THE CHRYSLER EXPERIENCE
 CHRYSLER’S ACCUMULATED LOSSES BY 1981 WERE USD

3.5 BILLION
 COSTS WERE OUT OF CONTROL; INEFFICIENCY WAS
RAMPANT AND PRODUCTIVITY WAS BELOW CHRYSTLER’S
COMPETITORS
 JAPANESE COMPETITION AND RECESSION WERE OTHER
BARBS
 LEE IACOCCA AS CEO INITIATED FOLLOWING:
 INDUCTED 15 TOP EXECUTIVES FROM OUTSIDE
 CREATED OVER 20 EXECUTIVE TEAMS TO DEAL WITH
IMPROVEMENT TARGET AREAS
 WENT ON A RAMPAGE OF CLOSURES AND LAYOFF
 CUT TOTAL EMPLOYMENT FROM 160,000 TO 80,000
AFFIRMATIVE ACTION
 SLASHED OVERHEAD COSTS BY USD 1 BILLION

 ONE-THIRD OF 60 PLANTS WERE CLOSED OR CONSOLIDATED
 A THOUSAND DEALERS DISPENSED WITH
 CUT CAR-REPAIR COSTS BY IMPROVING QUALITY OF SUPPLIES
 SOUGHT BETTER TERMS FROM VENDORS AND WORKERS, AND
LOWER INTEREST RATES FROM LENDERS
 MANAGED CUT USD1 BILLION FROM OVERHEADS AND ABOUT
USD 200 MILLION IN REPAIR COSTS
 HARPED ON A STRONGER MARKETING ORIENTATION AND
HEAVIER PUBLICITY
 MANAGED STAKEHOLDER RELATIONS SKILLFULLY – GOVT,
BANKERS, LABOR AND SHAREHOLDERS
 INSPIRED STAFF WITH HIS OPTIMISM, OPENED UP CHANNELS
OF COMMUNICATION WITH MANAGERS AND STAFF
RESULT: FROM A PEAK LOSS OF USD1.7 BILLION IN 1980,

THE COMPANY BROKE EVEN IN 1982, & WENT ON TO EARN
USD 2.4 BILLION IN 1984 ON REVENUE OF USD20 BILLION

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THE WHITE MAGIC OF

 TURNING ORGANIZATIONS AROUND CAN BE

 PEOPLE CAN BE CREATIVE, HEROIC, FRIENDLY,

RESULT: FROM LOSSES OF 45% ON SALES IN 1076 & 1977,

RESULT: A 1991 LOSS OF DM 426 MILLION ON REVENUES OF

 CHRYSLER’S ACCUMULATED LOSSES BY 1981 WERE USD

 SLASHED OVERHEAD COSTS BY USD 1 BILLION

RESULT: FROM A PEAK LOSS OF USD1.7 BILLION IN 1980,

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