1. Boost the Bottom Line
2. Attract Talent
3. Make a (Smart) Deal
4. Sell, Sell, Sell

Boost the Bottom Line

In the case of HP, CEO Mark Hurd, the successor to Carly Fiorina, needed concrete ways to attack this first element of the turnaround formula. The obvious target was to reduce costs for the business by selling off unneeded assets and laying off thousands of workers. This makes sense from a number of perspectives: direct control over the change, speed of the impact and the predictable effectiveness of the turnaround activities employed.

A once-great company that has fallen into disrepair is likely to have wasteful resources on the books and on the payroll. To boost the bottom line, you either need to sell more or spend less, or both. In the case of a turnaround, when speed of recovery is critical in the eyes of the investment community, it is almost always faster to take a decisive swipe at your costs than to emphasize new sales initiatives or to take the time to develop new products and markets.

It is never easy to lay off workers. Likewise, it is normally not positive for corporate image to hear that a major employer is releasing 15,000 workers as HP did in their turnaround process. Investors and, in many cases, existing employees, are more likely to approve such a move if they see it as a way to ensure a healthier existence for the long-term – the difficult short-term treatment required to enable the patient to lead a continued strong and healthy life.

The lesson for those businesses not yet needing a turnaround: An ounce of prevention is worth a pound of cure. By conscientiously managing all of your costs on an ongoing basis, you can avoid the dramatic cost-slashing activities that are necessary during an emergency turnaround.

Attract Talent

A company finds itself in a turnaround situation for specific reasons. Part of the blame justifiably falls on some members of the existing organization. The rare exception to this might occur when a business is staffed with excellent workers who are burdened with the responsibility of executing a terrible strategy -- in which case, the company should replace their strategy development process, their strategy development personnel (e.g., senior management) or both.

In any case, it is probably appropriate to bring in new employees with new ideas and the ability to challenge the status quo. Your business will probably not need the star power of a prominent CEO or a well-known senior manager from another Fortune 500 company, but look at talent acquisition as a valuable opportunity to upgrade your organization, versus an obligation to fill vacated slots in your old organization chart.

Make a (Smart) Deal – Not Required in All Cases!

In the high profile world of major league corporations (HP is the 11^th largest U.S. corporation), making acquisitions is a realistic requirement for growing sales and moving the business forward. The multi-billion dollar corporation is unlikely to develop all of its future products and technologies through in-house creativity and incubation. Making a smart acquisition was another move that assured the investor community that HP was in command and moving in the right direction.

This may not be a requirement for smaller businesses. HP acquired Mercury Interactive for $4.5 billion -- roughly 5% of its $90 billion annual sales and $104 billion market capitalization. For a smaller corporation of less than $100 million in annual sales, almost any acquisition of a significant, established business is going to consume a much larger percentage of corporate resources -- resources that may simply be unavailable given the company's recent performance.

A smaller corporation is also more likely to have plenty of room to grow in its established core markets (possessing a lower percent of total available market share) without making an acquisition and increasing the scope of its business portfolio or potentially diluting its strategy with activities not governed by its current strategic focus. If your business is in need of a turnaround, making even a "smart" deal may not be one of the ingredients required for your recipe for success.

Sell, Sell, Sell

As long as the products in your existing portfolio have demonstrated profitability, there is no argument that, especially in a turnaround situation, the quickest route to improving top line performance is to emphasize your strengths and sell, sell, sell. All of the logistics for selling your current products are in place, you understand how they work together and your employees know how to make this process happen. It is unlikely that moving more of your current products and services will spawn any unexpected financial surprises on the road to recovery -- very positive aspect of including this in your turnaround program!

By all means, pursue this path of selling more of what has made you successful in the past, but, remember to strive for more. Although this is the most direct route to improving the top line for the business, it can also fail to address the longer-term needs of the business turnaround. Re-energizing the sales of your existing products should be used to provide the resources to finance the gradual evolution and, possibly, the re-invention of your business. The immediate needs of a business turnaround require immediate financial progress. Once your returns begin to improve, senior management should initiate development of strategies for new products and services and the organizational changes needed to support these drivers of future financial success.

Clearly, HP's simple four-step approach, applied intelligently, can be a solid recipe for improving your long-term success. Whether you are in dire need of an immediate turnaround or not, it can be summarized in the following table:

For a Mid-sized Company

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© Copyright 2009 by Center for Simplified Strategic Planning, Inc. Ann Arbor, MI -- Reprint permission granted with full attribution.