Law Suit Filed: Morgan Drexen Faces Potential Federal Class Action
December 30, 2009
Morgan Drexan FAces Potential Class Action
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Law Suit Filed: Morgan Drexen Faces Potential Federal Class Action
Settlement: Comverse Shareholder Settlement Agreed at $225 Million
December 29, 2009
Comverse Shareholder Settlement Agreed at $225 Million
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Settlement: Comverse Shareholder Settlement Agreed at $225 Million
Law Suit Filed: Skyline Homes Faces Class Action Over Moisture Problems
December 24, 2009
Skyline Homes
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Law Suit Filed: Skyline Homes Faces Class Action Over Moisture Problems
Law Suit Filed: California Talent Agency, Be Productions, Faces Federal Class Action
December 23, 2009
California Talent Agency, Be Productions, Faces Federal Class Action
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Law Suit Filed: California Talent Agency, Be Productions, Faces Federal Class Action
Settlement: Comcast Agrees Tentative $16 Million Settlement in Consumer File Sharing Class Action
December 22, 2009
Comcast Agrees Tentative $16 Million Settlement in Consumer File Sharing Class Action
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Settlement: Comcast Agrees Tentative $16 Million Settlement in Consumer File Sharing Class Action
Turnaround Management Firm Offers Five Key Points For Avoiding Financial Ruin
December 20, 2009
Turnaround Management
Revitalization Partner, a Turnaround Management firm based in Seattle, WA is in the business of teaching companies how to avoid disaster.
The international specialty turnaround management and business advisory firm, which is headquartered in Seattle, has clients in a range of industries-from technology to retail to manufacturing-who usually seek out help from the company’s partners with a common problem: Financial distress and stunted sales growth.
“Often corporate leaders and managers can’t see the forest for the trees,” said Bill Lawrence, Revitalization Partner principal. Because of this they have a difficult time recognizing warning signs that point to immediate or future trouble.”
When, finally, they are no longer able to ignore issues or rely on hope to see them through, bankruptcy may seem like the only solution. Having discussions with a turnaround management firm can often provide viable alternatives.
With the new bankruptcy laws that have taken effect, this option, instead of helping to solve some of their problems, will likely create new headaches and may lead to the end of the company.
“In short, corporate leaders must do everything in their power to avoid bankruptcy and this means being pro-active in recognizing potential problems and having plans in place to deal with issues should they arise.” Admitting that you need turnaround management is never easy, but the right turnaround management firm can often provide new insight into a company’s problems. According to Lawrence, there are some simple steps for turnaround management that can be taken by corporate leaders and managers to reduce the risk of the financial stresses that could lead to bankruptcy:
Turnaround Management
Turnaround Management Step # 1 - Forecast cash flow. Having a definitive annual cash flow plan, that’s updated regularly, based on conditions, will provide a way to monitor activities and judge whether there are issues with cash flow that need to be addressed.
Turnaround Management Step # 2 - Understand variances between projected revenue and cash flow. A significant variance can signal a problem. Find out why it exists. Don’t assume it’s a fluke or the problem will fix itself. It’s better to be pessimistic and pleasantly surprised than be faced with a financial disaster that could have been avoided.
Turnaround Management Step # 3 - Keep your lenders and board of directors in the loop. Financial crunches happen. Lending institutions and board members will be more likely to help with additional funding or loan extensions if they’ve been kept informed. Discuss with your board and lenders the possibility of bringing in third party assistance. Often, by suggesting that you are talking with a turnaround management firm, you can gain time to resolve difficulties.
Turnaround Management Step # 4 – Have a Plan B. Having in place a contingency plan that minimizes cash drains, accelerates revenue, and cut expenses will help to plan for the long-tern effects of any financial trouble that presents itself.
Turnaround Management Step # 5 – Don’t be afraid to ask for help. While it can be a difficult to do, seeking outside help from a turnaround management firm when a company has encountered an extended period of missing forecasts is the most prudent thing to do. It can make the difference between big financial gains and bankruptcy.
A reputable turnaround management firm can help your company avoid financial ruin. Recognizing the need for turnaround management services is never easy, but securing capable turnaround management executives will likely save your company. We would be happy to meet with you and discuss your turnaround management needs.
When you need Turnaround Management services,
we can help you restore your company to financial health.
The 6 Panaceas for Corporate Recovery
December 20, 2009
Corporate Recovery
CORPORATE RECOVERY PRINCIPLE 1: TO TREAT THE SYMPTOMS, KNOW YOUR COMPETITORS AND CUSTOMERS. TO ELIMINATE THE ROOT CAUSE, KNOW THE MARKET
Sun Tzu, the strategist in The Art of War said: “If you know yourself and the enemy, you need not fear the result of a hundred battles.”
Though it is important to know your competition, one should not do so at the expense of neglecting one’s customers. Merely knowing the competitor is equivalent to a person driving a car and constantly looking out for the competitor’s car at his side.
He is so pre-occupied with the competitor that he fails to look at the road ahead and may run into hazards. Knowing only the customer’s present needs is also merely treating the symptom and not the ailment. Such a lack of proper focus often leads to trouble and the need for a corporate recovery.
Today’s customers are more demanding – they want more of those things they value. Meeting their demands can help you avoid the need for a corporate recovery.
- If they value cheaper prices, they want even lower ones.
- If they value convenience or speed at the time of purchase, they want it even easier or faster.
- Hence, companies’ efforts may yield temporary results if they only deliver what the customers want now.
These attempts may not sustain the company’s long-term growth, as they are unable to optimize on profitability, resource allocation and opportunities. To insure a successful business and continued long-term growth and avoid the need for a corporate recovery, companies must strive to drive the market. They need to pre-empt both the customers’ and competitors’ present and future developments.
3M’s Post It notes, which nobody had asked for previously, are now one of the most commonly used office products. Microsoft’s operating software, Windows, came not from responding to customers’ demands or competitive threat, but from anticipating their needs.
The 1980 launch of CNN by Ted Turner was ridiculed by TV veterans CBS, NBC and ABC. They failed to tap a niche that no one had yet asked for: a 24-hour news service. Other great innovations of our time including the personal computer, jet airplanes and the Internet were created without any customers or competitors in sight. Therefore, one has to understand the market, otherwise it may destroy you.
CORPORATE RECOVERY PRINCIPLE 2: A SICK COMPANY NEEDS TO UNDERGO SURGERY, RESUSCITATION AND NURSING
There are many companies falling sick due to corporate diseases such as global economic recession, rapid changes brought about by globalization, terrorist attacks and incompetent management. When a company falls sick, it needs to undergo the three phases of corporate recovery, namely:
Phase 1: Surgery: A corporate recovery requires a restructuring of the troubled organization to face the harsh new reality and quickly improve its cash flow.
Phase 2: Resuscitation: To revitalize the business so as to increase its sales revenue and profits … and begin the corporate recovery.
Phase 3: Nursing: To rehabilitate a strong and healthy corporate immune system or culture in order to sustain long-term growth. For a complete corporate recovery, it is important to finish the full course of antibiotics prescribed in all the three phases. Restructuring alone is not good enough. As the doctor said: “The surgery was successful, but the patient died.” Without the resuscitation and nursing phases, an attempted corporate recovery is like merely upgrading a cancer-stricken patient to another ward in the hospital – it does not cure the disease. Building a strong and healthy company takes a long time – and a successful corporate recovery is not a one-time inoculation. It is like taking vitamin pills every day for the rest of your life in order to build a strong corporate culture which can manage change.
PRINCIPLE 3: RESTRUCTURING EXERCISE REQUIRES THE SURGEON’S SKILLS AND CALLS FOR THE 4Cs: COMMUNICATION, CONCENTRATION, COST CONTROL AND CASH FLOW IMPROVEMENT
A corporate recovery restructuring is not a slash-and-burn exercise, but one that calls for the surgeon’s skills. It does not require the use of a machete or knife but the surgeon’s scalpel.
During a corporate recovery restructuring exercise, remember the 4Cs.
CORPORATE RECOVERY: The 4 “C”s
Corporate Recovery # 1 – Communication: The manager needs to personally communicate with the staff; not delegate this important activity; just as a doctor does not delegate to a nurse the task of briefing the patient about his ailment and treatment. A successful corporate recovery requires open communications. You need to communicate the restructuring plans truthfully. People are not against bad news per se but they want to see quick results.
Corporate Recovery # 2 – Concentration: The surgeon operates on only one patient at a time. Similarly, the sick company needs to concentrate on its core competence. In bad times, you need to concentrate even more as resources are scarce. If possible, divest non-core businesses.
Corporate Recovery # 3 -Cost control: Cut costs to the bone without injuring the muscles and organs. If circumstances permit, amputate non-profitable businesses rather than try to bandage and apply stitches.
Corporate Recovery # 4 – Cash flow improvement: Cash flow is your life blood. Slipping into losses may give you a headache, but a sudden shortfall in cash flow will cause an immediate massive migraine. Try to create internal liquidity by cutting inventory, purchases, perks, credit to customers, outstanding debt and related items without damaging the basic structure of the company.
CORPORATE RECOVERY PRINCIPLE 4: JUST AS THE SURGEON OPERATES ON ONLY ONE PATIENT AT A TIME, SO A SICK COMPANY NEEDS TO CONCENTRATE ON ITS CORE COMPETENCE
During the Corporate Recovery - when the company is on the brink of bankruptcy - there are time and resource constraints. The company needs to concentrate all its resources on doing a few major things right. You should have a laser-sharp focus just as a surgeon focuses on only one operative field during surgery.
If you are a patient, you will be worried if your surgeon operates on you and another patient simultaneously. Similarly, an ailing company needs to concentrate only on its core competence and try to rid itself of businesses that do not help the bottom line or immediately improve its cash flow.
In such a critical situation, you often can succeed at a far lower cost by ensuring that you do a better job with the businesses and skills you already have. In order to release resources for its core business, the ailing company has to divest any unprofitable or non-related businesses. Quite often, in their bid to bolster sales performance, troubled companies clinch lots of sales contracts that have poor profit margins.
This is tantamount to buying sales which often turn into subsequent financial losses. Such a scenario is equivalent to having a lot of sizzle but no steak. It is better to amputate all loss-making ventures and unprofitable sales whenever possible. According to the standard surgical procedure, if there is pus, get it out. In fact, the famous Chinese military strategist Sun Tzu believed in the principle of concentration to fight a war.
He said: “The strength of an army does not depend on large forces. Do not advance relying on sheer numbers. Rather, one must concentrate one’s forces and anticipate correctly the movement of the enemy in order to capture him.”
CORPORATE RECOVERY PRINCIPLE 5: COST CONTROL IS AN IMPORTANT ANTIDOTE OR EFFECTIVE REMEDY TO ADMINISTER IN DESPERATE TURNAROUND SITUATIONS.
Unnecessary cost is always your number one enemy. You must attack it by justifying and challenging every expense that you incur.
Whether your company is in trouble or not, cost will kill you even if you come up with better products. If your cost to make something is your competitor’s selling price, you cannot stay in business for long.
Any first-year business student knows how to cut costs. The key here is how the costs can be cut to restore financial health in the short term without hurting the ailing company in the long term.
The turnaround manager should discuss the relevant details with the respective department managers, soliciting their advice as this can improve remarkably the chances for full co-operation and success. Sometimes, staff can offer valuable suggestions to save time or money or both for the company.
Remember, this is not the time to create unnecessary stress by finger pointing. The key is to foster a cohesive environment for problem-solving, establish solidarity and put everybody’s self-interest to work for future gains. Sometimes, cost reduction can be achieved through streamlining procedures and operations.
Through this, duplication and inefficient methodologies can be pared down to a minimum. In some instances, similar or more superior results are achieved through outsourcing. Outsourcing provides you with the advantage of being able to focus on those areas that are vital to the company’s operations, instead of being distracted by things that have little impact on the company’s success.
People-related expenses can be reduced remarkably through cross-fertilization of multi-disciplinary skills. Productivity can be improved by deploying staff to perform high value-added duties. Remember, every cent of cost saved or cut goes right into the bottom line.
CORPORATE RECOVERY PRINCIPLE 6: DOWNSIZING IS LIKE AMPUTATING A PART OF ONE’S BODY, CREATING SIDE EFFECTS
Downsizing is like an amputation which removes part of one’s body but creates side effects such as low staff morale and bad reputation. It is not the only remedy available to managers to improve a company’s performance. Other remedies include increasing sales revenue and non-personnel cost control measures.
There is no problem in removing the corporate fats, dysfunctional personnel or cancerous tumors in the company. The problem with one-size-fits-all downsizing is that good people also get fired in the process. In some instances, ‘corporate genocide’ or the deliberate extermination of a healthy business is often committed in the name of maximizing shareholders’ returns. However, in some instances, downsizing is inevitable.
But one has to carefully manage the aftermath of the downsizing exercise. As the saying goes: “Even rats will desert a sinking ship.” Hemorrhage or the exodus of good caliber staff may take place and deal quick and severe blows to the company’s vital organs. The ailing company is unable to attract good caliber staff to replace those who have left, since its reputation in the marketplace is tarnished. You must try to win over the trust of the existing staff after a downsizing exercise.
Silence is not golden. Communicate to the staff the reasons for this exercise and the plans to execute the corporate recovery. Be humane in treating the people to be fired. The golden rule in a downsizing exercise is: ‘Do not do unto others that which you do not want done to yourself’. For one day, you may be the person to be fired.
This article was originally authored by Dr Mike Teng (DBA, MBA, BEng) who is the author of best-selling book, “Corporate Turnaround: Nursing a Sick Company back to Health.” He is often referred to as the “Turnaround CEO in Asia”. It has been adopted for use in the United States by Revitalization Partners. Companies do fall sick and die; However, there are panaceas that can turn a critically ill organization around into a healthy one. Proper treatment is necessary as the remedies can sometimes be worse than the disease.
Revitalization Partners can guide your Corporate Recovery and restore health to your company.
W.Va. funeral home sued over customers’ funds
December 14, 2009
The West Virginia attorney general is suing a funeral home for allegedly misappropriating money consumers spent on prepaid funerals. The lawsuit in Wyoming County Circuit Court names Adam Toler Memorial Funeral Home in Oceana, as well as Donna Toler, Daniel Toler and Rebekah Cline. Kim Stitzinger-Jones, press spokesperson for the AG’s office, says Toler was supposed to
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W.Va. funeral home sued over customers’ funds
Jury awards farmers $2M for biotech rice accident
December 14, 2009
Bayer CropScience must pay two Missouri farmers more than $2 million in damages as the result of the company’s accidental release of experimental biotech rice into the food supply. This was the first verdict in several lawsuits filed in response to Bayer’s accidental release of Liberty Link in 2006. The rice wasn’t approved for human consumption
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Jury awards farmers $2M for biotech rice accident
Selecting A Turnaround Professional
December 7, 2009
Note: The following article has been updated from an article published in the May, 2006 editions of the Orlando, Tampa Bay and South Florida Business Journals.
Even the most successfully managed businesses can sometimes find themselves in a situation when they get into trouble and need to bring in an Interim CEO.
Often, realistic and savvy business people underestimate the difficult challenges of successfully managing a troubled business.
In most instances, changes in both the internal and external business environments that bring a company to a crisis situation do not happen overnight. Typically, many subtle warnings occur well before the business crisis occurs.
Initially, pricing leverage shifts heavily to the customer, margins are squeezed, a key customer duel sources its needs with a competitor, internal business processes begin to falter, underlying assumptions on optimistic financial budgets are unrealistic or sales personnel lower pricing to meet the competition. Generally, as sales decrease or pricing decreases the situation worsens. An Interim CEO has experience dealing and fixing all of these problems and more.
The stories are all different, but always remarkably similar.
Cash must be managed closely. Management hopes begin to hinge on increased volume, a strengthened economy or a competitor’s failure. The independent auditors “qualify” their opinion on the company’s financial statements, citing “going concern” considerations. When you reach this situation, a fix is needed immediately and this is what an Interim CEO does best.
As a crisis deepens, liquidity often becomes a day-to-day consideration. Payments to vendors are stretched. Financial covenants under existing financing facilities are breached. The industry rumor mill questions the company’s continued viability. Lenders and customers grow anxious about the company’s future. Employee morale begins to falter. Key employees leave for greener pastures.
In today’s business climate, the Interim CEO that can focus on rapidly creating “internal liquidity” can have a significant impact on the ultimate outcome of the crisis.
Like a deer caught in the headlights of an oncoming car, most incumbent management teams suffer some degree of decision-making paralysis. They have never been down this road. In extreme cases, senior management retreats into a “bunker” and refuses to face reality. Ultimately, the company, its shareholders, employees and creditors all suffer. Selecting an experienced Interim CEO is typically the first step in the turnaround.
Action to save a troubled company must be prompt and decisive. The window of opportunity is often limited and the task at hand is generally difficult. All situations are unique and generally require difficult decisions. The management skills that are often required to deal effectively with a crisis situation are usually different than what is required when the company is profitable and thriving … and this is what an Interim CEO brings to the situation. He or she has not friendships to worry about hurting, no company "history" to protect … the Interim CEO is there to solve a crisis and is only accountable to the success of the implemented solutions.
It is difficult for senior management to accept that different skills and outside help are necessary in a crisis situation. Even sophisticated businessmen decide not to hire an Interim CEO where they are necessary.
They often conclude that there is no money to pay an Interim CEO. In many of these situations, the reality is they cannot afford NOT to hire an Interim CEO The sooner the company accepts the reality of the crisis and seeks help from a turnaround professional, the more likely effective help can be provided.
Much like oncologists, the Interim CEO often gets a client visits after it is too late. In those situations, the troubled business becomes a broken business and it is ultimately liquidated – all stakeholders are harmed.
Quality Interim CEOs bring specialized crisis management experience and an objective, unemotional assessment of the reality of the situation, outlook and potential solutions, if any. In many situations, an experienced Interim CEO is able to alter the status quo and renew employee and stakeholder expectations with fresh, disciplined processes to address the ills of a financially distressed business.
Once the decision to hire a turnaround professional is made, business people usually view industry experience as the most important factor. While specific industry experience may in limited circumstances be helpful, this qualification should generally rank low on the list of decision making criteria.
Generally, the Company's officers, directors, managers and employees possess all the needed industry experience. A turnaround professional manager without preconceived notions about the industry often adds more value by addressing and considering all viable alternatives, not just those which have been employed in one particular industry.
In this fashion, the Interim CEO brings something unique to the situation – - a fresh perspective.
Turnaround efforts are often directed at fixing underlying functional operational problems such as production inefficiencies, organizational structure, sales policies, product cost, etc. In other situations, the immediate concern is maintaining the operational and financial integrity of the business intact through tight cash management and cash forecasting, negotiations with vendors, lenders, unions and other stakeholders, or instituting emergency cost reduction/ cash saving measures. With other companies many of these issues must be addressed simultaneously.
There are major differences between the activities and expected outcome of fixing the operational aspects of the business and fixing the overall capital structure. They both generally involve different skill sets.
Not all Interim CEOs who consult and advise with troubled companies possess all the skills and experience to deal effectively with all of the necessary issues.
While some turnaround and restructuring professionals are adept at both fixing underlying operational problems and managing a severe crisis, other consultants skills, experience are only suited for specific operational issues (e.g., supply chain management, logistics, production efficiency, etc.)
In many instances, it is advisable to hire an Interim CEO from a turnaround firm with which has different individuals addressing different areas, thereby maximizing the strengths of all of the professionals.
When a business’s survival is on the line, it is extremely important to select an Interim CEO that can alter the outcome. Find a turnaround professional that has actually “been there and done that,” i.e., actually turned around troubled businesses and/or restructured their capital structures.
Conduct an extensive interview process to assess both qualifications and personal comfort with the individuals.
Once the decision is made, provide the specialist with full support to get the job done. Do not let egos block the path to a recovery. The stakes are too high.
