CM Lecture 2

Management > Crisis Management > 3 perspectives > Interdependence of the 3 models > Crisis and learning > Slatter's recovery > Meyer's 9 causes of failure > Hoffman's turnaround strategies

Hoffman's turnaround strategies

An academic, Richard Hoffman wrote on corporate recovery. He noticed that the effects of the environment, as well as crisis within the company, were important if a firm was to employ a successful turnaround strategy.

Like Meyer, his work was both descriptive and prescriptive, as he thought it essential that firms be provided with possible recovery strategies:

1. New leadership, which is a nicer term for "sacking lots of people, beginning with top management", which is important to restore company morale and rebuild trust. How can current managers be trusted if they were responsible for getting the firm into the crisis in the first place? There are different categories of crises where managers will not be replaced, such as external crises where it is proved beyond a shadow of a doubt that management is not to blame. This process takes from a few days to a few weeks.
2. Cost reduction (brought in by new leadership) such as losing people, is employed to stabilise the situation.
3. Asset redeployment. This process, plus cost reduction, takes from one to six months.
4. Selective Product/market strategy. This process takes from a month to a year.
5. Repositioning. This process takes the longest, from one to two years.

The firm will need to spend time making itself crisis-secure, employing such methods as monitoring changes in the environment and conducting audits of the company's performance before and during the crisis. They will also need to establish Crisis Management Teams (CMT) to create built in redundancy in communications (back up plans). Finally, a firm needs to develop a favourable culture with improved management control and communications.

Discussion

Invulnerability Syndrome