Hamburg, Germany (PRWEB) February 11, 2014
The complete survey results will be published in the 1st issue of the Turnaround Management Journal in 2014 and on the Turnaround Management Society website. The last survey on this subject was carried out in 1990. In the full text the results of this survey are explained in more detail and compared to previous surveys in order to identify changes over the last 40 years of why companies fail.
According to the 2014 "Why do Companies Fail" survey almost 88 percent of respondents held top management responsible for a crisis situation, and 30.3% blamed middle management. The most commonly cited reason was corporate strategy (45.5%) followed by internal communications (30.2%), marketing (24.3%), sales (24.2%), and customer service (15.2%).
The survey highlights 5 prominent problem areas:
1. Internal Communication
In almost a third of all situations, insufficient internal communication played a big part in fostering the crisis. Often the management does not communicate much once a crisis becomes obvious, or the communication is not clear enough. According to the survey a common mistake seems to be that the management plays down the severity of the crisis, or even communicates that everything is okay, while working on job cuts and salary reductions in the background.
2. The Educational Background of the Management
A third (30.3%) of all turnaround consultants found that the management of the company was not very well educated in business matters. The Turnaround Management Society, as a not-for-profit organization, has implemented numerous projects to target this problem. The TMS certification program, “Certified International Turnaround Manager” and the turnaround framework, “International Turnaround Management Standard” are just two of them. The Turnaround Management Society also advises universities on how to set up turnaround management courses and integrate relevant theory into their existing classes in order to educate the leaders of tomorrow as early as possible.
3. The Company's Product/Market Mix
Expansion of an existing product line is not always a success and can lead to a corporate crisis (21.2%). In other cases, investment into future products and technologies was, over the years, not enough (18.2%), leading to missed technological advances to reduce production costs, a lack of features, or new technologies that competitors can provide.
4. Corporate Finance
Quite high up on the list of causes of crises in the questionnaire were liquidity and cash flow problems (27.63%), which are often caused by insufficient controlling and accounting processes (21.2%) and no or inappropriate financial planning (15.2%).
5. Human Resources
No goals or wrong goals for the workforce (15.1%) often contribute to poor performance by employees and accelerate a crisis situation. Setting no goals is as ineffective as too many goals. An employee can only spend so much time on something they are supposed to focus on. If too many goals are set some of them will suffer, or the quality of the work will decrease.
The Turnaround Management Society also compared the internal causes over a timeline of 38 years. The comparison shows for example that the lack of financial control is becoming less and less relevant as a crisis factor. In 1984 inadequate financial control still contributed to 75 percent of all corporate crises. Today, in the 2014 Turnaround Management Society survey, only 36% reported this to be a cause of decline.
To overcome the problems of why companies and turnaround projects fail Dr. Christoph Lymbersky of the Turnaround Management Society has developed the "International Turnaround Management Standard". It is a project management based method of leading a company to a sustainable turnaround.
The International Turnaround Management Standard includes financial restructuring techniques, strategic & operational strategies, marketing aspects, crisis communication with stakeholders (to maximize the internal support and minimize bad press), controlling, quality control processes, risk management, etc.