Press and Awards
Nikkei Business
"People are paying attention to the turnaround business in the US;
Case One: Turnaround specialist, an emergency room doctor"
By Koichiro Sakai, New York Bureau Chief
Case 1: The Turnaround Specialist (translated from Japanese)
U.S. business news has been mentioning turnaround specialists quite a bit lately. A very applicable analogy is to describe turnaround specialists as emergency room doctors. They stop the bleeding and stabilize the victim. For instance, in February of 1998, Pam Am announced the birth of a new airline company after facing bankruptcy just two years ago. The actions were credited to a hired specialist from Florida.
In order to define who and what a turnaround specialist is, we target one of the best specialists in the business, chosen by the Turnaround Management Association in Chicago, Ms. Renee Fellman--CEO of Interim Management Company. She is in the business of reviving a dying business and "operates" in order to get the "patient" to good health.
Starting in January 1995 until April 1996, Ms. Fellman worked from 7:00 a.m. until 10:30 p.m., 7 days a week attempting to rebuild PML Microbiologicals, Inc. PML lost $1.61 million on sales of $15.2 million in 1995. After 15 months, the company was back in the black, earning $670,000 in 1997.
When Ms. Fellman took the job at PML in January of 1995, she took no title, but with the consent of the board of directors, she had full operating authority. She began by "stopping the bleeding," a procedure used by virtually every turnaround specialist. In this first stage, the specialist determines how much money the company has and how much flows where. This is the most important step for the specialist: to understand and control the cash flow of the company.
Another common tactic is to lay off people in order to cut costs. "Sometimes, however, the company has already cut too many employees and we actually have to hire additional people in order to get the work done." says Ms. Fellman.
During the 1980's, there was not much competition in PML's business. By the end of the 1980's, however, strong competitors entered the Northwest, resulting in a price war. PML acquired a troubled competitor, and the acquisition compounded the company's other problems.
Two weeks after Ms. Fellman entered PML, she gathered all key managers from California, Oregon, and Ontario. There in the corporate office, they created a recovery plan. Armed with accurate financial data, she and the managers identified existing problems with the company and proposed solutions. Ms. Fellman then ensured plan implementation by providing task lists to each manager.
"The key factor in successful implementation," says Ms. Fellman, "is to make sure that each manager knows precisely what he is expected to do and the precise date by which he must do it."
After the managers were briefed and duties assigned, the managers were all willing to implement the changes, but some were unable to change, and some positions were no longer necessary. Ms. Fellman replaced 75% of PML's managers.
Last advice to the CEO
When the PML crisis was over, Ms. Fellman assigned herself one final task--to replace the CEO, who was the son of the company's founder. "It's very dangerous to return to the old management system under the same manager after I leave," says Ms. Fellman. Although PML is a family-controlled business, she advised the company to bring in a new CEO from outside the company, and asked the current executive to retire from that position. This was perhaps the most painful job she had to do.
Ms. Fellman has dealt with 21 companies and has been able to save 12 of them. Though her titles may have varied from job to job, the faith placed in her by the client companies' boards of directors to revive their ailing companies has remained the same.
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