MediAvataar's News Desk
When companies find themselves in distress, turnarounds are one way to set them back on track. But turnarounds are messy and getting them right is no easy task.
It was November 2010 when Sankar Krishnan, managing director at the global professional services firm Alvarez and Marsal (A&M) and Nikhil Shah a senior director of the firm were called in to investigate claims of irregular activities allegedly involving the senior management of a textile manufacturer in India. The seriousness and potential impact of the allegations from a former employee meant they had to tread very carefully. They decided on a covert operation, since it was unclear who was trustworthy at the company and given that a direct approach might have led to evidence being destroyed that could be crucial to the investigation.
After a corporate investigations firm did an initial check and found some substance to the allegations, Shah and Krishnan decided that they first had to mount a swift takeover of the top management to get a handle on the business and the allegations. Krishnan assembled an interim management team and a forensic team to conduct investigations.
After meticulously planning every step of the takeover, the company’s CEO and CFO were invited to what they thought was a regular board meeting. They were immediately suspended, along with three other senior managers implicated in the accusations.
An interim Alvarez & Marsal management team was sent to the company’s headquarters, where they realised the full extent of the task ahead: plant equipment was obsolete; costs of raw materials were soaring; the brand was tired; long overdue payments were coming in at irregular intervals; there was no systematic or scientific inventory management. The challenge was multifaceted and daunting.
Over the years, Krishnan and Shah have implemented successful turnaround strategies in many struggling companies around the world. This particular case was no exception – in fact they assured me it was far from being their most challenging they had seen in their professional careers. In an interview on the case study of this turnaround, I asked them how they start when they first enter a turnaround situation and how they get a company back on its feet.
Getting to Grips with the Situation
“Cash is king”, Krishnan explained. “The first thing you want to do is get to grips with the liquidity of the business. This entails finding out exactly where cash is coming from, how much is coming in, how much is going out, and figuring out how to maximise incoming cash flows. This is crucial, since it ensures that there is enough cash to keep the business going, and buys management time to think ahead and gives them space to maneuver.”
The second step according to Shah is to determine where operational improvements can immediately be made. “We usually try and identify which aspects of the production process can be improved, and where productivity gains can be made. Where possible we also try to identify where wastage can be reduced, and search for better suppliers.”
Finally, the third step entails implementing the short-term turnaround plan. Shah and Krishnan typically spend the first 30-60 days designing a plan around what the business drivers should be going forward, taking into account the stakeholder issues, customer issues and potentially new methods to introduce to improve processes.
However each case is unique, and while these methods are broadly applicable to most cases, there are other company- or country-specific factors that must be taken into account.
Dealing with Stakeholders
Local culture (whether company culture or national culture) is one such factor. In the US, the top-down approach and fast decision-making style sits well with managers and employees; plus the court system is strict and bankruptcy procedures are orderly. “You are then working with secured lenders who really have control of the company” said Krishnan.
But in markets such as India, “upward of 70 percent of the businesses are owned by the founder so you have to have a very consensual agreement with the promoter…we may have the title of “chief restructuring officer” but if we can’t work wih or through the CEO or the chairman, nothing will get done”.”
Employees, suppliers, creditors and customers add to the complexity of executing a turnaround. “It’s very, very important to over-communicate in these situations. You have various stakeholders who can all put a stop to what you’re doing if they want to. Over time, once you build up the confidence and credibility with them, everyone starts moving in the right direction. But in the beginning communication is critical,” said Shah.
Communication is one of the key skills companies like A&M look for in the people they hire. Shah and Krishnan also share that analytical capability, objectivity and the ability to build consensus are essential skills to make a career in the turnaround industry. The ability to carry people and sell the plan can be adapted to most situations despite the varying degrees of distress A&M consultants find themselves involved in.
Warnings signs - The Writing on the Wall for Companies
In their experience, Shah and Krishnan point to a few key warning signs that a business is heading for distress. First, when an organisation expands into areas that distract it from its core business, capital and resources can be allocated to the wrong places and cause its cash flow to dry up. Krishnan cites the story of two brothers who ran an ink-manufacturing company. They decided to go into the aircraft leasing business and ended up losing €120 million. Secondly, expanding into unknown geographies without enough preparation or understanding of local conditions, which can often cause debt to build up and cash generation to suffer. Thirdly, assuming that things don’t need to change as long as the company is generating revenue. There are always things that can improve, from cash flow to operational efficiency. Companies that have become complacent are often those that end up in turnaround situations.
Authored by Claudia Zeisberger, INSEAD Senior Affiliate Professor of Decision Sciences and Entrepreneurship and Family Enterprise
Becoming a parent can be a daunting endeavor, full of many “firsts.” But before first words and steps, come first foods. So who do new parents turn to most for advice about the best baby food/formula to buy for the first time? The short answer is: family and friends. Forty-four percent of global respondents say they learned about baby food from loved ones, and nearly four-in-10 global respondents (38%) say that recommendations from friends and family had the most influence on their purchase decisions.
But consumers don’t just rely on their circles of friends and family; recommendations from health experts are also highly influential. Thirty-six percent of global respondents say they learned about foods/formula from a baby health expert, and 34% say these opinions influenced their purchase decisions.
Regionally, recommendations from health care experts top the list of most influential information sources in Latin America, cited by 42% of respondents, while their influence is significantly below average in North America, cited by only 18%.
“Marketers must prove their value to not only the shopper but to a broader network of trusted sources,” said Liz Buchanan, director, Global Professional Services, Nielsen. “Product endorsements from doctors, hospitals and health care professionals can hold tremendous clout with parents. As a parent’s first introduction to baby food/formula is often from these trusted advisors, aligning offerings with affiliations can provide an instant gateway to first-time users. But quality and good customer service will keep customers coming back.”
TV ads are also an important source of information, but their influence on decision-making is notably lower. One-third of consumers say they learned about baby foods through a TV ad, but less than one-quarter (23%) say this source influenced purchasing, a 10-percentage point difference. The use of TV ads to learn about new products and to influence purchasing decisions is well below the global average in Europe (22% use, 13% say they’re influential) and North America (20% and 13%, respectively).
Similar gaps between the percentage that use a source to learn about a product versus use a source to influence purchase decisions also exist for the other sources included in the survey. For example, the presence of a product on store shelves is a key source of awareness for nearly one-third of global respondents (30%)—including 36% in North America, where it’s the most commonly cited source—yet only 17% globally say it influenced their purchase decision.
Other findings include:
Almost half of baby food (46%) value sales come from North America and Europe, while Asia-Pacific accounts for 49% of baby food and 53% of formula value sales. More than half (51%) of diaper value sales come from North America and Europe, but the most rapid growth is happening in developing countries.
Asia-Pacific leads global respondents who say they purchase baby care products online.
Organic baby food value sales increased 26% over the past two years in 16 select markets, while non-organic products declined 6%.
Skin protection and comfort are the most important diaper purchase considerations among global respondents.
NetworkPlay, an SVG Media company, today announced winning an exclusive mandate from Airtel Digital TV to monetize all their digital advertising inventories. Airtel Digital TV is the DTH arm of leading global telecommunications provider Bharti Airtel.
SVG Media is the largest Indian Ad-Tech company with brands like Tyroo, DGM India, SeventyNine & NetworkPlay in its portfolio. In addition to DTH advertising, SVG media delivers performance, mobile and native advertising to digital marketers and advertisers and helps leading publishers monetize their digital assets.
Anurag Gupta, India MD, SVG Media said, “NetworkPlay has been working with Airtel DTH since their launch in India. Today, we are extremely delighted to take our relation to the next level with this exclusive partnership, which further strengthens our position in the industry as a leading digital ad-tech company. NetworkPlay’s technology will help in significantly growing the advertising revenues for Airtel Digital TV.”
“With the increasing penetration of HD technology, coupled with an overall growth in the DTH sector, the business is expected to multiply as more brands have started to explore DTH as a platform to reach out to the television audience”, he further added.
Deepak Jolly, currently Vice President Public Affairs & Communication to take up a new General Management assignment
Ishteyaque Amjad joins Coca-Cola India as Vice President, Corporate Affairs
Coca-Cola India, today announced senior leadership changes in keeping with its focus on providing more choice to consumers. Deepak Jolly, currently Vice President, Public Affairs & Communication has been entrusted the responsibility of setting up a new function within the Company which will promote its growing portfolio of niche brands within the franchise bottling territories. Deepak will continue to report to Venkatesh Kini and will take over his new responsibility starting November 1, 2015. The Company already has an established portfolio of premium brands like Schweppes Tonic, Schweppes Gingerale, Schweppes Soda and soon to be launched Fuze Tea.
Deepak is a veteran of the Coca-Cola system who has led the Public Affairs & Communication function within the company for over 10 years. He joined Coca-Cola India at a time when the Company was facing significant challenges and helped turn around the business by focusing on reputation management. Over a career spanning more than three decades, he has worked with top corporates like Hindustan Unilever, PepsiCo, Godfrey Philips and Bharti Airtel. In preparation for his new assignment, Deepak will soon attend an executive leadership program at a leading University in USA for a period of six weeks.
Ishteyaque Amjad, who has joined Coca-Cola India, today, will take over the responsibility of the Public Affairs & Communications function for India and South West Asia. Ishteyaque most recently was Director Corporate Affairs for Cargill, based in Singapore. Ishteyaque joined Cargill in 2008 to establish the Corporate Affairs function for their India business. He launched Cargill’s ‘Nourishing India’ program that aimed to provide solutions for food and nutrition insecurity. In a career spanning more than two decades, he has held senior roles in companies such as HCL Enterprises and Essar Group and also served with the Indian Army. He is a Post Graduate from Symbiosis Institute of Management Studies in Pune and a Bachelor of Economics from Aligarh Muslim University. He is also an alumnus of the Indian Military Academy, Dehradun.
Announcing these changes, Venkatesh Kini, President, Coca-Cola India and South West Asia, said, “Deepak has accepted the responsibility to lead the premium and niche segment in the franchise bottling territories. In many ways, he is returning to where he started his career from – the Operations and Sales role in a large FMCG Company. I wish him the very best as he takes up a very challenging new assignment. I also welcome Ishteyaque Amjad to the Coca-Cola family. He has solid credentials and will make a great addition to our leadership team.”
Mullen Lowe Lintas Group hires Sriharsh Grandhe to head LinEngage
LinEngage, the experiential marketing & activation arm of Mullen Lowe Lintas Group has announced the appointment of Sriharsh Grandhe (Harsh) as Executive Vice President based in Mumbai. He would be reporting to Vikas Mehta, CMO | President – Group Marketing Services, Mullen Lowe Lintas Group.
Prior to joining LinEngage, Harsh was with the WPP firm, POSSIBLE Worldwide Singapore as the Engagement Director. At POSSIBLE, Harsh was managing the global rollout of Standard Chartered’s Responsive Website, a first in the Banking domain across 55 countries in APAC, EMEA & Americas. Prior to POSSIBLE, Harsh was an AVP & Practice Head at Wipro where he was responsible for rolling out Marketing as a Process for several global businesses from Europe, US & Australia.
Harsh began his career with Tata Infomedia about two decades ago and has navigated an illustrious journey spanning Advertising, Consumer Engagement, Publishing & Retail. Harsh is an experienced professional across the marketing continuum with a pronounced focus on digital and activation. Throughout his professional journey, he has driven various marketing programs for Standard Chartered, P&G, J&J, a global major in Big Data & Cloud Computing, Large Australian Telco, a Financial Services Major in US and more such global businesses across the markets of US, APAC and Europe.
Speaking of his appointment, Vikas Mehta said, “Our ambition for LinEngage is to make consumer engagement an essential part of a brand’s narrative. A lot more innovation is possible in the area of creating meaningful consumer experiences. Under Harsh’s leadership, we are keen to make strides in strengthening this practice in an industry that’s largely driven by tactical activations.”
LinEngage offers specialist brand engagement expertise to a host of clients in India. Apart from its focus on the urban pockets, LinEngage boasts of a bespoke rural offering – LinTerland. The motive is to help clients capitalize on the consumer-engagement opportunities in heartland India. Both the urban and rural offerings of LinEngage have been growing steadily over the past few months with host of new business wins. Notable clients include Johnson & Johnson, Franke Faber, Bayer, UltraTech, Castrol, ICICI Prudential and Byju’s to name a few. Harsh’s remit will be to evangelise the experiential marketing practice for the group and further expand the portfolio.
Commenting on his role at LinEngage, Harsh said, “The strong lineage of Mullen Lowe Lintas Group is no secret. India is at an exciting phase of development and the agency is experiencing both momentum and growth. LinEngage is in a sweet spot right now with only one direction to go - upwards”
Harsh has been the recipient of awards at DMA for world-class marketing & activation programs for brands like Visa, Madura Garments etc. A familiar face in advertising he has also worked in agencies such as iContract, Rediffusion Y&R and JWT.