It uses analysis and planning to save troubled companies and return them to solvency, and to identify the reasons for failing performance in the market, and rectify them.
Turnaround management does not only apply to distressed companies, it, in fact, can help in any situation where direction, strategy or a general change of the ways of working needs to be implemented.
More and more turnaround managers are becoming a one-stop-shop and provide help with corporate funding (working closely with banks and the Private Equity community) and with professional services firms (such as lawyers and insolvency practitioners) to have access to a full range of services that are typically needed in a turnaround process.
Factors that cause this circumstance are new innovations by competitors or a downturn in demand, which leads to a loss of market share and revenue.
In public organizations are external shocks, like political or economic, reasons that could cause a destabilization of a performance.
These measures ignore other performance indicators such as environmental impact, employee welfare, and corporate social responsibility.
This political point of view suggests that a miscarriage in a public service may happen when key stakeholders are continuously dissatisfied by performance and therefore the survival of an organisation might be unclear.
In the public sector, success and failure is judged by higher bodies that bestow financial, legal, or other different resources on service providers.
If decision makers choose to take a new course, because of the realization that actions are required to prevent an ongoing decline, they need at first to search for new strategies (4).
Questions that need to be asked here are, if the search for a reposition strategy should be participative and decentralized, secretive and centralized, intuitive and incremental, or analytic and rational.
This means, that a compressed strategy process is necessary and therefore an extensive participation[clarification needed] and analysis may be precluded.
This can be done by selling assets, abandoning difficult markets, stopping unprofitable production lines, downsizing and outsourcing.
This includes developing new products, entering new markets, exploring alternative sources of revenue and modifying the image or the mission of a company.
This turnaround strategy is used, because it is theorized that new managers bring recovery and strategic change, as a result of their different experience and backgrounds from their previous work.
As a result, qualified employees resign, the organisation is discredited and the resources left will run out as time goes by.
[10] With a Renewal a company pursues long-term actions, which are supposed to result in successful managerial performance.