In Corporate Recovery: Managing Companies in Distress, authors Stuart Slatter and David Lovett, drawing upon decades of experience in Great Britain and abroad,¹ sketch a roadmap for the successful rehabilitation of companies in "turnaround situations." As defined by the authors, a turnaround situation presents itself whenever a firm's "financial performance indicates that [it] will fail in the foreseeable future unless short-term corrective action is taken."² This definition is broad enough to include firms that do not have a current cash crisis, which is appropriate because firms often exhibit symptoms of failure long before any crisis begins:

Such firms are often stagnant businesses with underutilized assets and ineffective management. Many such firms have survived over the years in spite of their poor management. If a stagnant business is not turned around, a crisis situation will eventually ensue because the management is unlikely to be taking the necessary steps to adapt to the changing product-market environment in which the firm is operating... By adopting turnaround strategies early enough, recovery can take place without the traumas usually associated with a turnaround situation... If no corrective management action is taken in a turnaround situation, the firm becomes insolvent, since external events can only postpone insolvency, not avert it.³

Because a turnaround situation may present itself at almost any stage of the corporate life cycle (excepting the start-up and early-growth stages), the authors note, the book should be of as much interest to the everyday manger as to the turnaround professional. After all, "turnaround management is everyday management."⁴

The authors seek to dispel the myth, often fueled by the media, that the turnaround manager is "some sort of corporate commando on a 'seek-and-destroy' mission" to achieve short-term cost reduction.⁵ To respond meaningfully to a turnaround situation, the authors argue, management must adopt a "holistic" strategy that looks beyond mere short-term crisis stabilization and toward long-term strategic change that will harness the firm's sources of competitive advantage with a view toward future growth—i.e., sustainable recovery. The key elements of such a strategy, though they may differ in their particulars, are in essence the same for every firm in every industry, namely: (1) crisis stabilization, (2) leadership, (3) stakeholder support, (4) strategic focus, (5) organizational change, (6) critical process improvements and (7) financial restructuring. Although set forth in linear fashion for the sake of discussion, these elements are interdependent. The virtue of an effective turnaround management team is the ability to address them simultaneously, in "real time."

Like most business books, Corporate Recovery consists primarily of stand-alone chapters that most readers will consult on an as-needed basis. Chapter 1 introduces the turnaround industry and emphasizes the authors' broad view both of what constitutes a turnaround situation and of the objectives of turnaround management. Chapter 2 discusses the common symptoms—and more importantly, the underlying causes—of corporate failure, rejecting as overly simplistic the "it all comes down to management" school of thought and highlighting the various internal and external forces that can contribute to a company's demise. Chapter 3 provides a thorough anatomy of a crisis situation, from the various risk factors (environmental, managerial and organizational) that make a firm more susceptible to crisis, to the effect of a crisis on both management behavior and the overall health of the firm. Chapter 4 provides a general overview of the turnaround process and lays the foundation for more detailed discussion of the authors' "seven essential ingredients" for a successful recovery in Chapters 6-8, 10-12 and 14. Chapter 5 discusses the process of diagnostic review, from the initial "quick-and-dirty" analysis of whether (and how) the business can survive in the near term to the increasingly informed analysis of its prospects for achieving sustainable recovery. Chapters 9 and 13, respectively, cover the development and implementation of the business plan going forward.

Corporate Recovery is eminently readable. The authors' writing style is lucid and unassuming, using language plain enough not to leave non-management readers (such as this reviewer) in the dust. While the authors backstop their positions with academic research, they avoid in-depth discussion of theoretical concepts. Having been "at the 'coalface' of turnaround management"⁶ for more than 20 years, the authors prefer empirical observations and examples drawn from their own experience and from several high-profile turnarounds in the United Kingdom and Europe (e.g., British Aerospace, Westinghouse Electric Corp., Bruno Banini and Philips Semiconductors). For more "visual" thinkers, the authors intersperse graphs, tables and flow charts (30 figures in all) at opportune times throughout the book. These figures are rarely (if ever) superfluous, and complement the analysis nicely.

The authors' instructional methods mirror their management styles. They cover quite a bit of ground in relatively little space (320 pages), using a hit-and-move approach that provides a brief primer on each topic, refers the reader to outside sources for more in-depth coverage and gives the bottom-line assessment of what must be done. As one might expect from veteran turnaround artists, the authors are very frank, and their advice often takes the form of pithy comments that seem designed to throw a little cold water on the situation. For example, on formulating a business strategy, they write: "It is a common mistake for troubled companies to assume they have some sort of divine right to exist. Few companies have that luxury, and the strategy must justify an organization's existence very clearly."⁷ On implementing the business plan, they write: "The association of one individual with a specific task is key. Collective responsibility inevitably leads to a collective vacuum."⁸

The authors also exhibit a keen understanding of human psychology in an organizational setting. For example, in their chapter on critical process improvements, the authors note that "[t]roubled companies are often characterized by the lack of any meaningful information, or the production of information to justify internal behaviours or sustain compensation packages despite trading realities." The cause is simple and eminently reasonable from the individual manager's perspective, namely: "There is a fear that measuring things will expose problems and lead to blame being apportioned. This leads to arguments over the reliability of information that is provided. ('It doesn't tell me what I want to hear, so it must be wrong!')." The solution? A new process of providing and sharing information that recognizes and respects that "people behave according to how they are measured" and, accordingly, creates "an 'amnesty from the past' so that historical performance can be 'forgiven' and a clean break from past behaviours can be made."⁹ In this and several other passages throughout the book, the authors are very careful to separate problematic personality and character traits from the people who exhibit them, disparaging the former while empathizing with the latter. Although the authors advocate playing "hardball" with employees as needed, they state unequivocally that it is "management's duty to treat everybody, every individual member of the company, with respect, both those who stay and those who have to leave."¹⁰

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Management or employees finding themselves in a turnaround situation might turn to the book for a glimpse of the long road ahead, while the management of a healthy firm might look to it...to ferret out behavioral and organizational problems....

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Corporate Recovery will serve different purposes for different readers. This reviewer found a cover-to-cover reading very rewarding and would recommend the same (or, at the very least, Chapters 1-4) to anyone seeking a "big picture" perspective on the turnaround industry. An experienced company doctor who is already familiar with most of the principles in the book might nonetheless find it a handy desk reference or self-checklist to help stay grounded during the hectic turnaround process. Management or employees finding themselves in a turnaround situation might turn to the book for a glimpse of the long road ahead, while the management of a healthy firm might look to it in connection with a critical self-assessment to ferret out behavioral and organizational problems that could develop into a full-blown crisis situation if left unchecked. The various stakeholders of a troubled business (and especially, the would-be providers of interim or exit financing for the turnaround) might use the book as a rubric against which to evaluate management's performance and the firm's prospects for a sustainable recovery. With so many potential uses, Corporate Recovery would be a valuable addition to any business library. In this reviewer's opinion, it should be standard issue in the arsenal of every turnaround professional.

Footnotes

1 Mr. Slatter is a founding partner of Stuart Slatter & Co. and the chairman of Stuart Slatter Training, as well as a visiting fellow in Strategic and International Management at the London Business School. Mr. Lovett was an Andersen partner for 18 years and founded its London-based turnaround practice in the early 1990s. He is currently a managing director of AlixPartners (London). Both authors were founding members of the U.K.'s Society of Turnaround Professionals.

2 Slatter, Stuart and Lovett, David, Corporate Recovery: Managing Companies in Distress 1 (Beard Books 2004) (1999).

3 Id. at 1-2 (emphasis in original).

4 Id. at xiv.

5 Id. at 5.

6 Id. at xiv.

7 Id. at 217.

8 Id. at 295 (emphasis in original).

9 Id. at 290-91.

10 Id. at 177.