Journal
AMERICAN
BANKRUPTCY
INSTITUTE
The Essential Resource for Today’s Busy Insolvency Professional
Corporate Recovery: Managing Companies
in Distress
Written by:
Stuart Slatter
David Lovett
(Beard Books, 2004)
Reviewed by:
Patrick A. Jackson
U.S. Bankruptcy Court, D. Del.; Wilmington
[email protected]
I
n 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,
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).
About the Reviewer
Patrick Jackson is clerk to Hon.
Mary F. Walrath and has accepted a
post-clerkship position with Young,
Conaway, Stargatt & Taylor in
Wilmington, Del.
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
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 standalone chapters that most readers will
consult on an as-needed basis. Chapter
1 introduces the turnaround industry and
emphasizes the authors’ broad view both
Suggested Reading
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 shortterm 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
3 Id. at 1-2 (emphasis in original).
4 Id. at xiv.
5 Id. at 5.
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 ingre-dients” for a successful
44 Canal Center Plaza, Suite 400 • Alexandria, VA 22314 • (703) 739-0800 • Fax (703) 739-1060 • www.abiworld.org
recovery in Chapters 6-8, 10-12 and 14.
Chapter 5 discusses the process of diagnostic review, from the initial “quickand-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 indepth 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 highprofile 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 com-plement 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-andmove 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
6 Id. at xiv.
7 Id. at 217.
8 Id. at 295 (emphasis in original).
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
per-sonality 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
theless 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 fullblown 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. n
Reprinted with permission from the ABI
Journal, Vol. XXV, No. 4, May 2006.
The American Bankruptcy Institute is a
multi-disciplinary, nonpartisan organization
devoted to bankruptcy issues. ABI has
more than 12,500 members, representing
all facets of the insolvency field. For more
information, visit ABI World at www.
abiworld.org.
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....
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 none9 Id. at 290-91.
10 Id. at 177.
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