{"id":5327,"date":"2023-10-17T15:33:09","date_gmt":"2023-10-17T13:33:09","guid":{"rendered":"https:\/\/kmnholdings.co.za\/consulting\/?page_id=5327"},"modified":"2023-10-18T10:50:46","modified_gmt":"2023-10-18T08:50:46","slug":"directors-during-the-implementation-of-turnaround-strategy","status":"publish","type":"page","link":"https:\/\/kmnholdings.co.za\/consulting\/directors-during-the-implementation-of-turnaround-strategy\/","title":{"rendered":"Directors During The Implementation Of Turnaround Strategy"},"content":{"rendered":"\t\t
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THE ROLE OF BOARDS OF DIRECTORS DURING THE IMPLEMENTATION OF A TURNAROUND STRATEGY<\/strong><\/p>

By Dr Kaizer M. Nyatsumba (MBA, PhD), Business Rescue Practitioner, Turnaround Strategy Expert and Chartered Director (SA)<\/strong><\/p>

So, you have decided to implement a turnaround strategy in your company to arrest its decline and return it good health? Well done. That is a very wise decision. As they say, a stitch in time saves nine. Implemented appropriately and timeously, a turnaround strategy is certain to stop your company\u2019s bleeding and to set it on a path to a new growth trajectory.<\/p>

Implementing A Turnaround Strategy<\/strong><\/p>

Implementation of a turnaround strategy is necessitated by \u201ca turnaround situation\u201d. Such a situation arises when a company has been suffering a decline in financial performance over an extended period, thus making it imperative that a series of tough, decisive actions are taken to reverse that decline. Failure to take such steps in good time is certain to lead to business rescue or even liquidation.<\/p>

Therefore, the implementation of a turnaround strategy is a matter of survival, and not a matter of choice. It requires a certain kind of leadership which is different from that which is necessary when leading a stable company.<\/p>

The Role of The Board of Directors<\/strong><\/p>

Section 66(1) of the Companies Act 71 of 2008 confers full authority on a Board of Directors for the running of a company. Specifically, the Act states that \u201ca company must be managed by or under a direction of its Board, which has the authority to exercise all of the powers and perform any of the functions of the company, except to the extent that this Act or the company\u2019s Memorandum of Incorporation provides otherwise\u201d.<\/p>

That means that, ultimately, a Board of Directors is directly responsible for a company\u2019s success or its failure to implement a turnaround strategy timeously. However, to be able to oversee the implementation of a turnaround strategy, a Board of Directors must know what a turnaround strategy is, what occasions it and what is expected of the Board during the implementation of that strategy. This is important because the literature on turnaround strategy is emphatic that running or governing a company during a turnaround period is different from doing so during a period or normality.<\/p>

To appreciate that fact, let\u2019s turn to the words of turnaround practitioner and academic Dr Donald Biebault (1999):<\/p>

A turnaround situation is an abnormal period <\/u><\/strong>in any company\u2019s history. It requires management approaches unique and distinctly different<\/u><\/strong> from those of stable or growth management. In turnaround situations, many of the old and proven management tenets, applicable to more stable situations, lose their validity. Basic principles still hold, but their implementation can take on an entirely new, and sometimes contradictory, appearance<\/em> (emphasis mine).<\/p>

Does Your Board Know What To Do?<\/strong><\/p>