Corporate Failure Research Published by the Turnaround Management Society

The Turnaround Management Society's main objective is to promote sustainability and best practice in the turnaround process. The executive director of the TMS is Dr. Christoph Lymbersky. He is also a turnaround management academic with considerable professional experience in turnaround and restructuring large corporations and mid-sized companies.

Los Angeles, CA, March 03, 2014 --( The Turnaround Management Society is involved in an ongoing research project that looks at why companies fail. They asked 405 turnaround managers and restructuring experts their opinions as to what usually leads to a corporate crisis. This 2014 survey aims to highlight the internal and external reasons why companies enter crisis through the experience of corporate restructuring professionals in the last five years. It will also identify particular cases that professionals have witnessed fist hand during their assignments. This crisis research is then compared to the results of the previous surveys in order to identify any changes in company failures over the last 40 years. This survey has enabled TMS to formulate the International Turnaround Management Standard, which provides CEOs and turnaround professionals with a framework of proven strategies for the management of a crisis situation in business.

Survey Findings

The TMS survey has revealed that the majority or corporate crisis are due to the mistakes made by the top tier of management. Usually it is because management has continued to use a particular marketing strategy that has ceased to be beneficial to the company. This is generally because management had lost touch with their customers and markets. Bad strategic decisions are often made if a strategy is not clear to all involved. Also, if a strategy is not flexible enough to adapt to change and managers underestimate market changes, their competitors will quickly gain new customers.

The TMS survey also reveals that another major cause of corporate failure are managers who have lost their entrepreneurial vision. This vision is vital in order to remain competitive in the race to draw in new customers. Managers without vision often stick to previous tried and tested techniques and will not take risks on new ideas and keep marketing strategies flexible to change.

Another reason for a company's downturn is insufficient communication. Often when a crisis becomes apparent, managers will cease to communicate or communicate less in order to downplay the situation. This is usually done while job and salary cuts are being implemented. Other common causes of corporate crisis as identified by the survey are financial and cash flow difficulties caused by poor accounting and financial planning. The survey also identified a lack of staff education regarding business as being another cause, and product line expansion at the wrong time.

The whole article is published in the Turnaround Management Journal and on the Turnaround Management Society website:
Turnaround Management Society
Sabine Klug