I would like to share with you the 12 most important lessons for carrying out corporate restructuring or recovery assignments. The lessons are based on many years of experience and, to be quite honest, learned through bitter experience. I will now briefly summarise the key lessons in the white paper for you.

1. 1
Lessons Learned
Twelve important lessons in corporate restructuring and recovery
operations
Introduction
Every business faces threats at some point in its life cycle. Following a period of growth, for
instance, when it finds itself in a situation in which its original structure is no longer suitable to
support efficient business processes and deliver the desired outcomes. Or when the
business finds itself in a difficult economic environment, or is forced to head in a new
direction because of changing market circumstances. Threats are often also caused by
difficult staff or other situations that constitute a constant problem in the business or manifest
themselves unexpectedly, for instance, because of illiquidity, claims, reputational damage or
fraud.
Corporate restructuring or recovery refers to the restructuring of the operations, finances,
legal personality, tax situation, asset base or other structures of an organisation. It is
opportune if potential threats result in financial risks. The distinction between restructuring
and recovery lies in the urgency with which the risk needs to be neutralised.
Generally speaking, a corporate restructuring operation is launched following a loss of capital
value. Sometimes also referred to as a “half past eleven” situation. Corporate recovery is
relevant when there is a loss of profits or – worse still – a loss of liquidity. A “five to twelve”
situation.
A recent survey by Roland Berger Strategy Consultants revealed that businesses in Europe
typically wait for 16 months before taking corrective action. Most businesses only intervened
once there was a profit crisis (54%) or – worse still – a liquidity crisis (17%).
I would therefore like to use this white paper to share with you twelve important lessons in
corporate restructuring and recovery operations (i.e turnaround operations). These lessons
are based on many years of experience and, to be quite honest, learned through bitter
experience.
© Martin M. Kok Executive Interim Management B.V. - www.executive-im.com - T. +31 344 627 286 - M. +31 6 53 83 35 56

2. 2
Lesson 1. Timely intervention.
Optimist
An entrepreneur or business manager is generally a natural optimist. If the results are
disappointing, he will tend to focus on the chinks of light or look the other way (i.e. boosting
revenues) rather than start slashing costs.
Late information
Supervisory directors and other stakeholders with ultimate responsibility for the company are
often only able and willing to intervene when hard information is available, for instance, in the
form of serious losses or independent reports that would legitimise intervention. This is by
definition already too late. Results are often also given an artificial gloss for a certain period
of time.
Consensus mentality
Late intervention is also caused by the non-confrontational consensus mentality that is
typical in the Netherlands. But the later you intervene, the bigger the problems will be.
Lesson 2. Hire independent interim specialists.
Your usual advisors will all have been involved in some sort of restructuring at one time or
another, but it is rare for them to be specialists in the field of restructuring and conducting
recovery operations. All too often, it is decided to use functional specialists such as lawyers,
tax consultants, auditors or business consultants. Or industry specialists. And they are often
sourced from within the organisation itself or from within the network. These will generally
suffice for advising on particular fields of expertise, but are not usually the right choice to
oversee an entire restructuring process or to implement a turnaround operation on site.
Avoid potential conflicts of interest. Do not make internal or external professional service
providers responsible for a restructuring or recovery operation where they already advise
your company in some other capacity, such as your accountancy firm. Make sure you avoid
even the potential for any conflict of interest by hiring an independent professional.
Restructuring is a critical operation. In experienced hands, the risks are limited. To take on
an operation like this without the right experience would be thoroughly irresponsible.
© Martin M. Kok Executive Interim Management B.V. - www.executive-im.com - T. +31 344 627 286 - M. +31 6 53 83 35 56

3. 3
High-energy motivator
Corporate restructuring is a discipline in its own right. It is a specialisation based on many
years of managerial experience in businesses at various stages in their life cycle. A good
corporate restructuring or recovery manager has strong analytical skills, and is a high-energy
organiser who is driven by achieving results. He must be capable of motivating people and
gaining their trust in a short space of time, but must also possess integrity and strong
communication skills.
Industry experience?
Specific knowledge of products or the industry is less important and may even prove
counterproductive, because the fixed paradigms of an industry may obscure the solution to
the problem. In every industry, the business processes often run along the same patterns,
and only the way they manifest themselves is different.
Experience within specific economic segments (e.g. heavy industry, service industry or non-
profit sector) may be valuable, however.
Choose an interim consultant
The strength of an interim corporate restructuring officer lies in the temporary nature of his
assignment. The building phase following the restructuring demands product-market
strategists with commercial flair. But the corporate restructuring manager is more focused on
solving problems and taking corrective actions against loss-making activities than on
strategic expansion and innovation. He has to leave the business when the restructuring is
complete.
Lesson 3. Make a plan.
Make a note of all considerations and make a judgement. If you decide in favour of
restructuring, you should then make a turnaround action plan. You will certainly need a
period of three months to prepare everything properly. If things are more urgent, it may be
that you do not have that much time. A corporate restructuring professional can perform a
quick scan of the business, business unit or activity in two to three weeks. Based on the
outcomes from this process, you can work on the turnaround plan in parallel with the
implementation of the initial recommendations. On my website (www.executive-im.com), you
will find a Quick Scan checklist which explains what is required to implement these
recommendations and put a restructuring or recovery action plan together.
Ensure that a turnaround plan is available as soon as you replace the incumbent
management or as soon as an interim corporate restructuring officer (iCRO) is assigned to
work with them.
© Martin M. Kok Executive Interim Management B.V. - www.executive-im.com - T. +31 344 627 286 - M. +31 6 53 83 35 56

4. 4
Vision, courage and experience
The turnaround action plan is used to set out the future of the various activities: which should
be divested, which need restructuring, what will the business look like at the end of the
restructuring process, and how will you achieve this? But what is really important is vision,
courage and experience. These qualities are needed to develop a strategy, to establish
management, to line up the financing, timing and implementation.
Lesson 4. Choose a project-based approach.
Restructuring will occupy a lot of management‟s time and attention for a number of months.
Time and attention which is nearly entirely focused on solving a number of one-off, largely
internal problems. The major risk of this is that the day-to-day operations will become
neglected, innovation will come to a halt and the business will find itself on a slippery slope.
Avoid the flight response and delays
The implementation of the restructuring and the day-to-day operations should therefore
always be segregated. It is preferable that different people are selected to manage and staff
the two activities. This will head off the flight response of operational managers towards the
„exciting‟ restructuring operation. It will also prevent additional problems, such as delays in
the restructuring process caused, for instance, by getting bogged down in day-to-day
operational problems. This will also prevent necessary, but controversial decisions from
being postponed or put off indefinitely, and also avoids „contamination‟ of the remaining
managers who will take up a more unifying role as they build the future of the business.
Lesson 5. Get it right first time.
“Desperate times call for desperate measures.”
Be prepared for immediate and drastic intervention in order to avoid the need for a second
round of restructuring or even a recovery operation, which will often entail additional and
unnecessary damage. Do not embark on a restructuring operation with over-optimistic
prognoses or limited finances. The process should always begin with a well-founded working
capital and cash flow forecast. This will show where there is scope for any potential savings
and revenues. It also provides an understanding of the consequences of the restructuring
measures as you proceed. What‟s more, it ensures that you are continually able to make
adjustments and see the effects of the recovery operation.
Generous margins
Refinancing is difficult to secure during a restructuring or recovery operation. The confidence
of financiers in the new plan will often be limited. Disposing of assets, divesting thriving
business activities or securing new venture capital in advance represent better options than
relying on impressive financial results or the generosity of the bank.
© Martin M. Kok Executive Interim Management B.V. - www.executive-im.com - T. +31 344 627 286 - M. +31 6 53 83 35 56

5. 5
Get the bank involved
It is wrong, but also dangerous to devise plans without involving the bank. The bank often
holds a right of pledge on the assets and is always the most appropriate financial backer of a
restructuring operation. It has a major interest in business continuity because restructuring
offers the best prospects of recovering the credit provided. Large commercial banks in the
Netherlands will usually take a largely reasonable and constructive stance in situations like
this. You should therefore go and speak with the bank as soon as the outlines of the plan are
known.
Lesson 6. Carry out two-stage restructuring.
A restructuring or recovery operation reveals problems in almost all departments and in
almost all aspects of the business operations. Solving all of these in one fell swoop is
impossible. The answer to this is a two-stage approach to deal with the minor issues once
the major issues have been dealt with. If you don‟t do this, the restructuring will get bogged
down in details and delays.
Stage 1. This should not last longer than two to three months. This stage is for dealing with
the most serious and urgent problems. Unviable activities are discontinued, superfluous staff
are made redundant, and managers at lower levels who fail to perform are replaced.
Stage 2. In this stage, the organisation will be fine-tuned. Business processes will be
streamlined, and you will go through the organisation with a fine-tooth comb. This stage
takes a lot more time and effort.
Lesson 7. Make a strategic shift.
If there is an impending loss of equity, loss of profits, or – worse still – a liquidity shortage,
this often means there is a strategic problem. Either the scale is too small, the technology is
dated, you‟re using the wrong sales channels or the production location is wrong. In many
cases, there will already be a hole in the business‟s equity position and the reputation will
have taken a hit.
© Martin M. Kok Executive Interim Management B.V. - www.executive-im.com - T. +31 344 627 286 - M. +31 6 53 83 35 56

6. 6
Choose core activities
Assess the strategic position of all activities, but look in particular at the short-term cash flow
and revenue potential. You should cease any activities that require heavy investment or are
marginal. In the stage after restructuring, the core activities need to re-lay a solid foundation
beneath your business. New policy and new activities belong in a stage that is two or three
years down the line.
Really solving the problem
Restructuring should be largely limited to cutting costs, disposing of operations or customers
with poor returns and reshuffling management. The restructuring will create breathing space
and time, but the real problems can only be solved through a strategic shift. For instance,
entering into a partnership or acquisition by a suitable party. Or even making an acquisition
to achieve critical mass, or finding a new major shareholder that represents a better match
for the organisation. Make sure you consider and raise these options at an early stage. This
will allow you to anticipate them during the restructuring process.
Lesson 8. Start by slashing the cost base.
Every restructuring must start by slashing costs, taking account of falling revenues and
margins. Do not rely on revenue growth and added value, because this is simply the wrong
approach. Restructuring always leads to unrest within the organisation and rumours in the
market. Can the business still meet its delivery commitments? What will happen with the
guarantee? You can at best maintain existing revenues by managing your sales machine
more actively or by increasing promotional efforts.
Generous margins
A restructuring is a one-off opportunity to make drastic cuts in the cost base without too
much expense. Use it. If performance is disappointing, a second restructuring is essentially a
non-starter, but if revenues grow it is usually relatively easy to find additional capacity. You
should always maintain a generous margin in the plans.
Lesson 9. Make sure that additional management capacity is available at an
appropriate calibre.
In a restructuring exercise, measures which should have been taken previously are
implemented in a short space of time. It is unrealistic to assume that such an intensive
operation can be carried out by the incumbent management team on their own. It will
therefore be necessary to replace the incumbent management team and to assist the new
management team on an interim basis by assigning a corporate restructuring professional to
work with them.
© Martin M. Kok Executive Interim Management B.V. - www.executive-im.com - T. +31 344 627 286 - M. +31 6 53 83 35 56

7. 7
Replace your management
Restructuring is a traumatic experience for incumbent managers. In some cases, they will be
treading the thin line between hope and fear for months. The confrontation with the „victims‟
follows immediately after the restructuring. Sentimentality and a sense of guilt are poor
counsel for a successful business. Don‟t take any risks: reshuffle the management team.
Replace the most senior manager, strengthen the second tier and/or integrate with a
strategic partner. The management should also be strengthened by assigning an
experienced outsider on an interim basis, who can also take on the role of the bad guy.
Lesson 10. Don’t be tempted to compromise on staff.
Choose the best and go forward with the minimum number of staff necessary to achieve the
plans. Stripes earned in a forgotten past, years of service or age should not be a factor. Only
strictly needed staff should be kept. If the business performs better than expected, additional
capacity can always be hired.
Lesson 11. Be honest and clear.
Tell the true story, even if this is difficult. Looming problems are the consequence of mistakes
made in the past. Management is therefore responsible by definition. Don‟t blame others, but
acknowledge it and start thinking about what you will do to prevent a repeat.
Go easy on crucial staff
Really good workers can pick and choose their employer. They are a hot commodity in the
labour market and will certainly start to look around if continuity is threatened. Make sure this
aspect gets the attention it deserves. Involve crucial members of staff when preparing the
restructuring. Make use of their valuable contribution and secure their involvement.
Create commitment
No one is looking forward to hearing bad news. But it is made worse if staff hear it first from
outside the business or in the media. By letting customers and vital suppliers know what the
situation is, you will gain their commitment and turn bad news into good news.
Lesson 12. Limit your dealings with the media.
Journalists do not generate customers or sales, but dealing with them can be time-
consuming. Be honest, but limit the time they occupy to a minimum. But if your business is
hit by a crisis caused by a serious flaw or a dangerous product, you should communicate this
extensively and in detail with all stakeholders.
© Martin M. Kok Executive Interim Management B.V. - www.executive-im.com - T. +31 344 627 286 - M. +31 6 53 83 35 56