A strategic turnarounds is a more serious form of external retrenchment and leads to divestment or liquidation. Turnaround strategies derive their name from the actions involved, that is, reversing a negative trend. There are certain conditions or indicators which point out that a turnaround is needed if the organization has to survive. These danger signs are:
- Persistent negative cash flow
- Negative profits
- Declining market share
- Deterioration in physical facilities
- Overmanning in physical facilities
- Overmanning, high turnover of employees, and low morale
- Uncompetitive products or services.
An organization which faces one or more of these problems is often referred to as a ‘stick’ company.