The Anatomy of a Successful Turnaround: Two Approaches; One Organization; Different Outcomes
Business turnarounds are far more likely to fail than succeed, with MBB estimating only 20-30% deliver mostly or fully on expectations.
We believe that failure rate is not due to lack of effort or resources, but because of how organizations respond when performance begins deteriorating. Having worked with a wide range of businesses in distress, we’ve observed how successful turnarounds demand both surgical precision and enterprise-wide perspective - a balance few organizations achieve, especially when pressured by oversimplified external advice.
A key business unit at our global manufacturing client faced classic distress signals: eroding margins, declining market share, accelerated customer distrust and churn, and mounting operational issues. Led by a purposeful Business Unit President, they initially took the right approach, beginning with:
Comprehensive diagnosis of close to 100 individual but meaningful areas of underperformance across the commercial, supply chain, manufacturing, and technology domains
Structured approach to sift through that long list to create a prioritized recovery blueprint, with a focus on quantifying and elevating their must-win battles to the top of the list
Integrated recovery plan to mature the critical capabilities needed to tackle those must-win battles, correcting for systemic weaknesses (i.e., the factors that caused them to go into distress)
Immediate, bold action to deliver EBITDA-accretive wins that built confidence and much-needed cashflow
Enhanced trust, collaboration, and productive debate across a functionally siloed, matrixed management team to enable coordinated execution
The result? Within 18 months, they generated a ~35%+ increase in EBITDA vs. base case, created belief across a previously beleaguered team, made a huge leap forward in terms of functioning as “one” organization, and were regaining market share and customer trust.
Then came a change in directive and accompanying change in leadership at the enterprise level. Facing continued deterioration across multiple business units, the enterprise-level corporate team engaged one of MBB to plot an enterprise-wide turnaround focused on headcount and a “do less with less” mantra—the opposite of the capability-building and maturation needed to deliver long-term viability. The consultants' recommendation relied heavily on generic industry benchmarks, suggesting aggressive headcount "right-sizing" across all business units to match theoretical staffing ratios, only partially relevant to the unique context of the client. Armed with this external validation, management implemented sweeping, company-wide cost reductions and restructuring.
While rightsizing represents an appropriate and often necessary need in these situations, this sledgehammer approach, legitimized by oversimplified benchmarking, made no distinction between struggling units and those showing recovery. It ignored the unique operational requirements and improvement trajectories of individual businesses. The result? The successfully turning-around business unit saw its hard-won gains at risk of stalling out and, worse yet, potentially evaporating. It was forced to abandon its systematic improvement approach in favor of broad-stroke cuts that matched arbitrary industry standards.
This case reveals why successful turnarounds must progress through four distinct phases, each requiring specific, fact-based approaches rather than generic solutions:
Recognition: The typical response is to rationalize declining performance, treating early warnings as temporary setbacks or blaming external factors. Successful organizations instead probe deeper when subtle changes appear, conducting granular analysis of actual performance drivers. Perhaps that customer who’s stated that they are considering dual-sourcing isn’t using that statement simply as a bargaining ploy.
Strategic Planning: Most organizations rush to cost-cutting and restructuring, often validated by industry benchmarks and peer comparisons. As our manufacturer story shows, this approach destroys value even in healthy business units. The key is systematically mapping current capabilities against market requirements, identifying specific gaps, and developing a clear sequence of actions - from stabilizing core operations to enabling growth. If you don't create a direct throughline from what ails you, to the strategy needed to course-correct, and the resources (human and financial) to execute against the same, you're likely to fail.
Phased Execution: The true test comes in moving from plan to action. Our manufacturing client’s initial success stemmed from maintaining focus and discipline in implementation. Rather than trying to fix everything at once, they concentrated resources on "stroke of the pen" initiatives for immediate gains (e.g., taking price where contracts allowed for it, rationalizing low-margin products, ensuring only margin-appropriate orders made their way into limited manufacturing capacity, etc.). Only after demonstrating measurable improvements did they expand their scope to address longer-cycle and investment-intensive initiatives. This disciplined approach built credibility with both the workforce and senior leadership, creating a foundation for sustained change.
Sustainability: Prior to the enterprise-driven reset, our business unit client demonstrated how sustainable turnarounds build momentum through a virtuous cycle. Each win generated resources for the next phase of improvement. Early EBITDA gains funded critical capability investments. Improved operational performance rebuilt customer confidence, leading to increased orders. Most importantly, the team's growing track record of delivering on commitments attracted additional enterprise support and investment. In turnarounds, actions speak louder than words - it's the consistent delivery of promised results that transforms skepticism into belief and tentative support into genuine commitment.
The lesson is clear: successful turnarounds require courage. Courage to recognize the unique needs of each situation, to resist the lure of oversimplified solutions, and to stay the course when pressure mounts.
So, before adopting a one-size-fits-all remedy for your organization, ask yourself: What's the real price of the quick fix? Which capabilities must you protect and strengthen to ensure sustainable recovery? And who will have the courage to protect what's working when the pressure is on?