Despite economic growth and healthy business environment in some areas, for various reasons some companies become unviable financially and thus need to liquidate. When companies do liquidations, they have said to reach the peak of a financial difficulty because a liquidation is normally the last resort.
Liquidations often lead to distress sale of assets, and potentially large losses to the creditors. Thus, if companies cannot avoid them, they try out various business rescue procedures to improve the overall money recovered for the creditors.
Sadly, this situation is never isolated. In the U.K. for example, the number of companies becoming insolvent have ranged from a high of 25,000 liquidations in 1992 to around 14,000 liquidations in 2003. This is also the time when turnaround specialists gain increasing importance. These are “professionals who turn around companies in distress (normally before the company goes into liquidation) to recover as much money as possible for the creditors and try to put the company back on a path of sustainable existence.” In the U.K. they group and call themselves the Society of Turnaround Practitioners (STP). STP has about 145 members in the UK.
An article in onesixsigma.com explored the possibility of using Six Sigma in STP’s operations. Mani Venkatesh, author of the article, interviewed members of STP and asked if they knew about Six Sigma tools and techniques, and had the opportunity to use them.
While all of the respondents believe that process improvement tools are critical to their job, results of the survey show a low perceived utility as well as low awareness and knowledge of many commonly used Six Sigma tools and techniques. Specifically,
- While identifying Key Performance Indicators (KPI’s) & appropriate targeting is considered critical, the knowledge and use of Measurement System Analysis and Gauge Repeatability & Reproducibility to ensure integrity of these numbers is limited
- While detailed analysis and running of financial numbers and break even is deemed important, the knowledge and ability to use process data and do appropriate hypothesis tests to isolate relevant factors or control charts to detect trends is limited.
- While improvements are deemed critical, knowledge of scientifically testing robustness of new processes and gaps in existing processes using Failure Mode and Effects Analysis techniques seem limited.
- Further, 53% of respondents had heard of Six Sigma but were not familiar with it while only 12% felt they were familiar with it – so an opportunity to train the community in six-sigma techniques may exist.
Venkatesh then posed the following concerns to Six Sigma professionals:
- Do we value this opportunity of expanding usage of Six Sigma into the corporate turnaround industry, and do similar opportunities exist on a global basis.
- What strategy do we adopt to expand usage in this case and to other such cases –do we arrange association to association interactions, do we advocate usage of specific tools or the entire DMAIC approach in all cases etc.
- What are the key issues and perceptions we need to be cognizant of and tackle – time to implement, complexity, availability of talent etc.
- Are there best practices we can borrow from the turnaround industry – stakeholder management, identifying and delivering quick wins, cash flow management and managing to very tight timelines.
Source: Six Sigma and Corporate Turnarounds
