Implementation of a turnaround strategy at Morison Engineering Ltd

Abstract

Globalization of markets and competition requires organizations to adapt to change incessantly. When firms fail to do so, performance declines and if the decline is not reversed, such firms can end up in bankruptcy. A turnaround strategy aims at arresting the decline and restoring a firm to a path of sustainable profitable growth. The implementation of a turnaround strategy determines whether a firm will regain its financial health or whether it will eventually end up in bankruptcy. Existing literature on corporate transformation indicates a high failure rate in turnaround efforts. The high failure rate is not caused by the turnaround strategy per se, but by poor and ineffective strategy implementation. While crafting a suitable strategy for an organization in distress is very important, strategy implementation is even more crucial. This is an aspect of strategic management that has persistently been underscored by those practitioners in management who have written about their experiences in successful corporate transformations. This research report investigates the successful implementation of a turnaround strategy by Morison Engineering Limited (MEL), a medium-size Kenyan company. MEL nearly went into receivership in 2002 following many years of poor performance. The company implemented a successful turnaround strategy during the period 2002 to 2007 and has returned to good financial health. MEL hopes to record an operating income of Shs.16.2 million in financial year 2007, the highest in its twenty-two history, and is poised for faster profitable growth during the next two years. The case study research involved collection of primary data during in -depth personal interviews of two directors, the CEO and departmental managers of MEL. The primary data was supplemented by secondary data obtained from the Company. Data from MEL's audited accounts has been reformatted and presented in the appendices. It depicts the improvement in the company's performance during the implementation of the turnaround strategy. Research findings indicate that the turnaround strategy implemented by MEL consisted of a retrenchment strategy, a recovery strategy and a corporate strategy. The simultaneous implementation of the three strategies has enabled the company to make substantial recovery and regain its leading position in the fire protection industry in Kenya. The MEL turnaround presented an opportunity to study a successful strategy implementation in a Kenyan environment. The study confirms that a successful implementation of a turnaround strategy requires a unique blend of leadership and management processes capable of meeting the many challenges of a turnaround situation.