A study of turnaround strategies employed by companies experiencing corporate ill health; a case of companies under judicial management in Zimbabwe

Abstract

Many companies are facing financial distress in Zimbabwe and it is a cause for concern that most companies that have gone under Judicial Management, which is supposed to be recuperative, have failed to recover. Studies indicate that more than 80% of companies under Judicial Management end up in liquidation. This study therefore sought to assess the corporate turnaround strategies implemented by Zimbabwean companies under Judicial Management as well as the impact of the strategies in transforming the companies into viable entities. The research also sought to understand the impact of the judicial manager‟s skills and competencies on the performance of the companies placed under judicial management. The researcher‟s personal experience with a business failure ignited interest in corporate turnaround. At the same time, as an academic and turnaround consultant the researcher has a preference for pragmatism. To mitigate his biases and subjectivity, a structured data-gathering method („questionnaire) was used to collect data form 52 respondents drawn from a sample of judicial managers, senior managers, junior managers and owners of companies under judicial management in Harare. The data that was analysed using SPSS shows that the most commonly utilised strategies are reorganisation of business processes, strategic alliances, reduction of wages and other incentives. Only financial strategies and operational strategies were shown to have a statistically significant impact on post judicial management order performance. Portfolio and managerial strategies had no statistically significant impact on the performance of companies under judicial management and yet they were the most utilised. This therefore offered a part explanation as to why the success rate of judicial management is low. The findings point to the need for companies to urgently consider breaking away from the past and effect radical not incremental change in critical areas such as cost, quality and response time. The skills and competencies of the incumbent judicial manager seemed to have an insignificant impact of the performance, maybe because of the low practice of Top Management Team (TMT) change as a strategy.