Economic headwinds in China are exposing more and more companies to value erosion situations. In this article, we share our experience of how best to understand and lead the turnaround process in China.

• Recognising leading indicators of value erosion enables preventive action to be taken and progressive value erosion to be avoided.

• Performance Improvement Plans (PIP) can help reverse value erosion but need to be carefully designed and implemented to avoid further reinforcing the value erosion cycle.

• Best practice is for a multidisciplinary turnaround team to be established, led by a senior Chief Turnaround Officer working fulltime and reporting directly to the CEO.

• Development of the PIP should include a strategic reassessment, helping to avoid an excessive focus on immediate needs at the expense of investment in meeting longer-term goals.

• Communication planning is critical and should address what to say and when to say it, maintaining coherence in the messaging and maximising positive emotional engagement.

• Attention also needs to be paid to treasury issues, including reducing cash leakage, deleveraging balance sheets and harmonising debt maturities.

About InterChina Consulting

InterChina Consulting has been serving international companies operating in China for more than 30 years. 

Miguel Montoya

Principal & North China Lead, Miguel.Montoya@InterChinaPartners.com Follow on LinkedIn