Part 2: The Words You Never Want to Hear From a Turnaround CEO

When I meet the CEO of a company starting or in the midst of a turnaround attempt, I always ask if they use a flash report to stay on top of the turnarounds progress.

If I get a curious face and the question, “what’s a flash report?” I’m concerned.

The flash report is a one-page daily document that is produced for management that has key real-time financial and operational data. You want the management team to know this data by heart and have the goals for each stat roll off their tongue. It provides the guardrails to know how the turnaround is progressing so actions can be taken quickly when the guardrails are being hit.

The financial part of the report should have daily cash, receivables, inventory, payables and any other accounting data that is critical. Focusing on working capital is crucial because falling cash conversion days is a leading indicator that the business is healing and rising days suggests problems occurring.

Secondly, the report needs key real-time operational data which acts as leading indicator for operations. For a manufacturer, it would focus on cycle times, on time and late shipments, scrap, overtime etc. For a service company, it would focus on complaints, turnover, productivity, bookings, billable rates etc. The key is to focus on 10 stats or fewer.

It’s critical that the report be just one page as it allows for extreme focus. The report should also be distributed throughout the company not just to the top management.

So, when you’re doing your research on a public company turnaround, part of your checklist should include an inquiry about the use of a one-page flash report. If management is using one the odds of success are going to rise dramatically and if they don’t be cautious.

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