Restructuring in Europe 2005

Many companies are unable to recognize risks and successfully turn themselves around, which is putting a brake on Europe's growth. This is the result of the study on "Restructuring in Europe 2005", submitted by Roland Berger Strategy Consultants. The international consultancy surveyed 2,600 managers from various industries in 12 European countries between 2003 and 2005. The study included only companies that had reorganized during the past three years.

According to the study, companies need an average of 16 months to react to a crisis and take action. Just under 50% were able to do so within 12 months. "Many companies are risking jobs," says Michael Blatz, Partner at Roland Berger Strategy Consultants. The importance of taking quick action is illustrated by another study finding: 75% of the companies that took action within one year were happy with the results. "Reacting quickly to a crisis means there's often time to implement creative solutions," states Blatz.

In general, Western European companies react faster to crises then their Central or Eastern European counterparts. Larger companies also tend to be faster than smaller ones. Retail (average reaction time of 5.3 months) and the consumer goods industry (6.7 months) are typically the fastest industries.

Noticeably, companies in crisis situations rarely used early warning systems: Only one third of the companies with serious cashflow problems had implemented rolling liquidity forecasts. Companies that had early warning systems, in turn, were fastest if they used balance scorecards (average response time of 11.2 months).

Across Europe, two thirds of those surveyed agreed that additional actions will be necessary in the coming two years. Only 9% feel that they've reached turnaround and can wrap things up. This means that restructuring is increasingly shifting from turnaround management to an ongoing and creative task.