4 Basics When Assessing the Level of Stress in a Company

Chuck Mouranie - Partner and Managing Director ·

What stresses a company? When a company is stressed, several variables, both external and internal, may be at play. Examples of external forces include governmental regulations, legal issues or market changes. These external issues are mostly beyond the control of the company’s leadership. However, our experience suggests the vast majority of reasons companies become distressed are self-induced. Quality, delivery, workforce issues, process control (or lack thereof), cash management and ill-timed expansion are just a few examples of these pain producers.

There are really four basic ways to assess a company’s level of stress. If a company performs well in three of the four, they have time and resources to improve the lone issue. Should the company perform poorly in two of the four areas, they need to put comprehensive plans in place to quickly fix the underperforming areas. Should the company only perform well in one of the four areas, they are teetering on collapse and need immediate action to save the very foundation of their organization. Finally, if a company is performing poorly in all four areas, they are a restructuring candidate and will most likely end up with a poor conclusion.

When assessing a company, grade each of the four items. If you can’t count at least two areas that are “good,” then you need help - quickly.

  1. Relationship with Lender: Does the bank want the company out; is the bank concerned for the company’s financial health? Is the firm starved for working capital?
  2. On Time Delivery: Does the company have difficulty consistently delivering products or services to either internal or external customers? Does this issue drive up operational cost?
  3. Deficient Quality of Service and/or Product: Does the company have inferior quality of product or service, either reported internally or by external customers?
  4. Employee Turnover or Demand: Does the company have a difficult time recruiting or retaining employees?

If you are interested in learning more about our restructuring services, please contact me at cmouranie@edsisolutions.com or visit our website at www.edsisolutions.com/restructuring.

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