Conversely, when the onset of problems has either been ignored or denied and problems allowed to multiply and grow, more substantial changes will likely be required. For purposes of this discussion, let's consider only these more troublesome turnarounds. Companies in late stages of decline, regardless of industry, commonly have too much debt and too little cash. Survival requires an immediate response to stop the hemorrhaging of cash and to work with creditors to reduce the level of indebtedness. This often impulsive decision is predicated on the ease with which workers may be let go rather than their specific accountability for the cash crisis or the likelihood the crisis will disappear once they are gone.
All resources consume cash.
Because of this interdependence, laying off workers will, in turn, result in reductions in the other three Ps. The question then becomes not which component to reduce, but which to reduce first. This decision is critical to a strategic turnaround and in making it every consideration must be weighed, one against the other. The characteristically topsy-turvy pyramids depicted below represent the profits that a firm may earn now and in the future from its three products. Costs and resources required for the three products are very different as well, with developmental costs generally far exceeding related costs for existing products.