Turnaround very simply is the process of helping a failing company get back on track and become profitable. This process can be emotional, drastic and disturbing to company leadership and its employees. Often this process is started too late and that’s when the most significant cuts are felt. Turnaround can be started early before any external signs are identified, or it can be started late, when the company is at risk of life or death. But if managed properly, turnarounds can be successful and can keep a company profitable. Turnaround can be divided into four key aspects – Evaluation, Proposal, Buy-In, and Execution.
Evaluation
The first step in assessing a turnaround is to understand the company. What are the issues, where are the problems? First, you need to evaluate the situation. Get as much data and information as you possibly can. Data is reality. So gather profit and loss statements, capital investment, customer profiles, marketing plans, manufacturing efficiency, product cycles, etc. Also talk to people, get as much information as you can. Ask questions and make sure to listen to the answers. All other information is just opinions, and often opinions differ. Opinions often hide the truth, and what we are looking for is the truth.
For example, let’s say you talk to the product team and they say the marketing guys have no idea how to sell the product. Then you talk to the marketing guys and they say the product is stale and hasn’t been freshened competitively. Who’s right? That’s the job of the turnaround specialist. The truth is most likely some of both and maybe something else, like just cost. I like to say there’s two sides to every coin, and then there’s the truth. So it’s important to get as much information as possible.
“The team, the team, the team”. As you could probably tell, another key part of evaluation is the team. Often times, companies have great products, efficient, cost competitive, but the culture isn’t good. When there’s a lot of bickering, negativity, and/or distrust, companies can spiral down. So this is key, evaluate the organization from top to bottom and understand all levels. Issues can be anywhere and its important to understand is everyone working together and confident in each other.
So overall, this is where the turnaround expert needs to get into the details. This is where the specialist doesn’t just sit in a conference room, but the walk the office, walk the manufacturing floor, meet with customers, meet with all levels of employees, understand the product, understand costs and investment. Without a thorough and detailed evaluation, a turnaround will never take hold.
Proposal
The next key step in a turnaround is the proposal. This is where the turnaround expert needs to take the evaluation and develop a plan that works for the company. The proposals are often more detailed and complicated than you might imagine, and no two proposals are the same. For example, a proposal often will need some quick wins to show the company that the expert is credible. Because as much as we might like to think that the companies value us as experts, there is a certain amount of evaluation occurring about us as well. So quick wins establish credibility. Quick wins also then allow you to identify longer term and more dramatic changes which will truly bring the company back to profitability.
The proposal needs to take into account the evaluation and then identify areas to cut in a dramatic way, including cost, investment, customers, and culture. Often experts will only look at cost and revenue, but the proposal needs to involve so much more than that. What about customers? Maybe you need to cut low profit customers? Maybe low profit products need to go. And finally, culture. Maybe organizations need to be shut down. Maybe the CEO needs to go, or maybe the workforce has grown too large and needs a size reduction. Whatever the plan is, it needs to be based on data, leaves no stone unturned, and it needs to be bold.
One error in turnarounds is that the proposal often isn’t deep enough. The plan needs to cut deep. One way to look at it is that not all aspects of the plan will come home, so you need to cut deeper than even you as an expert might think. So it needs to be deep, decisive, and dramatic.
Buy-In
So this step is much more important that many people realize. Buy In is so critical. I referenced this earlier, but the reality also is that the turnaround expert is being evaluated too. Much of the company knows something is wrong but everyone has differing opinions. The company has developed this culture, this paralysis because it doesn’t know what to do, or it can’t agree what to do. So when the expert comes in with their ideas and proposal, its easy and expected that it will be greeted with skepticism.
So Communicate! Communicate! Communicate! Not sure I said it enough, but communication with everyone is critical. The expert needs to take their proposal and promote it as a compelling new vision.
The proposal needs a strong coalition. Turnaround is truly a team sport, the entire team and right now its key to have the whole team on board. One reason why earlier I said early wins is important is right here. If you can get the team to believe in you and everyone is positive, the positive will start to steamroll.
This is a critical quality of a turnaround specialist and a critical aspect of the process. If you can’t get buy-in the proposal will never gain a foothold and the plan will fail.
Execution
This goes without saying, but execution must occur quickly and be decisive. Execution isn’t just rolling out a plan, present it and walk away. Execution is tough. This is where the rubber meets the road. This is where you need to gain those quick wins, and then assess. Maybe the plan needs to change? Often after a first few actions, your assessment identifies changes to the plan. Changes are expected. Communicate! This is so critical to communicate the plan will change. The plan needs to be continually monitored and adjusted as needed.
For example, let’s say the plan assumes a manufacturing efficiency. You might have to meet weekly to walk the plant floor to assess efficiency metrics. This might be something that occurs for 3 months to ensure the plan occurs.
You might set up a weekly metric review to assess metric performance. The review might be daily. You need to do whatever it takes to ensure the plan occurs and is modified as required.
One word of caution here is it can be a grind. The execution phase might take years. So it is important to make sure everyone understands the timeline, and the nature of the turnaround.
The other part of execution can be culture. Cultural changes need to occur right away. Often the team is a big part of the problem. Whether the changes involve only a few key people or an entire organization, this action needs to occur swiftly and without delay. No turnaround will occur without an organization moving together efficiently.
So overall turnaround can be a great action to take for struggling companies. The actions if taken early and often can lead to a generally healthy company that is in a continual mode of self-assessment and change. If the company ignores issues, then often when the expert gets in to understand the company, the change can be deep, painful, and difficult.
Maybury Partners, LLC 