In an article written by Brian Gleason for the ABF Journal magazine, he explains why embracing change throughout the given enterprise is essential to the success of a turnaround. Decades ago, I learned that people tend to have a much greater fear of the unfamiliar than they do of change. The two question they ask themselves are “How will this change affect me?” and “What’s in it for me?” Change agents who ignore these concerns are doomed to failure.
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Although every turnaround process is company-specific, here are some essential strategies businesses can follow for greater success:
o Accept the situation and be open to the process. Reluctance to change is often deeply anchored in the failure to fully appreciate the depth of the problem.
Be transparent with key constituents, particularly family members, throughout the process. Keeping key players in the loop avoids ruffling feathers, which keeps everything on track and facilitates a smoother turnaround process.
o Refrain from making assumptions. Jumping to conclusions without fully examining every aspect of the business is a waste of valuable time. Look at all facets of the company with the same microscope. Then, reevaluate business policies as they relate to today’s market. For instance, a long-standing business practice that allows certain companies to pay 90 days late (to retain the relationship) may need to be crossed off the books today if it negatively impacts the business’s bottom line.
o Utilize a strategic approach to evaluate the business. Avoid an emotional approach that might cloud judgment and interfere with rational decision-making. Ask questions to get a better understanding of the situation and pinpoint why the company is underperforming. For example, are there areas, methods or policies that aren’t working in the best interest of the company? Are there past methods or policies that should be resurrected?
o Determine the key metrics, both internal and external. Every successful turnaround begins by focusing on the business model. For instance, is the company currently a high-cost/high-quality or a low-cost/low-quality model? This answer may have changed over the years due to product expansion or new leadership. Determine what and how outside factors, such as a structural market change, affect the company’s bottom line. For example, the age of a trucking company’s fleet may dramatically impact its financial prospects as gasoline prices fluctuate. An older and less fuel-efficient fleet may be competitive in a low-cost gasoline environment but become unsustainable as fuel prices increase.
o Decide which business drivers that impact the company’s success are controllable and which are uncontrollable. Not all non-controllable drivers impact the business or do so in the same way, and many can be overcome. Focus the majority of the energy on impacting controllable drivers. Many a failed turnaround was built on a plan that hoped for better industry-wide pricing next quarter.
o Engage everyone in the turnaround process from the beginning to create a greater sense of community and ownership. Employees need to know “why” before they can move forward. Therefore, be transparent and clarify the reasons for the turnaround, breaking everything down into bite-sized pieces that are easy to digest.
o Additionally, encourage all employees to ask themselves the same question: “How does my job impact the business model and how does this need to change to make the company more successful?” Provide opportunities for employees to share their answers and ideas, and listen to them.
o Role-model effectively. Employees look to management for clues in how to proceed, so avoid the “do-as-I-say-not-as-I-do” attitude. During the turnaround process, adhere to the same expectations and policies expected from the rank and file. Adopting this stance is especially important when using the services of an outside turnaround agent. To avoid sending employees mixed messages or forcing them to choose whose advice to follow, always work closely with the turnaround professional. Once the agent leaves, encourage employees to follow the new plan.
o Stick with the plan to avoid falling back into the same trap. Although no turnaround is a piece of cake and following a plan is always easier when there is a sense of urgency, refrain from taking a breather once the turnaround is complete. Instead, keep the company focused on the goals established during the turnaround process. This might be as simple as rewarding employees for their continued efforts, which additionally helps to re-establish company morale lost before the turnaround. This, in turn, can lead to greater job satisfaction and higher employee retention.
Although completing a successful turnaround is critical for an underperforming company, change of any kind can be challenging. Yet, the fundamental truth in business is that to remain competitive, change, like death and taxes, is inevitable. Companies that embrace this basic concept recognize the value in doing things differently. As a result, the decisions and the changes they are making today are far from foolish. They are creating a firmer foundation from which they can move toward a more successful future.
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To learn more about the ABF Journal magazine, please click here.
Brian Gleason is a senior managing director and shareholder at Phoenix Management Services, which provides turnaround, crisis and interim management in addition to specialized advisory and operational due diligence services for both distressed and growth-oriented companies. For more information, please click here.