Turnaround is a bold and powerful word in the business world. To some it means desperation. To others it is scary. To most … they don’t understand it. To do it takes courage and commitment beyond what most are willing to give.
In fact preparing this blog was daunting, challenging, and exhilarating all at the same time.
When you want to turn around a company it is usually for one of two reasons. To pull a company out of the red on the P&L or to increase margins. Companies that are in a distressed situation normally do not have the cash flow/cash to achieve a turnaround … best to avoid.
An Inside Job
When the assignment is to turnaround a company you want to make sure the solution is coming from the inside. Outside solutions – even if very good and adequate – will never get the necessary buy-in from the employees to ensure proper execution unless it is from inside – it needs to be “our” plan.
Solutions from inside will be better accepted from people who do the execution when they feel “this is our plan.” Then they will execute. If from outside the attitude at best is, “we are trying their plan to see if it will work.” (Lacks commitment from workers)
Transformation
Once you determine a solution, you have to transform to a plan with priorities, timeframe, and cheapest (best value).
You have to look for the solution by talking to a lot of people … preferably people in the “critical process areas.” For example … purchasing is the No. 1 area to address. Normal business financials tell us what percent of business is in the purchasing area or process – this area has to be good, very good. If the normal industry percentage for purchasing materials is 40% and your company is at 50% or greater you need to analyze this area closely, delve into all purchasing functions, including processes, to see why the discrepancy. If the company doesn’t buy well, even if you do miracles everywhere else, you’re not going to make it up elsewhere. You must be sure purchasing is in line with competition and industry standards. This is a very important area.
The No. 2 area is knowing exactly what the segments are in the market that you are competing so you can re-establish the company – the brand – into these segments.
The commonsense approach is to determine processes that are most important and be sure you are as competitive as you can be. You have to go see the people who are in charge of this process – including everyone around this process – (do not delegate to someone else). Interview all of them (do not delegate). Learn what’s wrong. Ask questions like, “What do you think is wrong? “How can we fix it?” “What do you feel is the most important part of our purchasing process?” Etc., etc., etc.
By talking and listening to a lot of knowledgeable people a solution will become very clear. People usually avoid the over dramatic solution such as shutting down a plant, laying off people, etc.
Again, interviewing by asking questions – is a very simple way the solution is going to become very clear.
Final Plan
When you develop a final plan, everyone will join in and execute with results.
You have to remember that your job is turning around the company. Nobody cares if you have problem(s) … fix them. You accepted the job … that’s it … fix it.
Make as many changes as it takes to fix the problem(s). Nothing more … nothing less.
You know from the beginning that solving problems is going to result in changing habits – you need to say it – communicate it – then do it. People will accept change when they know commitment is behind the change.
Your Commitment
After a plan is decided and you get commitment from people to execute with commitment you must give in return a commitment to resign if after one year of starting the new plan if the company is not more successful in a defined way, i.e., take company into the black, increase margins significantly, etc.
Overtime-1
Strategy is 10% and execution is 90% of success. To accomplish this requires two things …
- a discipline of execution and
- Knowing the importance of processes. Yes, strategy is important, but at the end of the day, the company that has the best processes with execution will prevail.
The big difference in the success of businesses today lies in discipline and execution.
Overtime-2
The product is important. Therefore, at least every other executive meeting should be held on the production floor around the product being produced. For two reasons …
- That all executive management understands the product and the importance of the product.
- That the people executing see that management understands how important the product is and how important their execution is.
These are two very important areas that many companies overlook or don’t communicate far enough into the company.
Finally, a successful turnaround requires discipline, the right strategy, commitment, communication, and execution.
© Phil Hoffman 2012. All rights reserved
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