The
Turnaround Manager
This week we conclude our consecutive series
on turnarounds with a look at leadership, particularly the leadership recruited
to salvage troubled enterprises. When an enterprise finds itself facing an uncommon
and worsening situation, the stakeholders of that enterprise traditionally must
come to terms with reality. They might be hesitant to admit it, but their
current management, though not for trying, may not be well-suited to reverse
the course of a downturn. Consequently, with this realization, the stakeholders
must look outside of their enterprise for help. The people to whom these
stakeholders ultimately relinquish the reins of power are known as turnaround
managers.
Most people in the general public have a preconceived
and quite skewed notion about the practice of turnaround management. For starters,
they believe that turnaround managers are ruthless and uncaring individuals,
marching through enterprises like marauders in business suits. The general
public also assumes that the use of turnaround managers is restricted to large enterprises.
Quite to the contrary, however, most turnaround managers are not raiders, and
their work is not limited to the big corporations. These managers, in truth,
embed themselves into an enterprise, mostly on a full-time basis, actively
managing the operations of that enterprise to produce much-needed growth, and
they typically tie their performance to success of that enterprise. A
turnaround manager does not have the luxury of behaving like Gordon Gecko; the
manager actually has to get his hands dirty, one enterprise at a time. What’s
more, turnaround-management services abound for every stripe and size of enterprise.
In fact, a whole cottage industry exists that provides services to struggling, early-stage
and young enterprises, and among the providers in this sector is…well, need we
say more?
Any turnaround can be a challenge to even the
most seasoned manager, and there is no singular protocol for encountering every
enterprise in a downturn. Indeed, the circumstances facing troubled enterprises
vary from one to the next, and for that reason, a manager might find himself confronting
a substantial and underserviced debt portfolio in one case, while the paramount
issue might be a dated and inefficient facilities in another. That said,
however, there is a broader roadmap for all managers to consider when preparing
to undertake such efforts. This roadmap helps to move managers into the proper
frame of mind, in order to achieve the most optimal results from whatever
strategy he elects to deploy. Here are a few points from that roadmap:
(1) Perform
comprehensive intelligence. As the
turnaround manager enters the troubled enterprise, he must do so not ready to
act, but to learn. The manager must begin his work by gaining a clear understanding
of the situation affecting the enterprise. He must study its current strategy,
as well as its operational structure and capacity, and he must also learn as
much as he can about the offerings and the pipeline for new offerings, the
technology and systems used to make and deliver those offerings, and the
competitive environment in which those offerings are sold. Much of this
information needs to come in form of data points, but he must rely also on
interviews and conversations with his immediate subordinates, the stakeholders,
and key personnel. And before he goes further, he has to develop a keen
understanding of just how the current strategy, along with other factors,
contributed to the hardship of the enterprise. He should do this if for no
other reason than to avoid prescribing and making the same mistakes as his
predecessors.
(2) Analyze the
information. After all of the intelligence
is gathered, and as the analysis begins, the manager must remember that some
parts of what he has learned might be inaccurate or invalid information. After
all, the current structure and its flawed strategy were in place and likely
contributed to the downturn. For that reason, he must be very judicious about
the use of the information from his fact-finding exercise, and he must not
hesitate to dismiss anything that does not seem consistent with other portions
of those facts or his own understanding.
(3) Set
transitional priorities. From his
findings, the manager must begin to develop a new strategy for the enterprise,
one that is designed to reinvigorate, and one that is detailed in the numerous pages
of a strategic plan, a restructuring plan, a new operational model, a working
timetable, a Plan for Growth, and so on. This new strategy must address any
cultural and operational impediments of the enterprise that the manager identified
during his fact-finding exercise, and it must give a vision of what the enterprise
will look like and how it will operate going forward. More specifically, the
strategy should set new, measurable goals for every area of the enterprise, and
these goals should begin to produce marked results over the first twelve months
and far into the following year. Making these goals clear to the stakeholders,
and securing their buy-in, is an important step for creating the formulaic
system by which the manager’s own performance can be fairly measure. (To be
sure, some stakeholders might demand faster results in the first year, but a
rational manager should remain steadfast, reminding those stakeholders that,
since it did not take the enterprise a few short months to nearly collapse, it
would be imprudent to think that corrective action might yield serious results
in such a short time.)
(4) Establish a
turnaround team. Once the
manager has corralled the support of the stakeholders, he must act quickly to
institute his changes to the enterprise. This, he cannot do on his own; he will
need a team. But before he starts hiring, he must start firing. The manager
must purge the organization of its weaker personnel and those likely to resist
the imposition of the new strategy, as both types of individuals would only be
laggards in a new and more challenging environment. As the majority of the
dismissals occur, the manager must begin to install his new team of leaders. It
is important to understand that, while a few leaders might be carried over from
the old management structure or promoted up from the rank and file, it is more
common for a manager to hire from outside of the enterprise (if he has been
afford such latitude by the stakeholders). The two overarching reasons for this
effort are simple: he is seeking new and diverse ideas not readily found in the
current talent pool, and he is hoping to transform the operational expectations
and the general culture of the enterprise in a meaningful way.
(5) Articulate
the changes and expectations to the enterprise. People increasingly understand that change
is the only true constant, but that does not mean that they will easily accept
it or not be confused by it. This is especially true in the manager’s
enterprise, where a whirlwind of dismissals and new hires, to say little of wholesale
divestitures, promise to reshape everything, while leaving personnel to wonder
how they fit into this equation. For this reason, the manager and his new
turnaround team must act quickly to bring the personnel up to speed on what
these changes means and how they will impact their work. The new leaders of the
enterprise must demonstrate thoughtful and decisive leadership, articulating in
clear terms the new vision for the enterprise and, from there, sharing with
each work group and employee what is expected of them. The new leaders must
secure buy-in from the personnel, as well, and where there is not any, find
replacements. Then they must avail to the personnel avenues for short- and near-term
feedback. Opening immediate channel for communication is a good approach, because
the manager must assure that the goals of his strategy are being met and, if
they are not, make corrections where necessary.
(6) Score early
victories. This can mean nearly anything,
from restructuring debt to securing new financing to successfully winding down
costly operations. Through small achievements, the manager and his turnaround
team can act to demonstrate that their strategy is viable, and they can
maintain the necessary support to go forward. To that end, though, it is
understandable that larger goals may not be fully accomplished for some
time. Nevertheless, the manager can
still claim early victories. That is because, while the manager’s overall strategy
is made measured by goals, the progress made in achieving those goals can be quantified
by benchmarks. In goal-fulfillment, these benchmarks represent reference points
by which the performance of the enterprise, its manager, and his turnaround
team can also be evaluated over time. Therefore, it is necessary for the
manager to report this progress to the stakeholders, in order to maintain their
support for the strategy, and to the personnel, in order to bolster their
commitment for achieving the goals.
In a troubled enterprise, turnaround
management can make the difference, forestalling an untimely demise and
restoring the prospects for growth. Of course, even renewal takes time, but
with a competent team and the right strategic mix of options, most enterprises
can be pulled back from the brink, if the turnaround team is permitted to act
quickly enough. In order for that to happen, though, before all else, the
stakeholders of a troubled enterprise have to admit to themselves and to their
current managers that they need help from outside. Such an admission never
comes easily—but, alas, overcoming prideful decision-making is a subject for a different
time.
Gary C. Harrell is the founder and managing
principal of Axiom Strategy Advisors, LLC. For additional information, please write info@axiomstrategyadvisors.com.
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