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A Proven Business TurnAround Strategy and Process

June 4, 2010 by Frank Goley, Business Consultant

The most important parts of a Turnaround Strategic Development and Deployment are leadership (which we discussed in detail in my previous blog posts), experience and expertise.  As I also discussed in a prior blog post, the success of a Turnaround Plan rests with the people on the Turnaround Team and their ability and willingness to incorporate all Company’s management and employees in the process.  It is important to have Process structure which can achieve this.  As a Business Consultant, I understand process, but I also understand the importance of experience and fresh ideas in a turnaround situation.  It is the expertise of an experienced Business Consultant who can adapt process to a particular situation in order to find unique, creative, successful solutions to a tough situation, using the strengths and experience of the Turnaround Team and the insights of Company Managers and employees, finally putting it all together in an agreed upon, synergistic, effective Turnaround Strategy, Plan and Program.

Going into a Turnaround situation as a Business Consultant, I find that the processes I use to find solutions and options are very similar to the one’s I use when I consult with a non-turnaround Company, except for a few critical differences, like the time factor or creditor pressures; however, I find similar factors and pressures in non-turnaround companies as well.  I go back to the point I made in the first paragraph, you cannot hire a Business Consultant soon enough in any stage of business development or situation your Company may presently occupy.  A Business Consultant should be part of your Company’s success team, just like experienced Management is a key piece of a Company’s success.

You will find that this portion of the article on Turnaround Strategy is very similar in some parts to our article, What does a Good Business Consultant do?, because the processes employed in structural terms are similar when used in a converse situation and then tailored to the particular turnaround situation.  The most important thing a business consultant should do upon entering a turnaround situation is to listen, get to know everyone throughout the organization and give them opportunities and avenues to communicate to you, along with the Company CEO.  The Company CEO should be doing the same exact thing alongside the business consultant to instill trust, integrity and openness to the turnabout process.  If the CEO does not hold a position of high esteem with the employees throughout the organization, it is time for him or her to go and be replaced by either a CEO who specializes in turnaround situations or promote someone from within that has this relationship with the Company’s people and can adjust quickly to being an effective CEO.  With this trust and integrity established, it is time to get to work.

Steps to take in a TurnAround Process

Ø  Step One:  Learn about the Business

ü  Tour the facilities and meet the people.  Spend plenty of time talking to the employees explaining the role of the Business Consultant and Turnaround Team.  Encourage Feedback.

ü  Business Consultant meets with the Board of Directors, Executives, Founders, Owners, Department Heads, Managers and Key People.

ü  Assemble the Turnaround Team.

ü  Get a firm idea of the Company’s history, passions, successes, failures, competitive advantages, processes, organizational structure, trademarks, patents, intellectual property and so forth to fully understand the life blood of the business.

Ø  Step Two:  Meet with Advisors, Creditors, Customers and Suppliers

ü  These critical turnaround players need to have a firm understanding of the turnaround team’s goals and objectives.

ü  Establish credibility.

Ø  Step Three:  Evaluate the Problems and Issues

ü  This can only be done effectively if Step One, spending time with the managers and employees, has been accomplished.

ü  Determine timing factors from the outset.

ü  Identify, quantify and prioritize obstacles to overcome.

ü  Have a clear understanding of what the Market can and cannot support.  Give the Plan a believability factor. 

Ø  Step Four:  Identify the most Pressing and Significant Problems

ü  Segregate the problems which have the most influence on the turnaround situation and concentrate on those.  You can concentrate on the other problems later if your turnabout is successful.

ü  Be sure to identify problems as seen by ownership, executives, managers, advisors, creditors, customers, suppliers and most importantly, the employees.

ü  Prioritize, again, the pressing turnaround issues and problems.  Concentrate on this list and the related areas.  Do not get side tracked.

ü  Identify the revenue points and expense ratios for the products and services which are involved in these key problem areas.

Ø  Step Five:  Identify Opportunities

ü  Yes, I said it, opportunities.  Turnaround Strategy is not all about problems, issues and cutting them out of the organization.  That will result in a band aide which won’t be able to hold for very long. 

ü  Opportunities are what will gain traction with creditors, suppliers, customers and employees alike to bring about positive actions to put the Company on a healthy track or at least have a fighting chance thereof.

ü  Opportunities can be hidden but can effectively be flushed out with a good process and they don’t have to be time consuming to exploit or have to be too resources intensive.  Because, in the end, restructuring and cost cutting alone will not bring about lasting success for a turnaround Company and its creditors, suppliers & customers know that.

ü  Get a firm understanding of the resulting margins these opportunities could present, and whether existing products/ services can be used or need modification.  Note, modification is the key word here.  You will not have the time, resources or support of the major players to develop new products or services.

Ø  Step Six:  Analysis

ü  At this point, you must conduct market research and customer inquiries to determine if the market will support the assumptions you have made in the Opportunities Identification step.

ü  Make sure any supported opportunities have a good fit with the current business’s structure.  Can it be done?

ü  Pick out the opportunity or two or three which can be implemented quickly, efficiently and economically.

ü  Go back to your prioritized Problems list and identify strategies to employ which will cut expenses, restructure and bring the problem/ issue back in balance.

ü  Compare the key opportunities & Problems to determine if they are counterproductive and whether you can simultaneously implement them.

ü  Identify and link certain issues and problems.  Clear winners are those which readily relate.  Keep the others “on ice” until and unless necessary.  Exponential results of linking Problems with opportunities will be far more effective than divergent Opportunity and Problem strategies. 

ü  Best advice:  Remember that Turnaround Strategy is not all about cost cutting, problem identification and re-structuring.  Successful Turnabout Strategies are those which have lasting effects and are not just reactive.  Proactive Strategies will ensure the Company has a future, has a fighting chance and has opportunities in the market to quickly exploit.  Identifying and fixing problems are easy and temporal (i.e. the band aide effect); opportunities and successful exploitation of them brings lasting change; a change which may or may not be completely successful but which gives the Company and its employees a fighting chance.

Ø  Step Seven:  Resource Audit

ü  Do you have the right mix of skills, experience, management and people to suit the turnaround strategy?  If not, can you acquire them?  Cost? 

ü  Financial Audit:  Do you have the necessary financial structure and resources for plan deployment?  Is additional finance necessary, available and timely?

ü  Develop Cost Minimization Strategies for the deployable resources.

ü  Develop Contingency Resources.

Ø  Step Eight:  Risk Assessment

ü  Are the risks involved in the Turnaround Strategy manageable?

ü  Identifying critical milestones which will minimize the plan’s overall risk.

ü  Reprioritize the Strategy by plugging in risk factors and milestone achievement factors.

Ø  Step Nine:   Develop the Turnabout Solutions and the resulting Business Strategy

ü  The Turnaround Team puts together the final Turnaround Plan, which provides step by step solutions and exploits opportunities.

ü  The resulting Plan clearly shows how expenses can be minimized and certain profit areas will be maximized.

ü  A Business Strategy is developed which lays out important schedules, milestones and resource deployment to successfully implement the Turnaround Plan.  This Strategic Plan clearly shows customers, employees, creditors and suppliers how these changes will directly and positively affect them.  The Plan is backed by an experienced Turnaround Team, solid Analysis and Excellent Forward- Looking Market Analysis & Planning.  Lastly, the Strategic Plan will show how the Company will re-establish its Competitive Edge in the Market place.  Sell it!

Ø  Step Ten:  Acquire and Leverage Needed Resources

ü  Establish control systems and mechanisms.

ü  Clearly understand the motivations of Resource Providers.

ü  Understand that Financial Resources are mostly a question of structure, as good structure can minimize resulting costs and be strategically leveraged.  An expert Financial Consultant is absolutely necessary.

ü  Look to fill human resource needs inside the company before going outside.  Too many outsiders can breed distrust and unmotivated current employees.  Build in incentives and profit sharing to cut human resource salary and benefit costs.

Ø  Step Eleven:  Deploy and Don’t Look Back

ü  Confidence, leadership and direction are key at this point.

ü  Hindsight is 20/20 and looking back won’t help.  You have a good plan; people are sold on the plan; look and implement the plan.

ü  Deploy Management Systems, Control Systems and Performance systems.

ü  Re-work/ adjust the Turnaround Strategy and Plan as necessary as you progress and learn better, more effective strategies.

ü  The Turnaround Team should meet on a consistent basis and ensure the Turnaround Plan is being implemented as agreed and schedules are kept.  The Team keeps close communications with employees, customers, suppliers and creditors, updating them on progress and changes.

ü  Management is fully delegated and trusted to implement the Plan.

Ø  Step Twelve:  Obtaining and Distributing Value

ü  Along the way, when Plan milestones and successes are met, harvesting options should be considered and deployed to meet company obligations.

ü  Should have a clear understanding and agreement among all parties involved and contained in the Turnaround Strategy exactly what factors will trigger or prevent a harvest, and how that harvest is to occur and value distributed.

ü  This is the stage to remember who got your Company to this point (don’t forget about them):

1.     Your Employees

2.     Your Managers

3.     Your Resource Providers

4.     The Cooperation of your Customers, Suppliers and Creditors

The End Game

If you follow a similar process as prescribed and have a strong leadership qualities and skills, then, more often than not, will the Turnaround Plan be successful.  However, it isn’t always so; sometimes it is too little, too late, depending on the activity and stage of the dire situation.  If that is the case, a Major Re-Structuring, Quick Sale, Bankruptcy, Liquidation or other end result will become the End Game, replacing the Turnaround Strategic Plan with a business dismantling Strategy.   While this can leave a hollow feeling among the Turnaround Team, you will find that if a good Turnaround Process was developed and implemented, yet failed, employees and customers will understand.  They will adapt and move on and so should you.  Holding on to what “could be” is toxic to any future career or new venture.  Knowing you deployed a good Plan and gave it your all has to be and should be enough for you and your employees to move on to a productive future.  While many may see this as failure and defeat, as a Business Consultant, I see this as a learning experience.  Something which will not be revisited as owners and employees alike clearly understand, in the end, how they got there.  The learning experience is invaluable and should be leveraged into many successes in the future.  But remember, if you follow a good Turnaround Process, with an experienced Turnaround Team, the end result will very often lead to great success and renewed future growth.

Parting Advice

Three things I want to leave with you, which are critical to the success of a Turnaround Strategy and Plan:

Ø  Business Consultant’s Importance:  An experienced Business Consultant should head up and coordinate the numerous roles, duties and responsibilities of the Turnaround Team; not the business owner, CEO, lead investor, turnaround specialist, interim CEO, Board of Directors or Key Advisors.  It is the experience, objectivity and expertise which a good Business Consultant can employ to effectively manage a diverse team of Turnaround Experts and Players.  Give the Business Consultant the authority and negotiating room to achieve this and ensure the entire team is on board with this structure.  The Business Consultant is the one player who can be objectively accepted by all the parties involved in the Turnaround Plan- utilize that synergizing power and advantage.

Ø  The Turnaround Team Runs the Show:  It is the team’s role, responsibility and authority to ensure the Plan is well implemented, re-worked when necessary and performance controls are in place along the way.  However, remember the Team’s accountability to the employees, owners, investors, suppliers, customers and creditors is paramount.  Clear lines of authority and responsibility are critically important for the Turnaround Plan’s success, but the team must delegate and trust management with the day to day implementation and management of the Plan.

Ø  Gut Instincts:  Gut instincts are so very important in a turnaround situation.  Process works and is fine and dandy, but turnaround talent also depends on excellent business instincts.  This is where experience plays a major role.  Recruiting experience up front into the Turnaround Team will increase the “gut” factor and be the most successful element of a Turnaround Process, Strategy & Plan.

Please Note:  This is a general outline of a Turnaround Process to employ but must be adapted and expanded for the situation at hand.  This is a good starting point but by no means the final, resulting Turnaround Process.

Posted in Business TurnAround Strategies.