How to do a Turnaround in 5 (not so easy) Steps
As an ex-pat active in emerging markets, I’m usually called in when things look pretty bad. I’ve had my fair share of distressed situations over the years, and I know there’s no shortage of turnaround situations in this environment. So I thought I’d share some of what I’ve learned from some hard experiences. The following is a 5 step process that has produced results.
1. Identify Heroes, Holdouts and In-Betweens
– Heroes: Every company has a group of committed, talented people who love what they do. They are usually frustrated by the events that led up to the crisis and have been holding on, hoping things will change. These people will be the key to your turnaround strategy and the first thing you need to do is identify some of them.
– Holdouts: These people don’t want anything to change and will fight you every step of the way. Fortunately, they are a small minority, but they can do a lot of damage. Figuring out who these people are is never very hard. They are usually proud of their role as a “status quo evangelist.”
– In-Betweens: Most people are fence-sitters and will go along with whatever seems easiest. They don’t really mind the status quo that much, but would like to see things improve. Usually, you are just the newest “change initiative” so they are going to wait and see how things will go. Unlike Heroes and Holdouts, In-Betweens are trying not to be noticed.
2. Start small and easy
The most common turnaround mistake is to try to change too much at once. Usually people are exhausted, demotivated and frustrated. Moreover, you haven’t proved yourself and probably don’t understand the business or its problems very well yet (even if you think you do). Trying to do too much too soon will inevitably end in failure and you will lose your momentum even before you really had any.
Your first initiatives should be relatively small and play to your strengths. Although it might seem that you don’t have time and need to move quickly, overreaching will not make things move faster, it will only set you back and you will lose valuable time that you really don’t have.
3. Fire away!
Within 3-6 months (and sometimes faster), you will need to do your first round of firings. This is usually surprisingly easy, since the people responsible for the poor performance of the company are usually still around and quite proud of their role as a thorn in your side. These “holdouts” are invariably incompetent, nasty and fighting you every step of the way. Moreover, they are not usually well liked outside a small circle of loyalists and most people are happy to see them go.
4. Re-organize and build momentum
At the same time you are doing your first round of firings, you need to start building momentum. Hopefully, by this time you have had some small successes, identified some heroes and solved some of the problems that were destroying value. Now you can start moving your heroes into key positions, bringing in some new talent and start solving some tougher problems.
5. Formulate a long-term strategy
By the end of the first year, you will need to formulate a real long-term strategy. The tendency is to want to do this first, but that is always a big mistake. When you come into the company you do not understand the business or its problems well enough to know what its long-term strategy should be. Besides, you will spend most of the first year fighting fires, so formulating an “eye level” strategy is not something you’re going to have the time or energy to do.
The key to formulating a long-term strategy in a turnaround is to identify the unexpected successes within the company. Most companies have people, processes or products that can create enormous value, but have been overlooked. Usually, the company is so focused on its failure, that it has been blind to the potential for success. Get your heroes together and build a strategy to move the company forward and start killing the competition!
I hope you have found this helpful. Please let me know your comments.