Leading Effective Business Turnarounds

By Steven L‟Heureux

Turnarounds: Envisioning the Possible

Copyright 2010, Steven L'Heureux

“Turnarounds require a methodical triage of the business situation and decisive action; but most importantly, a vision of what is possible.”


Building the Leadership Team

Houston,...We Have a Problem!

Turnaround Framework

Making Organizational Changes

Delivering Double-Digit Growth and Profitability

Wrap-up and Questions

The Principal Reasons for Corporate Decline Percentage

Sheer Bad Luck 1%

External Factors Beyond Management‟s Control 8%

Internal Problems Triggered by External Factors 15%

Balance of External and Internal Factors 24%

Internally Generated Problems Within Management‟s Control

52%

Copyright 2010, Steven L'Heureux 4

Source: Donald B. Bibeault, Corporate Turnaround

In Most Cases, Business Problems are Internally Generated.

1. Management Trying to do the Same Things Harder or Faster 2. Lack of Focus on Key Financial Metrics 3. No Clarity Within the Company of Objectives or Business Goals 4. Internal Rivalries and Intergroup Conflicts 5. Culture of Contentment or Blame and Sense of Entitlement 6. Sloppy Business Processes, Quality and Cost Control Programs 7. Absence of Market and Competitive Landscape Knowledge 8. Management is Self-Indulgent Rather than Self-Critical 9. Poor Communications 10. Low Aspirations, Negativity and No Accountability



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“Durable turnarounds are rarely accomplished as quickly as expected. The more deep-seated the company‟s underlying problems, the longer it takes for a cure. Even in the best managed turnarounds, things will often get worse before they get better.”

Vet and Mentally Prepare the Leadership Team

Benchmark the Company‟s Performance and Quantify the Gap Against Industry Leaders

Identify the Underlying Causes of the Shortfall

Establish the Turnaround Plan Objectives

Gain Buy-in on New Key Performance Metrics and Timetable for Achievement

Communicate the Plan - Infuse the Entire Company with a Sense of Urgency, Accountability and Passion for Winning


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Objective One - Active listening

and learning mode; fact

gathering and getting to know

the team.

Objective Two - Take steps to

ensure that the current business

is operating at its full potential.

Objective Three - Design a plan

for accelerated growth and

profitability.

• Conduct ‘deep dive’ assessment of Company, industry and competition

• Face to face meetings with all key stakeholders, including top customer and new prospects

• Uncover knowledge networks and key influencers; get a feel for the culture

• Identify ideas for operational improvements and future growth

• Execute a multi-faceted communications plan to overcome confusion and distrust

• Begin corrective actions related to current operational issues and opportunities for improvement

• Compile growth ideas and prioritize

• Determine resource allocation requirements, translate to budget and operating targets

• Present growth strategy to Board for approval, refine based on Board input

• Communicate to organization; execute!


Crisis Stabilization Take control Cash management Initial cost reductions

Craft Strategic Vision Assess company‟s strengths and opportunities Conduct product and market segment analysis

Build „Go Forward‟ Leadership Team Launch Stakeholder Communications Install Organizational Changes

Structure change: right-size the company Culture change: build corp. resilience and commitment to winning

Implement Critical Process Improvement Financial systems and controls Sales and marketing Quality and customer support Information technology systems

Radical, Not Incremental Changes are Required


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Bias Toward Action – Extraordinarily intense individuals that

operate with a high sense of urgency.

Outstanding Communicators – Inspirational leaders that

build confidence within the firm‟s key stakeholder groups.

Highly Focused – Able to quickly identify the important

issues and properly prioritize the necessary actions to be taken.


Key Leadership Team Members Head of HR – Strong team development skills

CFO – Strategic, system process savvy

Sales & Marketing Chief – Highly competitive/winner

Key Department Head Contributors

Product Marketing Manager

Customer Support Manager

Marketing Communications/Brand Manager


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Quickly Assess Key Managers Benchmark against industry best

Use outside sources such as customers, search firms

Create a management questionnaire

Leverage testing tools Kouzes Posner Leadership Practices Inventory (LPI)

Meyers Briggs

DISC

BarOn Emotional Quotient Inventory (Emotional Intelligence)

Conduct an Employee Survey 360 review of management

Follow-up with the results

Hire a Team Leadership Coach


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Seriously Consider Hiring a Search Firm with Industry Expertise

Leverage Testing and a Leadership Coach‟s Insight

Give More Weight to „Potential‟ over „Experience‟

Conduct Multiple Interviews – Include Dinner with Significant Others


Functional

Expertise

Industry

Expertise

Company Cultural

Fit

Measure Along These Three Dimensions:

Top Priority is People Development Expertise

Must Have Solid Business Knowledge Beyond HR

Excellent Judgment – Must Be Able to Value Input

Strong Self-Confidence, Enthusiasm and Tact

Extremely Well Read in Behavioral Sciences

A Developed Sense of Urgency, Action Oriented

Capable of Being a “Trusted Confidant”

Creative Leader of Motivational Programs

Key Hiring Factors – You Must Get This One Right!


There Are Five Essential Stages in Leading Successful Organizational Change:

Raising a Feeling of Urgency - Reducing organizational complacency and fear of change.

Building the Change Leadership Team - Identifying the right individuals and empowering the team.

Communicating - Establishing genuine „gut-level‟ buy-in, overcoming confusion and distrust.

Celebrating Wins - Diffusing cynicism, pessimism and skepticism by securing „little wins‟ early.

Reshaping the Corporate Culture - Overcoming the pull of „old ways‟ of doing things by embedding new behaviors in the organization.


Source: John Kotter, The Heart of Change

In Today‟s Dynamic Global Business Environment, the Ideal Organizational Culture is Based on Resilience – Where It Anticipates and Proactively Adapts Quickly to Market Shifts, Yet Remains Focused on and Aligned with the Agreed Upon Corporate Business Strategy. There Are Four Key Steps in Transforming to an Ideal Culture of Resilience:

Communicate: Ensure information flows (bi-directionally), communicate and gain buy-in on metrics used to measure performance; regularly communicate expectations and results.

Empower: Ensure decision making authority is clearly understood and individuals feel empowered to use their authority.

Motivate: Motivators such as incentives, rewards and opportunities should be personalized (as much as possible), aligned with the goals of the company and not such that they place individuals/departments within the organization in conflict (e.g., sales focused on maximizing revenue at any price while product managers are focused on preserving margins).

Structure: Organizational structure supports rapid decision making and maximizes productivity of the firm. The org chart is understood by everyone in the company and all reporting relationships are well documented.


Successful Turnarounds Typically Require a New Organizational Structure to:

Reflect a leaner operation Support rapid decision making Allow for flexible and cost effective resource allocation

The New Structure Must Allow the Company to be Capable of Adapting Quickly and Successfully. It is Essential that the Company is Capable of More than Responding to Industry Trends, It Must Shape and Lead Them.

The Organizational Design Imperatives are to Maximize Productivity and Competitive Market Advantage. Evaluation of the New Structure Should be Along the Following Dimensions:

Efficiency of resource utilization Facilitation of sound & rapid decision making Responsiveness to the market Adaptability to change Ability to hold people accountable


Improve Customer Base Retention Provide high value services and product enhancements Measure and continually improve customer satisfaction

Focus on Market Share Gain Improve product/service value proposition Target complacent competitor(s)

Identify High Growth Market Segments Rigorous data driven market segment analysis Prioritize based on measurable evaluation criteria

Penetrate High Potential Adjacent Markets Measurable data driven selection criteria Conduct Buy vs. Build Assessment

Invade New Lines of Business


Within 17 Months, Revenue Jumped 145% and EBITDA Increased 240%...Company was Sold to Harris for $340 Million. Revenue From Existing Customers Increased 84%

Increased Market Share From 10% to 25% at Expense of Largest Competitor (Harris)

New Customer Revenue Increased 10X by Targeting Emerging Global High Growth Market Segment

Increased TAM (Total Addressable Market) by 4X via Expansion into Two New Adjacent Markets


Strategy and Operational Decisions are Important, but the People Judgments are the Most Critical

Invest or Divest

Build an Empowered, Customer Centric Company Culture – Always Ask “Why Should the Customer Buy from Us?”

Listen to Ideas and Be Open-Minded

Be Flexible, but Remain Focused on the Strategic and Financial Goals

Make Decisions and Act Swiftly

Communicate Continuously and Honestly


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“Always bear in mind that your own resolution to success is more important than any other one thing.”


Thank You….Questions?

Please email thoughts/comments to [email protected]

Leading Effective Business Turnarounds

Business

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