Planning a Sustainable Turnaround: A Concise Guide To Success
By Alan Ball
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Planning a Sustainable Turnaround - Alan Ball
Biography
PREFACE
Business consultants and leaders will often tell you that the most important thing in a business turnaround is either the strategy or the implementation. Now, while a strategy and implementation are important – without them, how can you follow and measure a path to success? – most important are the people in your business, and understanding where they stand and what you need to do to get everyone on the same page.
Having led, and turned around, several businesses, I now support other businesses in achieving growth and turning around their fortunes despite the barriers formed by people.
What I learnt over 30 years of leadership is that it is the way you manage the people that gets you results. Yes, you need a strategy. Yes, you need customers and suppliers and a team. But when you face the need to turn a business around, nothing is achieved that is sustainable without the people being onside.
The aim of this book is to navigate you through the turnaround process, but more importantly, it will guide you through the understanding of people, and how you deal with them through your turnaround journey.
At the end of it all, you will need to implement the findings and the guidance of this book. It is a proven theory, and while it might be uncomfortable for some, I am confident that applying it rigorously will increase the chances of success in the long term.
CHAPTER 1
START WITH THE ‘WHY’
There might be a hundred reasons why a business feels the need to turnaround, to transform, to accelerate growth. The reasons come from events, and we need to break these down into their lowest common denominators to fully understand the position we are in.
Stakeholders or shareholders may be unhappy with results, MDs and CEOs may see a decline and want to return the business to better days, or it could be that banks or lenders are concerned about performance and cashflow.
Recognition and acknowledgement of a problem may require the CEO to admit, at a minimum, that mistakes have been made, and at worst, that there has been a failure. This creates significant psychological barriers that need to be overcome. Four common psychological stages of a turnaround are:
•denial
•projection
•reluctant recognition
•aggressive action.
In the denial phase, the CEO refuses to recognise that a problem exists. He or she is confident that this is a period of temporary challenges and that the company should not deviate from its current strategy. With this psychological mindset, a CEO can remain in his or her management comfort zone. This phase can last anywhere from several days to several months, depending on the level of external pressure brought by independent third parties (bankers, accountants, vendors, etc.).
In the projection phase, the CEO grudgingly admits that there is a problem but refuses to search for the root cause. Instead, he or she projects accountability for the problem to sources external to the business (bankers, vendors, customers, new regulations, economic swings, etc.). This phase allows the CEO to continue to avoid responsibility and to hang on to or remain in his or her management comfort zone. This phase can also last anywhere from several days to several months, again depending on how much external pressure is brought to bear.
Eventually, the CEO must admit that there is a problem and recognise that they must act before the business reaches the point where it cannot be saved. This is the phase of reluctant recognition. In this phase, the leader is willing to listen to advice from the management team and outside advisors.
The fourth psychological stage, aggressive action, is when leadership begins the turnaround process by either beginning the search for the root-cause problem(s) and developing root-cause corrective action or engaging professional turnaround management to start this process. The amount of time that it takes to get to this point is directly related to the speed and success of the turnaround.
If the leader is unable to recognise that there is a problem with his or her business and is unwilling or unable to take aggressive action, the company will continue to deteriorate. This will make the turnaround process more difficult and could result in substantial damage to the value of the business that may ultimately result in catastrophic failure.
Don’t get sucked into comparing yesteryear’s turnaround businesses and today’s, trying to justify why it’s different today than it used to be. It’s not. Regardless of size and sector, there are businesses going through the same challenges today as they were 25, 50, 100 years ago. Sure, the dynamics might be different, but fundamentally, if you get it wrong, it’s the same result – failure.
There is a quote from Tolstoy in his novel Anna Karenina: ‘All happy families are alike; each unhappy family is unhappy in its own way.’
The same is true in business: a healthy business carries the same traits as every other healthy business; an unhealthy business is unhealthy in its own way.
This is the reason the ‘Why’ is so important. It has to be your ‘Why’. You need to unearth it, own it, deal with it.
One of my more recent turnarounds is a good example to illustrate the ‘Why’.
Tradelink is an Australian plumbing and heating distributor. It has been in existence for over 150 years and has more than 200 locations across Australia. Being owned by a New Zealand Plc meant profitability was key, but results had for two years been on the decline and sales were falling fast.
The business leaders at the time had invested millions in a new strategy that focused on showrooms and trade branches, so there was a self-fulfilling prophecy that failure was not an option.
Stores had been refurbished, lighting was made up of copper tube, and trade counters were a work of art made of angled wood to take the business into a more retail experience.
Blindsided by the wow factor of the new design, management continued to pursue the makeover of stores across the country. Sales began to fall, profitability was at risk and staff were leaving to join competitors, in particular a new competitor that was opening large stores fast.
On my arrival in Brisbane, the business was