Turnaround… Tough Times… Terrible Economy. Call it what you will, in any case it takes a special focus to manage in a down turn and be able to emerge positioned to grow. I have managed organizations that required turnaround skills as well as hyper-growth, and there are challenges associated with both. Turnaround management skills require you to improve or stabilize financial results without putting the company in a death spiral.
The best turnaround management includes not only cost cutting, but more importantly increasing or stabilizing revenues. Any cost cutting effort without an eye to the revenues will only result in continued cuts in an attempt to improve bottom line, which in the end could destroy your company. A focus on the following areas is necessary when managing in uncertain economic times and/or a turnaround situation.
1.) Employees – Employees are your most important asset. Any headcount reductions need to be made swiftly and humanely, while reassuring those that remain of their importance to the turnaround effort. Try to orchestrate all near term headcount reductions at one time, this reduces the concern by the remaining employees of future reductions in force. When making decisions on employee reductions work to retain customer facing positions and any “tribal knowledge” workers. You will need the customer facing employees to help maintain and develop revenues, and the historical company knowledge (referred to as “tribal knowledge”) will be necessary to run your business in the short term and then again after emerging from the crisis.
A key area of managing your employee base during these times is communication. In fact, there is no such thing as over communication during difficult times. In the absence of information your employees will fill the void with what they think is happening, and most times it is untrue and detrimental to moving the company forward. Refer to the November 17, 2008 post in this blog for a complete discussion of employee communication.
2.) Suppliers – Communicate with your key suppliers to update them on your situation and status. Treat these relationships as key partnerships. During the discussion focus on your goals, timing and action plan. Use this as an opportunity to consolidate suppliers and leverage the increased volume with key partners to assist you with your turnaround effort.
3.) Customers – Customers are the lifeblood of your business, and you cannot risk your top customer’s hearing about any turnaround effort through the grapevine. They can and most likely will hear about any difficult time you are managing from your employees or through the internet. Be proactive and discuss your situation with key customers. Visit them in person when possible and reassure them that you are focused on emerging a healthier company prepared to serve them well into the future.
This is also the time to review profitability by customer and make the difficult decision of firing those unprofitable or marginally profitable customers. The client meeting is a good opportunity to discuss a price adjustment that brings them in line with your objectives or terminating the relationship. It will not be a comfortable discussion for you, but it is something that needs to be done and done quickly.
4.) Partners – Partners may be a dealer or VAR sales channel, joint venture partners, or banking/finance partner. It is necessary that you communicate openly and honestly about your situation along with the recovery plan in place. If you have not heard from your banking/finance partner yet, you will, so be proactive and present your plan of recovery along with time lines. It is good with this constituency to be very conservative in your recovery plan, so you feel comfortable the company can achieve the results even with any unforeseen issues that will arise.
5.) Focus on Cash Flow – Now is the time to focus on your cash flow. Have your finance group develop a rolling 13 week cash projection. Have a key management meeting revolving around cash flow to review progress and plan steps to improve the projection. P&L reviews are nice, but they are inherently poor for this activity, due to all the non-cash accruals embedded in the document. Focus on cash generation and cash preservation activities.
6.) Leadership – This is the time your company needs you most. Demonstrate confidence in front of your workforce, even if behind closed doors you and your management team are having violent discussions on the turnaround plan. Your employees need to see a common front from the management team, so they can confidently follow your leadership and the direction to improve company results. Once again, communication is key to building this confidence and providing regular feedback on the progress the team is making.
Turnaround management is not fun, but administered correctly you can emerge from difficult times poised to take advantage of opportunities. Take advantage of your advisory board as input to your plan, and hire an outside consultant to help with your efforts.
Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a business consulting practice focused on helping businesses increase enterprise value in all stages of company life cycle. For additional information visit www.RoundhouseAdvisors.com .
Wednesday, November 26, 2008
Monday, November 17, 2008
Tough Times Require Greater Employee Communication
Even the best leaders hear their employees complain about the lack of communication in a company. I have heard this complaint even in companies where I had some communication effort reaching out to the work force on a weekly basis. This is an indication that the employees need regular communication to help them feel engaged in the company and move the company forward.
The employees will fill any void of information with their own assessment of the situation, and in most cases this information does not operate in reality. This informal communication channel then provides the wrong message for a broader employee base, which in many cases demotivates and disrupts the direction of the business.
A lack of internal communication is a problem in good times, and is detrimental in difficult financial times. Instead of focusing on the daily work at hand, employees get caught up in the rumor mill resulting in an atmosphere of fear and concern. The end result is a loss of productivity and more importantly a reduced level of customer service by those employees responsible for dealing directly with your client base.
The senior leadership of a company can prevent this from happening by implementing a proactive communication program. The tactics may be uncomfortable for those senior leaders that spend most of their day sitting behind a desk, because it requires them to get out of the office and spend time with their teams. A few tactics that I have used successfully with teams as large as 1,600 people include:
1.) All Employee Meetings -- I have found that a monthly meeting of all employees provides an opportunity to cover information ranging from progress on initiatives to financial results from the previous month. Even in privately held companies, where there is a need to keep financial results confidential, I have shared how the company had done compared to key financial targets. For example, "last month revenue was better than planned, but profit was short due to unexpected expenses related to..." This provides even the front-line employees with a feel on how the company is performing, and it also gives the senior leaders an opportunity to explain how the different departments contribute to the financial results of the company. I have never had an employee tell me they would rather not know how the company is performing.
2.) Employee Emails -- Take advantage of email to communicate with all the employees that have access to provide updates through the month. The information may be a new sale that just closed, progress on hiring a key position, customer feedback, or the company being highlighted in the press. Communicate the good and bad! Your employees will hear and see the bad, so take a proactive approach and communicate it up front with an explanation they can understand. Emails should be relatively short, and anything that takes more than a 4 sentence paragraph probably deserves an additional all company meeting to explain.
3.) Bulletin Board Posts -- Bulletin board posts allow all employees to share in the information outlined in the employee emails. Post everything that goes out in email as well as any company related articles in the press that did not get communicated in an email.
4.) Walking Around -- I cannot emphasis enough the need to get out of your office and "walk" around the company. It may be walking through the assembly or manufacturing area, spending time in engineering, calling a customer, or making a sales call with your sales and marketing teams. This gives you first hand knowledge on what is happening in your company and allows you to talk to those employees closest to the process and closest to the customer. One of my favorite activities is dropping in to observe a meeting that is taking place (My management team in one business referred to this practice as a "drive by" -- if I was walking by a meeting and it looked interesting I would stop in to observe), which allowed me to hear the issues and observe how my teams were handling with topic.
Increasing communication with your employees will yield a more engaged and effective work place. This could be in the number of widgets produced, but more importantly improved customer interactions and workplace team dynamics. Improving the level of communication with your employees will position you to emerge from these tough economic times a stronger company. Hopefully the economy improves sooner, rather than later.
Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value in all stages of company life cycle. For additional information visit www.RoundhouseAdvisors.com
The employees will fill any void of information with their own assessment of the situation, and in most cases this information does not operate in reality. This informal communication channel then provides the wrong message for a broader employee base, which in many cases demotivates and disrupts the direction of the business.
A lack of internal communication is a problem in good times, and is detrimental in difficult financial times. Instead of focusing on the daily work at hand, employees get caught up in the rumor mill resulting in an atmosphere of fear and concern. The end result is a loss of productivity and more importantly a reduced level of customer service by those employees responsible for dealing directly with your client base.
The senior leadership of a company can prevent this from happening by implementing a proactive communication program. The tactics may be uncomfortable for those senior leaders that spend most of their day sitting behind a desk, because it requires them to get out of the office and spend time with their teams. A few tactics that I have used successfully with teams as large as 1,600 people include:
1.) All Employee Meetings -- I have found that a monthly meeting of all employees provides an opportunity to cover information ranging from progress on initiatives to financial results from the previous month. Even in privately held companies, where there is a need to keep financial results confidential, I have shared how the company had done compared to key financial targets. For example, "last month revenue was better than planned, but profit was short due to unexpected expenses related to..." This provides even the front-line employees with a feel on how the company is performing, and it also gives the senior leaders an opportunity to explain how the different departments contribute to the financial results of the company. I have never had an employee tell me they would rather not know how the company is performing.
2.) Employee Emails -- Take advantage of email to communicate with all the employees that have access to provide updates through the month. The information may be a new sale that just closed, progress on hiring a key position, customer feedback, or the company being highlighted in the press. Communicate the good and bad! Your employees will hear and see the bad, so take a proactive approach and communicate it up front with an explanation they can understand. Emails should be relatively short, and anything that takes more than a 4 sentence paragraph probably deserves an additional all company meeting to explain.
3.) Bulletin Board Posts -- Bulletin board posts allow all employees to share in the information outlined in the employee emails. Post everything that goes out in email as well as any company related articles in the press that did not get communicated in an email.
4.) Walking Around -- I cannot emphasis enough the need to get out of your office and "walk" around the company. It may be walking through the assembly or manufacturing area, spending time in engineering, calling a customer, or making a sales call with your sales and marketing teams. This gives you first hand knowledge on what is happening in your company and allows you to talk to those employees closest to the process and closest to the customer. One of my favorite activities is dropping in to observe a meeting that is taking place (My management team in one business referred to this practice as a "drive by" -- if I was walking by a meeting and it looked interesting I would stop in to observe), which allowed me to hear the issues and observe how my teams were handling with topic.
Increasing communication with your employees will yield a more engaged and effective work place. This could be in the number of widgets produced, but more importantly improved customer interactions and workplace team dynamics. Improving the level of communication with your employees will position you to emerge from these tough economic times a stronger company. Hopefully the economy improves sooner, rather than later.
Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value in all stages of company life cycle. For additional information visit www.RoundhouseAdvisors.com
Thursday, November 6, 2008
Managing Through Tough Economic Times
Many say we are in for another 12 - 18 months of difficult economic times. Things were tough enough earlier this summer and it looks like it just keeps on getting worse. There are a number of things you should focus on in your business in order to work through the tough times. In this blog we will discuss spending associated with customer facing activities.
Customer Facing Activities
Evaluate your spending and start cutting back on those that are not customer facing. Any customer facing activity needs to continue until you absolutely have to cut back further. A natural reaction is to cut back on marketing expenses… I have to admit that I have taken this approach in difficult times only to regret it during difficult times and then again when better economic times started to arrive.
Marketing is cumulative and any drastic cuts in marketing communications will take at least twice as long to get back any momentum that you have created. If you have ever started a marketing program, in many cases early months do not yield much in results but as the program continues it seems to snowball. This cumulative effect is lost if you take the tack to going “dark” for a few or many months, so be prepared that it will take a good 6 months to get any momentum back once you start your programs again.
Cutting back on marketing activity also limits your business development efforts. Sales are generated by your sales people, but marketing softens the market and helps drive demand. Cutting back in sales and/or marketing only hurts your ability to stay with your current market.
An Alternative
An alternative to cutting back completely on marketing communications is a good PR program. In my experience, it is the best bang for the buck. It costs a fraction of what advertising costs, and it allows you to craft the message that you want the market to hear. PR provides a great vehicle to offset some higher advertising dollars without going “dark”.
Be prepared, just as advertising takes time to build momentum so does PR. Give it some time and it will help you drive your brand and sales. I recommend using a good outside agency to handle your PR activity. This is what they do and they can help you craft your message and still be a variable cost.
Just because you are going to an “agency” does not mean that you will need to spend big dollars at a large firm. There are a large number of independent contractors that specialize in PR that do a great job and cost a fraction of the big integrated marketing firms.
Spend wisely, focus your efforts and expenses on customer facing activity and it will help you work through the tough economic times.
Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value in all stages of company life cycle. For additional information visit www.RoundhouseAdvisors.com
Customer Facing Activities
Evaluate your spending and start cutting back on those that are not customer facing. Any customer facing activity needs to continue until you absolutely have to cut back further. A natural reaction is to cut back on marketing expenses… I have to admit that I have taken this approach in difficult times only to regret it during difficult times and then again when better economic times started to arrive.
Marketing is cumulative and any drastic cuts in marketing communications will take at least twice as long to get back any momentum that you have created. If you have ever started a marketing program, in many cases early months do not yield much in results but as the program continues it seems to snowball. This cumulative effect is lost if you take the tack to going “dark” for a few or many months, so be prepared that it will take a good 6 months to get any momentum back once you start your programs again.
Cutting back on marketing activity also limits your business development efforts. Sales are generated by your sales people, but marketing softens the market and helps drive demand. Cutting back in sales and/or marketing only hurts your ability to stay with your current market.
An Alternative
An alternative to cutting back completely on marketing communications is a good PR program. In my experience, it is the best bang for the buck. It costs a fraction of what advertising costs, and it allows you to craft the message that you want the market to hear. PR provides a great vehicle to offset some higher advertising dollars without going “dark”.
Be prepared, just as advertising takes time to build momentum so does PR. Give it some time and it will help you drive your brand and sales. I recommend using a good outside agency to handle your PR activity. This is what they do and they can help you craft your message and still be a variable cost.
Just because you are going to an “agency” does not mean that you will need to spend big dollars at a large firm. There are a large number of independent contractors that specialize in PR that do a great job and cost a fraction of the big integrated marketing firms.
Spend wisely, focus your efforts and expenses on customer facing activity and it will help you work through the tough economic times.
Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value in all stages of company life cycle. For additional information visit www.RoundhouseAdvisors.com