Turnaround… Tough Times… Terrible Economy. Call it what you will. In any case it takes a special focus to manage in a down turn economy 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. Too many of the companies I have met with in the last two years have waited too long before looking for help and have focused primarily on trying to ride out the storm, only to find out they do not have the cash reserves to make it to the end.
A focus on the following areas is necessary when managing in uncertain economic times and/or a turnaround situation.
Employees – Employees are your most important asset. Your employees have probably gone through at least one round of layoffs and/or seen reductions in their salary/hours. It is difficult in good times to keep employees motivated and even more difficult when they have gone through the turmoil of the last few years. Unmotivated employees can negatively impact customer service, productivity and ultimately profits.
A key area of managing your employee base during this time 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.
Customers – Customers are the lifeblood of your business. 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 others in the industry. 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.
Partners – Partners may be dealers or Value Added Resellers, joint venture partners, or banking/finance partners. It is necessary that you communicate openly and honestly about your situation along with the recovery plan in place. Be proactive with your partners and present your plan of recovery along with timelines. It is good with this constituency to be very conservative in your recovery plan, so feel comfortable and confident that the company can achieve the results even with any unforeseen issues that may arise.
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 recovery plan. Your employees need to see a common front from the management team to confidently follow your leadership and the direction to improve company results.
Leverage the collective strength of your management to provide the focus and direction of the organization. The diversity of skills on your management team is exactly what is needed to prepare for the recovery. Remember, the collective group is smarter than the individual.
Business as usual will never be the same after the economic turmoil of the past few years. Communication and focus on the right areas of your business is necessary to be in the best position as the economy continues to improve. You may be too close to your business to see all the areas that should be addressed, so take advantage of outside help to provide a 360 degree view of your situation and opportunities. This may be your advisory board, contacts in a networking group, or 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 consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com
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