Get the junk out of the trunk: Now is a great time to reassess your business.

Every year about this time my wife organizes the house in preparation for the holidays. This includes going through all the stuff we have in our closets, shelves, hampers and trunks. The ritual is fairly painful, because she pulls everything out to reassess usefulness and how each item might fit in our plan for the next year.

Now is the time to get the junk out of your trunk and reassess your direction, tools, products and people. How much baggage does your company carry into every year? Evaluate your business as objectively as possible and get rid of those things that have no place in 2012.

Some areas to look at include:

Your business model

Many businesses and industries have materially changed since early 2008. We hear many people talk about the “new normal”; this may mean that products and services that you have relied on for years are no longer valid going forward. One company I work with has relied on a personal one-to-one service model and has added books and videos to their product offering. This was done to diversify their revenue and reduce the reliance on a business model that requires the principals to be involved with the generation of revenue during an 8:00 to 5:00 business day.

Opportunities

What opportunities have you missed in the past that might have put your company in a different place today? I meet with a number of business owners that discuss the actions they could take that would improve their business, but then go on to say “we discussed these areas 12-18 months ago and just couldn’t find a way to execute.” Does this sound like your company? Many business owners and leadership teams can sit down and plan how to take advantage of new opportunities, but fail to execute. Objectively evaluate your opportunities and develop a plan to get them implemented.

Strengths

When was the last time you and your management team identified your company’s strengths only to find a list that included things like “good customer service” or “good customer relationships”? Evaluate your company from the view point of your customers, partners, competitors and prospects. Does good customer service or good customer relationships set you apart from others in your industry? If not, then look deeper for sustainable areas of differentiation and identify how you can further exploit these strengths for a competitive advantage.

Weaknesses

Deep down we all know what some of our weaknesses are, but in many cases don’t confront them. It is difficult without outside input to develop a complete list of areas in which your business needs to be improved. Take this time to have candid discussions with your customers to learn how your company can improve. There are also some excellent tools and resources to perform a loss analysis, to develop insight into how your company can improve for the future.

People

Do you have the right people in the right places in your company? Many businesses have not strategically evaluated their most important asset… their people. Take a hard look at the direction of your company against the skill sets in your business and identify gaps that your management team can work on in the coming year. It may mean moving people into new roles, implementing training programs to help develop your employees, or hiring new people to supplement your team.

Yourself

As senior leaders we have a tendency of overlooking our own developmental needs. Are you ready to make the changes necessary in the new year to be successful? Just because you have been successful in the past, does not necessarily mean you will be successful doing the same things going forward. Successful leaders are those that can manage in changing environments, retool their company, and operate during times of ambiguity. Take an objective look at yourself and get ready for whatever the future brings.

Look at the junk in your trunk

Take the time to pull your leadership team together and objectively look at these areas as you prepare for 2012. Get an outside facilitator to work with you and your team to help develop the objective thinking and forward look needed to develop the basis of your operating plan for next year. Be prepared to gather additional information from your customers and partners to help guide you through the process. Taking the time to evaluate your business with independent input will help you develop a strong plan.

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 two books “Owner Exit Planning: Leave On Your Own Terms” and “Mapping Your Recovery: Grow sales in difficult times”. For additional information visit www.RoundhouseAdvisors.com

“Mapping Your Recovery: Grow sales in difficult times” provides additional information on areas that can positively impact your company.

Tough Times Mean Tough Decisions

Drastic measures are sometimes needed during these times of volatile economy just to have your company survive. It is tempting to make across the board cuts in what is probably your largest expense category… human resources. Be careful with across the board the headcount reductions. A wrong move may mean a steeper drop in sales or an inability to invest in areas once the economy bounces back.

Tribal Knowledge

Tribal knowledge is that historical and company specific intellectual property that is key to maintain and growing your business. This can be specialized product development talent that has knowledge specific to your company and industry that once lost would be very difficult to replace, or it may be that special person in customer service that knows all past issues and has a great relationship with key clients or distribution channel partners. In any event, identify these key individuals and do what is necessary to retain them.

Retaining Key Employees

Retaining key employees can come in many forms including retention bonus program, increased communication and soliciting input from these key employees. A retention bonus that is tied to their performance along with the company emerging from this difficult economic position (probably late 2009 or early 2010) is a good way to preserving talent without adding additional cash flow burden on your company. Increased communication to all employees is important, but even more important to those key people with the tribal knowledge to move you forward. Utilize the knowledge by soliciting input from these key employees and bring them into the fold as a part of the solution to the current economic environment.

An Example

I was appointed CEO of a company in August 2001… that’s right, one month before 9/11. Not only did I need to maneuver in a difficult economic environment, but it was also a turnaround situation. The best strategy and tactics used during the turn-around revolved around retention of key employees and using the talent in this group to help with company performance improvement. The key employees came from all disciplines of the company and at all levels including senior management team to front line employees.

Communication to the entire employee base on a regular basis was key to keeping everyone engaged, but additional focused communication to the key employee group allowed me to utilize their skills and knowledge to manage small cross-functional teams to tackle the many tasks that needed to be addressed. This got the employees involved with key turn-around activities, and kept morale up even with reducing the total employee headcount by 40% during the first 90 days.

The end result of the turnaround was an increase in net profits from a negative $6 million to positive $800,000 in the first full year on sales of $38 million, and an increase in EBITDA from 15% of sales to over 35% of sales. I could not have done this on my own and enlisting the employees allowed us to accomplish this in a very short time frame.


Managing in a tough economy is not easy, but can be rewarding. Emerging from difficult economic times stronger than when you entered allows you to grow the business. As business owners and leaders, it is your responsibility to look out for the viability of your company. Take that responsibility seriously and manage expense reductions diligently to focus on the near term while keeping an eye to the horizon.


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

Managing in Uncertain Economic Times

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 .

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