In part one of this two-parter on corporate turnarounds, I covered defining the core problem preventing organizational success, the CEO’s real role, and the importance of a standout CFO. Now let’s go further and look at the diagnostic or evaluation team and the metrics needed to get the job done.
What seems to generally happen during a turnaround is a CEO is selected, rolls up his or her sleeves, and then gets to work. This is likely why most of them fail. This would be like walking into a doctor, saying you’re sick, and being tossed on the operating table. Until you know in detail what the problem is, any large move you make may do more long-term damage than good. You have to diagnose the patient and then determine what unique steps are needed to fix the problem, and you need detailed information.
Now the CEO and CFO won’t have the time for this as both will initially be engaged in keeping the company afloat. Much of their initial time will be spent on plugging obvious holes in order to have the time needed to do a turnaround (the rule of thumb is three to seven years, with few CEOs surviving that long). This is why Steve Jobs focused so tightly on getting money from Bill Gates and in ending litigation; he needed to massively reduce bleeding before he could actually focus on anything else. Think of it as corporate triage.
Building an Evaluation Team
Much like you would bring in a team of specialists to diagnose a complex medical problem, you’ll need to bring in a team of experts to analyze what is wrong with the company. Often, analyst firms are used, but the problem with that is that the analysts generally haven’t been recent practitioners. That lack of experience can result in recommendations based on past experience with other companies that are both out of date and not applicable.
Better to bring on board subject matter experts who have relatively recent executive and operational experience. Fortunately, with tools like LinkedIn, these folks are reasonably easy to define. You’ll need at least three but I’d recommend five for this task. The necessary three are finance, sales and manufacturing or software development, depending on the firm’s product. The other two are human resources and operations. The task of this team is to go into each of these company divisions and determine what is broken and then individually select the things that need to be fixed, prioritizing them based on impact and cost.
They will then be asked to work together to set up a master list. This last effort works best if initially supervised by the CFO because CFOs by nature are both detail- and numbers-oriented. The CEO then is brought in and pitched on the result with the entire team present so that egos don’t overcome good judgment. We used to call these Tiger Teams. I ran one years ago in IBM. You do have to be careful because the folks who do this tend to be strong type-A personalities and this can skew the result toward the person with the strongest personality, which is something both the CEO and CFO must be aware of to correct.
This process should identify the priorities and organize them into a plan that can be executed. It also gives you a team of people who can then be deployed as aides, with loyalty to the CEO. These aides can then be regularly queried to make sure the reported progress is in line with what is actually going on. Many companies die unnecessarily because the progress that is reported isn’t real.
Putting in Place Metrics
Before moving on, the team, along with the CFO, should put in place a set of measurable metrics the CFO will use to gauge progress. Good CFOs, when given a tool like this, can become incredibly effective in pointing out what (and who) is working and who isn’t. Jerry York was famous for his no-BS meetings, where line managers went in dry and came out dripping with sweat. He often knew more about their business area than they did, largely because he drove a process like I’ve described to fully understand what was actually going on and set metrics so he could tell when executives were misrepresenting the truth.
David Campbell, Ph.D., actually wrote a book, “If You Don’t Know Where You’re Going, You’ll Probably End Up Somewhere Else,” which speaks to the problem of not having metrics and why they are so incredibly important. His book is on life but the concept works as well for companies.
Wrapping Up: A Turnaround Is Like Medicine
The keys that seem so often forgotten in a turnaround are that you first need a general diagnosis to get the specialist you need to fix the company, you need qualified specialists, and they need the detailed accurate diagnosis to come up with a plan to cure the patient. And they need to monitor progress so they can assure the patient is actually getting better so they can correct any mistakes before the patient/company dies. It really isn’t very helpful to have a book come out after a company failed on what should have been done, particularly if you could have determined that beforehand.
Turnarounds are hard but they don’t have to be impossible. And if they are, you can still maximize the return if you play heads-up ball.