Turnaround When’s the best time to start the process?

Trevor-character-turnaround (C) C. BurkeOne would think that the term Turnaround is analogous with failing company. In today’s environment you’d probably be correct, but it doesn’t need to be a company that’s failing, in fact smarter managed companies are in or should be in a constant state of flux; terminal turnaround.

A friend of my Regis Quirin, the Director of Finance at Gibney Anthony & Flaherty LLP said about the causes of turnarounds:

Simply stated, when business is good, it is very easy to overlook inefficiency and waste. But the macroeconomic weakness that is affecting the US is resulting in sales declines; while at the same time costs continue to rise. As a result, profits decline.

It is just this definition that a turnaround or restructuring or change management (or a dozen different management speak terms that essentially mean the same thing) needs to be implemented and run as an on-going project. As part of the management team or a Board member, you can’t wait for that sales decline, because the longer you wait, the harder it is to succeed in bringing about the change and preserving employee and customer/vendor value (I will ignore shareholder value as a valid contrary to B-school dogma, since investing in keeping or increasing employee and customer/vendor value will bring shareholder value as a result).

To further examine the concept of waiting for a sales decline, most of us live in a bubble of NIMBY (not in my backyard). While this term is usually used as a reason for not allowing some type of entity to establish a foothold in a community, it is equally true in management. Management fails to realize that there is a problem. The entity is sound, we are the best of the best, and the unthinkable is just that, unthinkable.

This silo thinking is the beginning of the end for a business entity for the world is dynamic and as such, markets change, industry changes and the economy changes daily. Just as your marketing department is always fine-tuning the value proposition, management needs to fine-tune the rest of the organization (which includes that value proposition).

Too often I have seen management realize their market has changed; try to implement some new or novel changes to the company, be they joint ventures, mergers or acquisitions, encounter the unavoidable misfires, failures and then get further dragged down by doubt and hesitance to react. Failing to pull on the trigger due to self-doubt further forces the company down the rabbit hole to the never regions of survival.

Sure, companies should be looking for new products or services, but they are usually in their core business segment. The smart company has budgeted funds to research the industry and examine what the competition and parallel businesses are doing. They are positioning themselves for diversity, mergers and acquisitions where time, at least on their side, is not of the essence.

They are looking at their systems, processes, infrastructure, and human assets and re-assessing whether or not they are sufficient not only for today, but tomorrow. Can the company handle a change in its core mission? What are the gaps between now and what needs to be accomplished?

Let us be realistic. Turnarounds, restructuring or change management (or whatever your term de jure might be) is costly. It has actual and unrealized costs associated with changing your organization. Real costs in time, energy and acquisition of new systems. Real unrealized costs in uncertainty of employees, customers and vendors.

To manage both you need a strategic plan, a tactical plan and most importantly a communications plan. As in any project, communications is the absolute key and in a turnaround you must communicate with your stakeholders.

So when is the best time to start the process? That time is today, not tomorrow or next week.