Corporate transformations have been around since the days of the East India Company. But the speed at which business is conducted today—with economic headwinds and disruption affecting companies around the world— means that executives must manage day-to-day operations while keeping one eye on projects that will transform the business to ensure it stays relevant in the future. Some of the skills learned through restructuring have had an impact on how transformation is being approached in this fast-paced world.
To be successful in these conditions, companies need to be agile, move swiftly and execute highly detailed plans. Such perspectives, skills and capabilities are often found in restructurings — the corporate equivalent of the hospital emergency room. Companies that need to transform or turnaround in some way would do well to import an experienced leader. Below are eight tips to guide a company through a successful restructuring.
Recognize the Disruption
The early stages can be like the emergency room in a hospital. You need to quickly establish what the lifethreatening injuries are and what’s more of a flesh wound. Create a fact base. How bad are things really? Is this a business that is running out of cash, or is it a business where the rules of the game are changing and the company needs to transform? I believe there are four types of extraordinary disruption that affect a company and its ability to react, whether they are planned or unplanned, or from an internal or external source: transformational, reputational, hostile and creative. Many issues may not be immediately apparent.
Come to Grips with the Key Issues
Once you have established that the company can stand on its own two feet, it is time to investigate further to resolve the root source of the issues. Across the globe, change and disruption is everywhere. So companies, even if they are not in the emergency room stage, need to look to new skills and experience to transform and stay relevant. Spend time in the business, use your eyes and ears effectively, engage employees and make them feel comfortable enough to express their concerns. A company can become blinkered when the business has been successful, so look externally to provide insights. Where does the company need to focus its efforts?
There’s never a better time to tackle the mistakes of your predecessors than right at the start. Don’t forget about the value of symbols and symbolic actions. What symbols can you make use of to signal there needs to be a change — a move of the head office? Does the senior management parking lot look over-filled with expensive cars and gas guzzlers? Send quick and decisive messages that things need to change.
In the meantime, never take your eye off the cash. Often it is surprising how even large corporations are obsessed by an intense study of a whole array of KPIs and arcane measures and yet lose track of cash in the business. Cash is king.
You’ve got to have a plan; Where are you going? How are you going to get there? What does everyone have to do to play their part?
It is important to have high levels of emotional resilience, communication qualities, IQ, EQ (emotional quotient), XQ (executional quotient) and integrity. Ensure there is a good level of engagement and integrity across the board and top management. And ensure they all know where they need to go before embarking on a journey that is going to take vast effort.
Set Out Your Vision and Choose Your People
The plan should be practical but it must also inspire — what’s going to get better, when and for whom? Even if the details have to change in response to events, your vision can remain intact. Signal a change in behavior is required and that you need people to recognize there is a need to change. You need to force the pace and jump start people out of a “business as usual” mindset.
Ensure the right leadership team is in place. Find those within your organization who are up for change — they may not necessarily be the existing leaders and senior managers, and may be frighteningly young or those who thought they were coming to the end of their careers. But they must be the types who are not afraid of casting aside the status quo and are up to do things differently and with urgency.
Harvard professor Joseph Schumpeter famously talked about “creative destruction,” but for every person attracted by “creative” there are many more terrified by “destruction.” Non-conformist, free-thinkers are the ones happy to question the status quo. However, most people are inclined to rationalize it as legitimate, even if it goes against their own interests. If the world is supposed to be this way, we don’t need to find fault with it. You need to seek out the bold, original thinkers.
Keep Stage and Stakeholders Updated
You simply cannot explain your vision too vigorously or too often. Get it out there and across all the channels — internal meetings, traditional media and social platforms. Leave no doubt as to your intentions. It doesn’t matter what the nature of the turnaround or transformation is, it will go nowhere fast if you can’t sell it to the workforce and business partners and show momentum and progress along the way. And this means all your stakeholders.
Internal and external communication should be consistent, clear, frequent and timely.
Revert to Zero-Based Budgeting
Today, zero-based budgeting (ZBB) is the buzzword around companies looking to transform and manage growth at the same time.
ZBB is painful and time-consuming. Vested interests will fight in their corners to the last. But this process can allow a business to focus with intensity on what really matters and what doesn’t. By attacking fat and overheads in this radical way, you can take granularity to a new level. However, gone are the days when setting a cleaver to an organization has lasting impact — many companies have already been through several rounds of cost cuts.
Besides willingness to cut, companies need the knowledge and experience to see where some savings can be re-invested or re-directed. Growth and new shoots are always the key to ZBB working.
Stay Calm and Be Optimistic
You will likely find yourself under intense scrutiny. People will be watching you very closely for signs of those twin imposters: hope and desperation. So, remain cool and cheerful but always entirely realistic. Even if you are scared, try not to show it. But by the same token false hope, openly expressed, can be damaging. Try to look sharp and behave professionally even if you don’t always feel it. It’s an overused word but “authenticity” can count for a lot during turnarounds.
Make Sure You Have a Plan-B
The path to success — like love or happiness — rarely runs true and straight. A fall-back position will always be a necessity. You should, of course, not plan to fail. But business today, more than ever, is filled with uncertainties. You must assess and refine your approach, events and situation as the process unfolds. If the founders of Google, Starbucks or PayPal had stuck fast to their original business plans and dreams, we would never have heard of any of them. There is never only one way.
Most turnarounds inevitably focus on the short term. But the best transformations have a destination, a vision and a narrative that all stakeholders can understand and know is for the long term. If the destination plays to the heart of your business and is continuously reinforced in the minds of all your people, then you stand more chance of winning.