When a turnaround management consultant is engaged, many stakeholders are extremely interested to learn the findings. Management and owners want to know what the consultant plans to do — and why — and when to expect positive results. No doubt about it, they are always concerned about managing the costs associated with consultant fees while getting full value in return.
Clients, management or owners are also concerned about confidentiality. The consultant is normally bound by confidentiality via the engagement letter, and communicating important information to outside stake- holders should be done in a transparent fashion with the knowledge and consent of client management.
As we all know, senior lenders are anxious to learn the consultant’s initial findings, the key elements of the turnaround plan and the significant challenges and risks involved. They want to know if the turnaround is achievable and, if so, within what time frame and what support will be requested from senior lenders. These lenders also require the necessary information to make credit decisions supporting the turnaround plan.
Other stakeholders, such as subordinated lenders, government and regulatory bodies, and unsecured creditors are also anxious to hear how their debts will be addressed and when. And of course, a dialogue must commence with the employees and the unions representing them, since they will also be a key part of the turnaround strategy.
Keep in mind that all of the client’s shareholders, both active (such as private equity interests) and passive must also be informed.
The initial stages can be quite chaotic for the turnaround consultant. Since the key stakeholders are anxious to get information, they will often make repeated requests to various levels of management as well as the turnaround team. Therefore, the consultant must establish an orderly process to field these requests, set expectations for timely responses and ensure that a process is put into place to provide the most appropriate information with proper interpretations to the users of the information.
It is very important to address these communication concerns by implementing a formal communication protocol in all turnaround engagements. A communication protocol consists of the following:
Establish & Communicate Protocol
At the commencement of the engagement, the consultant advises all stakeholders of the communication protocol to be followed throughout the engagement.
Draft Weekly Report
Each week the turnaround consultant prepares a draft report, which discusses the turnaround’s key business elements in brief bullet points. The report includes an update of the 13-week cash flow forecast, a variance analysis of actual cash flows versus forecast and a dashboard report on key operating metrics. This report identifies the status of active business initiatives underway and sets expectations for results and completion dates. The report should be prepared at the same time each week.
Review Report with Management
The turnaround consultant reviews the draft weekly report with management and ownership to get their input and agreement. This review also includes a discussion and confirmation of the consultant’s going-forward work plan, deliverables and associated fees and expenses. The consultant must also confirm with
management that sufficient resources are available to complete the deliverables as planned. This review meeting is scheduled in advance and held at the same time every week.
Weekly Review with Key Stakeholders
The turnaround consultant finalizes and circulates the weekly report to senior lenders and schedules a review meeting by teleconference, although a face-to-face meeting may be required from time to time to more effectively address certain critical issues. The report is circulated at the same time each week, and the teleconferences are scheduled in advance and held at the same time each week. The length of each teleconference call is not as important as establishing a schedule for the calls and strictly adhering to it.
The weekly report serves as the agenda for review meetings and the turnaround consultant is the host. Participants include management, owner and senior lender(s). In the development stages of the turnaround plan, the meetings are used to identify key issues and discuss corrective actions. All participating stakeholders have an opportunity to understand contem- plated actions, voice objections, concerns or support and request additional information. In this way, a turnaround plan is developed that gains the necessary support of the key stakeholders before it is finalized.
Informing Other Stakeholders
The turnaround consultant modifies and circulates similar weekly reports to the other stakeholders (customers, employees, key suppliers, unions and government bodies), as required, which are designed to keep the stakeholders informed about the business turnaround. Conference calls are also scheduled, as required, for each group to review the modified reports.
Once a turnaround plan is finalized and adopted, the weekly review meeting sets expectations.
The review contains information on the timing of completion of the various implementation steps and reports on the results achieved.
The advantages to this communication protocol are:
- Establishes a process to assist client management in monitoring and controlling consultant’s fees and expenses, and to enforce confidentiality agreements
- Sets reasonable expectations for deliverables with all key stakeholders
- Reduces surprises and identifies roadblocks as they arise to facilitate steering in a different direction, if required, with the knowledge and support of key stakeholders
- Efficiently uses resources of all stakeholders by providing a regularly scheduled forum for discussion, inquiry, decision-making and reporting
- Provides a documented trail of decisions made and actions taken throughout the turnaround
The dominant theme for any turnaround consultant should be to identify strategies and tactics that optimize financial performance and returns to all stakeholders.
Overall, putting a solid communication protocol in place will meet the needs of management, owners, senior creditors and other stakeholders in many, if not most, turnaround situations. Communication with other constituents (customers, employees, suppliers, unions or government bodies) is also critical, but the appropriate protocol must be specifically tailored to each engagement.
All stakeholders will condition themselves to this protocol and will appreciate the forum to hear and be heard.