This is the second of two blog posts focused on turnarounds. Like the last post, the management tips in this blog post apply in most situations, but are particularly relevant for managers who need to improve struggling performance. These are best practices inspired by both our own experience, and the experience of other renowned management and turnaround experts. The last post was about people. This post covers product and processes.
Get back to basics
“A strategy of simple rules provides the flexibility to seize opportunities, produce good decisions when data and time are scarce, and help the various parts of an organization coordinate their activities to achieve common objectives.” 2
A common trait of struggling organizations is a lack of focus on what is important. The reasons why different organizations lose focus vary. Sometimes a shift in the marketplace has caused managers to pursue new projects to try to increase revenue. Other times the introduction of complicated processes, procedures, or regulations is what drives the lack of focus. However, in nearly every situation, simplicity is preferable to complexity. Look for ways to streamline, simplify and to reduce waste and clutter. Try to ensure that everything you do is in direct support of the mission and vision of the company. Once you have identified what is important, invest in those things that directly support your priorities.
Patiently invest in the positive
“There is nothing wrong with efficiency, but it has to be matched by smart management and investment in the kinds of things that prepare you to offer the best goods or services in the future.” 1
What are the investments that you can make to support the mission and vision of the company? Maybe you need to hire more engineers? Maybe a certain kind of tool or software will help make you better, faster, or cheaper. Seek out these things. Beware of things that reduce your focus on priorities or the ability to achieve your goals. You will probably be presented with many different opportunities. Develop simple, logical prioritizing rules for selecting the best investments. Excerpts from the incredible story of América Latina Logística (ALL), as told in the book, Simple Rules, highlights the power of a simple set of criteria for deciding which projects merit investment:
“In the late 1990s the Brazilian government privatized the country’s freight rail system. After decades of government underinvestment, the rail infrastructure was literally falling apart—half of the bridges needed repair and one in five was on the verge of collapse…A prominent Brazilian private equity firm bought the portion of the rail network that ran through southern Brazil, and installed Alex Behring as CEO of the new railway, América Latina Logística (ALL). Behring, then all of thirty-one years old, walked into a tough situation…
The company had been starved for investment capital for years, so nearly all of the projects had merit, but there wasn’t enough cash to go around. Which were the high-priority projects that should be tackled first? Which projects could wait?…There is no question that Behring understood cash-flow models—he was the top finance student in his MBA class. But he did not take that route. Instead, Behring assembled a team of managers from different departments and charged them with developing simple rules to rank the worthwhile proposals that had cleared the bar for capital spending….
The team came up with a handful of prioritizing rules, ranking projects according to whether they (1) removed bottlenecks to growing revenues, (2) provided benefits immediately (rather than paying off in the long term), (3) minimized up-front expenditures, and (4) reused existing resources…Within three years, ALL increased revenues 50 percent and tripled its operating cash flow, while maintaining the best safety record of all freight lines in Brazil.”2
Once you have selected the projects that merit your attention, move ahead with courage and prepare to exercise patience. You need to be prepared to wait before reaping the fruits of your decisions.
The solution, as it so often is with troubled companies, would require time, money, and a change of management culture.” 1
While time is rarely a luxury for struggling businesses, waiting patiently to reap the benefits of positive changes requires courage, patience, and fortitude. As any experienced manager knows, when you make a change, you may see a decline before seeing improvement. Be sure you set the expectations of stakeholders accordingly. It is important to maintain your focus on the priorities of the business.
Find the right indicators
“Often, complex rules and regulations arise out of a distrust of human nature.” 2
As Peter Drucker famously said, “you can’t manage what you cannot measure.” While true, it is important to remember that you are looking for KEY performance indicators, not just performance indicators. We have met with clients who invest a tremendous amount of time and energy “watching the numbers.” One senior manager had an entire binder full of numbers he reviewed every month. One person cannot keep that much information in their head and be effective. Look for the precious few indicators that tell you the critical elements of what you need to know. Demote or archive all the rest of the information. Keep a closer eye on the troubled parts of the business, but try to focus only on key details and results. Leave the details to line management. Remember that the data should be working for you, you should not be working for the data.
1Miller, R. S. (2009). The turnaround kid: what I learned rescuing Americas most troubled companies. New York: Collins.
2Sull, D. N., & Eisenhardt, K. (2015). Simple rules: how to thrive in a complex world. Boston: Mariner Books