Turning around a company isn’t as straightforward as stabilizing finances, containing costs or fixing operations.
More often than not, a turnaround goes well beyond the fundamental business issues, delving into areas such as employee attitude and temperament.
From my experience, there are three key areas that must be addressed in order to create the best possible opportunity for success.
Deal in reality
Optimism is a huge attribute of visionary leaders. It can, however, be an Achilles heel for those charged with leading a successful turnaround. Looking at a struggling business through rose-colored glasses can waste precious time and delay important decisions. A healthy dose of pessimism can be an advantage because it can help you address issues directly and immediately. When you deal in reality, you cut costs and rationalize your budget to fit the business trend — not what you would like it to be or what it used to be, but what it is.
For example, if your top line sales have been declining by 10 percent annually, you shouldn’t plan on them returning to flat in the next quarter. If you lost a customer that represented 15 percent of your business, you shouldn’t expect another to walk through the door.
Start taking the tough, immediate steps to stop the bleeding and give the business a change to heal. Most importantly, put time on your side. You need as much of it as possible.
Communicate often and openly
Don’t keep bad news hidden. Involve your organization and respect your people by communicating openly and honestly. As you enter into the turnaround phase, it is important to be direct. Demonstrate leadership and build confidence by laying out business realities and the tough steps that need to be taken. Equally important, build confidence, alignment and support by outlining the recovery plan. And don’t just speak, listen. Ask for your team’s support — and their ideas. Chances are most of your team will rise to the challenge. Those that don’t shouldn’t be there.
Plan thoughtfully and strategically
While cutting costs, you also need to be planning for growth. Not by being reactionary, but by thinking and looking to the future strategically and by asking important questions: How has the category changed? Who is your target and how can you best engage them? Where are the competitive gaps? More importantly, why does the business exist?
Reviewing and redefining your business or brand positioning can galvanize your organization behind a singular reason for being and start building back cultural glue that is often frayed in a struggling business. Here too, it is important to gain alignment.
Gain insights and perspectives from across your organization to form the final idea. Outside resources can help facilitate focused collaborative “ideation” sessions involving team members from all levels and areas of responsibility. Conducted properly, this can be stimulating; it can break down barriers and re-energize an organization that has gone through tough times. It also can create “shared advocacy” for the path forward and lead to developing a meaningful and thoughtful strategic plan that includes realistic timelines, roles and responsibilities and of course, financial benchmarks.
Once you gain buy-in from your board or ownership, the business positioning and strategic plan should be presented clearly, broadly and openly to the entire organization. Candor, openness and directness can build confidence and gain the level of support that you need to rebuild positive momentum.
T. Scott King is chairman of the board of Gordmans, a retailer based in Omaha with more than 100 stores. King spent 12 years at Sun Capital Partners, a private equity firm focused on turning around troubled companies. As senior managing director and co-head of the operations team, he was responsible for the performance of over 50 companies while at Sun. He is a board member of FlexShopper, a financial technology company that provides a seamless lease to own option for the consumer who does not have good credit.