"Usually the first sign that a company is in trouble is that they cannot service their debt," says Jean Robertson, partner at McDonald, Hopkins, Burke and Haber Co., LPA. "Something's got to give, and they never give up on payroll. ... So they stop paying other debts, and the first debt they stop paying is the bank. Most companies think, 'Well, the bank's got lots of money. But my vendors, well, they're a small business like me, and I need to pay them so they can pay their payroll."
So oftentimes it's the bank that sees the first warning signs and says, "Unless you get professional help, there's no way we can salvage this relationship," says Peter Tourtellot, chairman of the Turnaround Management Association and managing director of Anderson Bauman Tourtellot Vos & Co.
There are two types of turnaround practitioners: Consultants, who offer advice but play no operational role in the company, and intramanagement practitioners, who take the lead role at a company and not only give advice, but implement it, Robertson says.
Once a turnaround specialist is in place, the first step is to analyze the situation.
"You need to determine how sick the patient is," Tourtellot says. "If you have trouble, but that trouble isn't going to sink the ship, you certainly don't want to have overkill."
The next step is to take action.
"In almost every case, if you're bleeding, you must stop the bleeding or you will not make it to the second stage," Tourtellot says. "If you don't stop the bleeding, then that company is going to die."
A turnaround specialist will also talk to and try to gain the trust of employees.
"The employees have known for a long time the company is in trouble," Tourtellot says. "The problem is that management has been in denial. So when we come on the scene, the employees are, for the most part, relieved, even in those cases when they may lose their jobs, because now they know. It's awful to work in an atmosphere when you don't know what's going to happen tomorrow."
Listening is vital if there's to be any hope of turning a company around.
"You'll find that a lot of the answers are there," Tourtellot says. "The employees know what to do, they just haven't been listened to."
The specialist will try to build a team around those employees who want to see the business turned around and are willing to go the extra mile.
"Those people are almost always there. If you'll just listen and gain the employees' confidence, that can mean the difference between survival and death." Tourtellot says. "Sitting right there with those employees are those little nuggets that they're willing to give you if they feel that you will listen and give them the respect they deserve. Once you do that and get their confidence, there's nothing a turnaround guy can't do."
But not all employees will be willing to cooperate.
"You'll also find people you can't build around who don't want to accept change, who are still in the denial stage, who blame everyone but themselves, and those people usually need to find a new place to hang their hat," he says. How to reach: Peter Tourtellot, (336) 275-9110 or www.turnaround.org; McDonald, Hopkins, Burke & Haber Co., LPA, (216) 348-5400 or www.mhbh.com