Stephen D’Angelo had seen a turnaround or two before joining Dick Corp. in February 2003. Before being brought in as the chief restructuring officer for the fledging construction company, he owned his own consulting company and estimates that he’s done seven full-fledged turnarounds.
So, it’s no surprise he was called upon to help the organization regroup.
The company grew rapidly in the late 1990s and early 2000s, but it hit a rough patch after getting caught in the downturn of the power market. The company had almost a billion dollars worth of power projects under construction, one of which was with Enron.
“The company was in a real dire situation from a liquidity standpoint,” D’Angelo says. “They had a tremendous amount of bonds outstanding. They had, obviously, contracts where construction needed to be finished, but the ability to collect the money on those projects was in doubt.”
D’Angelo saw potential at Dick Corp. and decided to restructure it as dck worldwide LLC.
“You need to get back to basics,” says D’Angelo, now chairman, president and CEO of the $650 million company. “A lot of turnarounds, it’s about getting back to basics. You need to be flexible. When you are in a turnaround, it’s really not about a long-term vision and a long-term plan. It’s really about some short-term goals and being creative and flexible to help achieve those goals.”
Plan around cash
D’Angelo says the first thing you do in any turnaround is assess the situation in general and get your arms around the issues.
“The actions that we take on day one are all around minimizing the outflow of cash and maximizing the inflow,” he says.
That means looking at places where the company is bleeding money.
“Every turnaround is really around cash, cash flow and how much liquidity you have and how long you can operate on that liquidity,” he says. “That takes some time and really getting your arms around that — trying to understand what you have as opposed to what management might think that they have. You find in a lot of these companies a lot of the tools and a lot of the focus in a turnaround is much different than when a company is operating over a long period of time like Dick Corp. had.
“A lot of the measures and the tools that are necessary to really manage in a turnaround are not available. So, really assessing the situation, determining viability, putting tools in places and structuring things in a way to try to stabilize operations and put things into, I wouldn’t say a normal operating mode, but into a mode where people can operate on a consistent basis.”
At Dick Corp., the company was very focused on P&L but not necessarily cash flow, so D’Angelo put collection processes in place and addressed accounts payable issues.
“In some cases, we termed out certain payables, we froze certain past due payables, and we kept current payables current,” he says.
“It was really coming up with an overall strategy to bring in as much cash as possible and then, at the same time, preserve as much of that cash as you could, while also operating the business.”
But, don’t be afraid to alter your basic strategy if you aren’t seeing the results you want.
“If you’re measuring the plan and you’re measuring success and that plan is starting to deliver success, then you need to keep improving that plan,” he says. “If that plan is not working and not generating the success you thought it would, then you would need to rethink the plan and adjust it.
“But you have to be careful in the early stages of a turnaround. You just have to stay very focused on what the plan is. Your window becomes two months. Your successes are measured on a weekly basis.”
While it’s helpful to be positive when devising a plan, that can hurt a leader when dealing with a turnaround.
“We tend to think that things will always get better,” he says. “In a turnaround, you really need to know what your downside is. You need to be reasonable about that. You don’t have to be ridiculous about it, but you need to be reasonable about it. You need to have some bookends. You need to have a plan to really deal with the situation in what you project as the worst case.
“Normally, what we would do is we would run a worst case, a best case and maybe a likely case. And we would try to manage our cash to the worst case and try to push the business to the best case.”
Taking part in a turnaround is not for the weak of heart. Because of the challenges you face, it’s also not something you want to do alone.
“You really need to be able to deal with a lot of adversity and not let that adversity deter the goals that you are trying to accomplish,” he says. “You can’t expect that when you walk into a turnaround situation — this company, for example, that had been around for 80 years — you can’t expect that everybody in that organization is just going to jump behind your vision and be part of your team.
“Because, you are bringing in a bunch of different concepts and ideas. They’re all nervous. They are worried about what is going to happen and they are worried about their jobs.”
That’s when you have to look for talent to help you deal with those obstacles that you will face.
“You need to put a strong team around you that shares your vision and understands a turnaround,” he says. “Those people don’t need to necessarily come from the outside. You may find them on the inside, but you need to have that small team that can stay focused and really just execute a plan and deal with that adversity and measure success in small increments.”
D’Angelo brought in some of his own people but also found Dick Corp. employees he could trust. He needed the strong performers who were doing good work to help stabilize the company and finish projects.
If a project manager and a superintendent were doing a good job on a project, he wanted to keep that team together and also provide them with that safety net so they could focus on the task at hand and not on whether they were going to have a job tomorrow.
“You need to take the key individuals that you need to finish projects and you need to run the business and you need to give them maybe a contract,” he says. “Give them some type of a retention bonus if they stay through the contract, and if it accomplishes A, B, C or D, you’ll earn a retention bonus,” he says. “Or if something happens, if the company is sold, you’ll be given this severance package.”
You also want to look for the employees who handle adversity well. If they are coming to you with a problem, you want them to stick around at the company rather than someone who recognizes a problem and says nothing about it.
“A lot of it depends on how those individuals react to the situation or how they react to bad news,” he says. “Do they turn around and say, ‘Hey, we’ve got a problem here and we need to get together and fix it,’ or, ‘Do we ignore that problem until it’s too late to be resolved.’“
Finding out who can be trusted won’t happen right away, but you have to be patient and tap into those current employees for information.
“Turning the company around, you can’t do it without the people in the organization,” he says. “They understand
the organization better than anybody.”
D’Angelo had to cut the company’s operations and revenue by approximately 35 percent. It’s not an easy task, but it has to be done.
“In most turnarounds, there is a downsizing that does take place,” he says. “But without understanding what that downsizing is, you really have to talk to [employees] and let them understand the process.
“We had meetings all over the country and brought everybody together and said, ‘Look, this is the situation, and this is how we are going to address it. This is what a turnaround looks like, and these are the steps that we are going to go through as a company, and this is how we need you to support it, and these are some of the things that we’re going to be asking you to do.’”
Being direct with everyone and communicating the plan is the best way to handle cutbacks.
“Say it the right way, but don’t sugarcoat it,” he says. “We have a tendency to make things sound better or we have a tendency to think that we have to flower it up a little bit. Have more faith in people because they just want to know what the truth is. For the most part, when people understand what the challenge is, they will stand up and help you.”
Within a month, D’Angelo and his team were traveling to different locations and updating employees on the company’s status. He would bring some people from within the company so there were some familiar faces, and he would meet with groups of 50 to 75 employees.
“The biggest flaw in a lot of companies that go through turnarounds in the early stages is that they don’t deal with that stuff head on,” he says. “They continue to think it will get better. They don’t give answers. They continue to push it off week by week by week.
“What happens is you lose a lot of credibility. These things are tough conversations. You have the tough conversations … and then you turn around and you do exactly what you said you were going to do. People may not like it, but at least you start to build credibility and you start to get some movement and you start to get an understanding that whether they like it or not, you’re going to do what you tell them you’re going to do.”
Just like with employees, D’Angelo had to be upfront with customers, vendors and suppliers when communicating the message.
“You get them to buy in, because if you really get down to it and work through it with them, then normally vendors and suppliers are normally much better off working with a company that’s going through a turnaround than allowing that company to fail,” he says.
“As long as you can structure a program where you recognize their risk and their exposure, then you talk to them about how you need their support. But at the same time, you’re going to help them manage their risk. In most cases, it doesn’t happen overnight, but in most cases, they’ll stand by you and support you.”
Support like that is setting dck up for a better future. In December, dck acquired the last of Dick Corp. assets, signaling an end to the restructuring.
“The company is stabilized,” he says. “The company has a nice solid balance sheet. It has a lot of cash on its balance sheet and it’s poised for growth and we are looking at the right opportunities.”
D’Angelo and his team thought about keeping the Dick Corp. name, but because the name was tarnished in the marketplace, they decided to change it and start fresh. They chose all small letters for the new company name as a way to show a humble new beginning.
“For the people in the organization, dck represents their future,” he says. “To make the acquisition of the Dick assets the way we did and to close that chapter in their lives, it gets rid of any little bit of uncertainty that might have been left in their minds. It gives them something they can put their arms around and feel like they were part of because they were. Everybody in this company was part of making this turnaround work and making dck work.”
How to reach: dck worldwide LLC, (412) 384-1000 or www.dckww.com