‘PEOPLE FACTOR’ IMPORTANT
It has to start with a visionary leadership who has positive unifying effect
TURNAROUND of businesses is critical to a nation’s economy. A successful turnaround creates substantial value to shareholders and secures jobs for employees, while failed turnarounds can lead to much pain to shareholders, employees and the economy.
What are the keys to a successful turnaround?
I have been involved in the leadership teams of two successful business turnarounds, in which new leaders brought distressed organisations back from the brink of failure and set them on a healthier course.
One company has now become the world leader in its industry with its stock price on Nasdaq in the US$60-US$110 (RM243.80 to RM446.90) range over the last two years, compared to US$3.80 in 2000 when the turnaround started.
I have also been involved in one business turnaround that unfortunately did not end well. Hence, I feel compelled to share my experience.
Looking back, there seem to be common traits of a successful turnaround. While financial and business strategies are important in a turnaround, it could only be as good as it is on paper.
The more important factor, often overlooked, is the people who will be executing the business strategies — how motivated, aligned and empowered are they?
In a declined organisation, there is often denial, secrecy, blame, scorn, avoidance and turf protection that leads to passivity and feeling of helplessness. These need to change to avoid the organisation going into a downward spiral. Let’s look at what was done in the successful turnaround companies that I have been in.
Leadership
There is a need for a new leader, who has experienced the successful turnaround of a company, to be at the helm of a troubled company. Readiness to change and turnaround has to start with a leader with visionary leadership, who has a positive unifying effect on people. Let’s look at the common traits of a turnaround leader.
Business mindedness: Able to assess the business from the customer’s perspective and passionate about the business and its products. Very attuned to the return on investment, which is always in the back of his thoughts, feelings and actions.
Visionary: By itself will not be enough, but a strong collective vision if shared and aligned, is very strong. The leader needs to communicate the vision explicitly while being sensitive to stakeholder needs.
Great communicator: A leader needs to be able to rally the people towards the common goal of turning around the business. Without the people behind a turnaround effort, the effort often becomes futile or not sustainable.
Taskmaster with a soft heart: It may sound conflicting, but this attribute is important. Leaders who led successful turnarounds are aggressive on results and even “feared”, resulting in deliverables being achieved. However, many didn’t see their softer side, where decisions are made with people in mind and with genuine care for people. Eventually, people understood his toughness and kindness. He’s feared, but loved and remembered.
Inspiring: He needs to be the catalyst for people around him to change. Always inspiring through his words and actions.
Empowering: Once structures are established that allow people to collaborate, the leader needs to empower people to initiate action that will improve the company’s financial and strategic position. The leader ’s role is to monitor the results on a 24/7 basis through dashboards of indicators and to clear obstacles where the line managers cannot.
Selflessness: Organisation’s needs over personal needs. There is some degree of personal risk that a turnaround leader takes once he accepts the job. He needs to know that the end result of the assignment is either he becomes a hero or a zero.
In Malaysia, in particular, many leaders who were unsuccessful in turning around a company continue to be assigned to lead another organisation despite their track record, leaving the organisation that failed in tatters.
Entrepreneurial and risk taker: Decisive when needed and prepared to make difficult decisions based on facts and calculated risk, even if it may not be popular to some stakeholders. He has to be a bit of a maverick. Many decisions in a business turnaround need to be done quick. Delayed decisions can be fatal in a market where your competitors are ready to move faster and bury you for good.
While corporate governance is very important, there are times where the decision making process needs to be shorter and unhampered by authoritarian processes. In many multinational corporations, turnaround leaders are given almost full authority to plan and execute.
In one of the companies I was in, the chairman and chief executive officer positions were held by the same person during the turnaround period. This leader was fully accountable to the success or failure of the turnaround. He would be compensated generously when he is successful in turning around the company. On the same token, he would be sacked for failure. Turnaround leadership is a very risky business and not for the faint hearted.
Small power gap: A turnaround leader should not to be too status-conscious. He has to be approachable and accessible to his people. Simple gestures like the leader talking to employees in a townhall in a casual manner with no podium between him and employees, or the leader participating in employees’ activities are examples of how to get rid of the perceived distance between leadership and the workforce.
Trust: The most crucial of all the attributes. The leader needs to create a trustworthy environment where his people are confident that whatever he does is for the greater good. This is a key competency for a turnaround leader. People will go to great lengths when they trust their leader and work is done much faster (crucial in a turnaround mode) in a trusting environment.
There is some degree of personal risk that a turnaround leader takes once he accepts the job. He needs to know that the end result of the assignment is either he becomes a hero or a zero.
Tomorrow: Part II The writer was senior director for Asia human resource at Western Digital, human resource director at PepsiCo bottler and Proton. He has more than 30 years experience in human resource, organisation support and customer service.