Business Turnaround Best Practices
6 Best Practices for Accelerating a Business Turnaround
There is no one way to perform a business turnaround. But there are best practices that share valuable lessons of what works, what doesn't and how to accelerate your results.
We catalogue Business Turnaround Best Practices by category, and we've pulled from a few categories for this post.
Prevention is the Best Medicine
As your mother advised, an ounce of prevention is worth a pound of cure. Monitor the early warnings before the situation becomes an existential crisis.
The earlier you detect the signs of distress the easier it is to fix. Early warning signals include weakening sales pipelines, deteriorating sale opportunity win rates, inability to grow customer lifetime value, a slow but steady increase in customer churn, an increase in staff turnover and an overall feeling of inertia.
These are the advance warnings to more serious setbacks such as recurring revenue decline, eroding profitability and cash flow challenges. Early detection allows early intervention, and the option to respond to these challenge before they become a liquidity crisis.
If the early warning signals are not heeded, they will be followed with more serious signs of distress such as poor staff morale, cash flow constraints, deep cost cutting, austerity measures and key staff defections. At this point, an intervention is overdue.
Continued delay between recognition and action increases severity and decreases the likelihood of a corporate turnaround.
A Revenue First Focus
It's unlikely you can cost cut your way to success. Sure, cost management is essential and cost cutting is needed to funnel cash toward company priorities such as the most impactful revenue growth programs.
But the all-too-common knee jerk reaction to apply a finance first focus is a loser. Instead, the company's leadership and key talent must apply a growth mindset, recognize that revenue cures all ills and relentlessly pursue prioritized and sequenced revenue growth methods.
But a recurring pattern among troubled companies is that they don't know what growth programs deliver the fastest and biggest financial returns. So, they pursue the easiest instead of the most effective.
A company transformation is a process, not an event. So, to visualize that process we use a proprietary model we call the Predictive Pyramid.
It advances data from historical to predictive and can thereby engineer future financial outcomes.
It's interactive to support dynamic modeling and What-If scenarios so it can identify the most direct path to success. And the path that can be accomplished in the least time and cost and with the least risk.
A predictive model is needed because no revenue growth program lives in isolation. Each has cascading effects that impact many areas and those impacts must be considered when making tradeoffs. This visualization is extremely helpful in determining where to invest your limited time and money to achieve the biggest and fastest financial uplift.
It Takes a Village
Company transformations are not easy but are made easier with a solid sales turnaround strategy and the right team. This is not an effort the CEO can lead alone. He or she needs to surround themself will like minded and fully committed colleagues that expand reach through the company to achieve a force multiplier effect.
Restructuring teams look a lot like special forces teams. They are not particularly big, they are highly motivated, they are disciplined, and they are nimble.
They are also change agents. People with no sacred cows to protect and who let go of old habits to drive improved outcomes. People that stop defending the past and build for the future. People that know how to separate activity from progress and don't confuse the urgent with the important.
The transformation team must be visible and vocal champions. They must exhibit a growth mindset, inspire and motivate, and deliver communications pursuant to the Comm Plan.
These teams normally consist of the CEO, C-suite and particularly influential managers and salespeople. They are often incented for their success. And while those incentives may seem large, any payouts will be small relative to the company's success.
Corporate Culture is a Turnaround Superpower
How many people really personally care about the company? Not for what the company can do for them but for the company. Many times, it's a short list. It includes the CEO. But we can't ask the CEO to work 3-5X more, or hire 3-5X more CEOs. So, to scale we need to get more staff to personally care about the company.
There are a lot of things the company can do to drive business improvement programs. But the one thing that will directly impact everything else is corporate culture. Culture is a precursor and top contributing factor to anything and everything that requires employee effort.
A high-performance growth culture carefully defines, measures and reinforces shared company values. It drives the behaviors which determine the quality and volume of employee (discretionary) effort, and which in turn determine staff productivity, and the quality and amount of work that gets done.
A company transformation requires new revenue strategies and increased effort from many people. Corporate culture is the human performance engine that directly impacts the level of success, or failure, for every business strategy, revenue initiative, operational performance and change transformation.
Innovation is the Secret Ingredient
There is an evidence-based, undeniable correlation between innovation and business growth. But corporate turnarounds frequently go wrong when pursuing a high number of small improvements to products or services. In a company transformation, it is far more effective to pursue very few high impact innovations.
Corporate turnarounds also flounder when pursuing the wrong product innovations.
Most company executives think they know what their customers want. And they are partially right. But their inaccuracy lies in subconsciously inflicting their own bias, thinking customers are all the same, believing customer wants are static and all customer wants translate into a willingness to pay. Small inaccuracies in customer preferences for your products and services are usually what lead to revenue declines.
Failing to verify exactly what different customer segments want creates a cascading effect that degrades product R&D, marketing offers, sales conversions, services delivery and customer experience (CX) objectives. The negative financial impact incurred in any one of these areas is a significant hidden loss than often goes unrecognized until it's a serious problem.
Fortunately, customers will tell you what they want, and how to improve your products or services, if you ask them. Companies that collaborate with customers during product design, manufacturing, distribution, sales, service and returns create more valuable products and services.
We're in the age of the social customer. Customers want to provide input to their suppliers. And that input is valuable in steering the company to produce products and services that are enthusiastically embraced by customers and producing customers that make repeat purchases with their suppliers.
A Change Management Program Keeps Staff Engaged
Charles Darwin first discovered that, "It is not the strongest or the most intelligent who will survive, but those who can best manage change." That discovery is directly applicable to corporate turnaround programs.
A company transformation must be willing to upend the status quo, dismiss business as usual or let go of old norms to make way for new ways of doing business.
But adapting to new business conditions, growth programs, cost controls or business models creates a lot of change. And the problem with change is that it causes anxiety for employees. And while the changes are endorsed by the few imposing them, they are not so well accepted or are even contested by the majority receiving them.
To bridge that difference, a change management program systemically shifts individuals, teams, and organizations from a current state to a defined future state while mitigating productivity loss during the transition, creating an environment for sustained change and realizing the benefits of change more quickly.
Some of the change events and artifacts to make this happen include a change readiness assessment, Comms Plan, business impact analysis, learning and training tools, intermediation measures and value realization measurements. These steps ensure resistance to change will not delay or derail the company transformation.
For most companies, embracing change is not the norm and is a difficult journey. A time-phased change management plan will help the journey and keep staff feeling engaged, instrumental to the effort and focused on their daily contributions.