Making Turnarounds Work !
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The document discusses six critical elements for making turnarounds work: 1) Having a champion to execute the turnaround, 2) Defining the right and ambitious scope that impacts the entire business, 3) Understanding the company's value from the customer's perspective, 4) Addressing cross-influences between different parts of the company, 5) Monitoring the turnaround progress and results, and 6) Thinking outside the box with new scenarios and approaches. It also lists some common pitfalls to avoid, such as having the wrong team or overlooking communication.
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Making Turnarounds Work !
- 1. Making Turnarounds WORK by Erik Van Rompay FIRST DRAFT – © 2008
- 2. Note This presentation was made for an audience of young net-entrepreneurs. The style reflects the spirit of the audience. All illustrations were used to tell an animated story …. (up to you to imagine…) A very strict “business” presentation made for a French Bank (without images) also exists and is available on request (see last page)
- 3. Why do so many turnarounds fail ? Companies squander their energies on attractive-looking projects or major restructuring projects that fail to produce bottom-line results WHY ?
- 4. After months of turnaround activity and redesigning the company, we find dramatic improvements in major fields…. but with an overall performance decline. How is this Possible ? DEFINITION (Platt – 1993): The Turnaround Manager is responsible for getting control of cash, eliminating excesses (people, products and facilities), focusing upon the company’s core competencies and preserving assets .
- 5. NUMBERS…. not available for Turnarounds For Major Change Management programs European survey LOGICA/EIU (2008) 36% are stopped before deployment 30% do not give financial results => 66% fail (and we are not yet at TURNAROUND LEVEL) Turnarounds Change Mgmt Programs Projects VALUE High impact – high value Low impact – no value
- 6. Personal experiences - 1 one of my consulting missions : a furniture distribution company in distress 2 turnaround plans in 18 months GREAT : operational costs reduced by 15 %, the creating of a real brand name, larger audience and sales increase of 14% during those 18 months (+ successful web launch). BAD : Financial results : unchanged (ebita worsened by 0.2%) Note: I was only a consultant on this mission so I could not handle some sensible issues like closing down the 10 most lost-generating outlets.
- 7. Personal experience - 2 turnaround of a retail company in the event industry GREAT : operational costs reduced by 45 %, beating the historical leader, sales volume multiplied by 150 times in 18 months. BAD : the company was close to bankruptcy and had severe cash problems. Our exponential growth only created a success story hiding our continuous cash problem. A great business success but without any financial result (so negative shareholder value) ?
- 8. Personal experience - 3 Solving cultural conflicts after a failed merging (2 Internet platforms) GREAT : Strong audit detecting the possibility of a perfect merging BAD : The merging did not work No new products No new sales neither new clients No innovation during 2 years in a very competitive environment I came in to solve the cultural conflicts and to make the company running again. Result : growth of 70%, 2 successful new productlines…
- 9. Now, it is time to present… The six elements that make a turnaround work !
- 10. Or do you think you can fight better than Cesar ?
- 11. Critical element 1: you need a champion Who do you pick as a champion to execute ? The intellectuel The communicator The force of nature The beauty
- 12. Critical element 1: A high engaged executive You need the first 3 in one person : the intelligence, the communicator and the force Turnarounds can only succeed when senior executives invest time and energy In 80% of the cases, a new executive is brought in to execute a radical change In 80% of my missions, I was preceded by at least 3 failing change management experts. Only a boss can act to: Dedicate the best people Be generous on resources (people, IT…) to make things happen Implement the right communication Define the adequate pace to change
- 13. Critical element 2: The right and ambitious scope
- 14. Critical element 2: The right and ambitious scope Most turnarounds fail as they are oriented towards one « field » or one « activity » or one « process » and not to the whole company (or even market transformation). Don’t go too wide You can not change everything overnight. You need a roadmap. People need to follow the leader… take care they are behind you The target must span the entire business to ensure sufficient breadth… If you can impact the whole market ! Just go for it!
- 15. Critical element 3: Know your value ? What do they want you to do ? Why are you important for your clients ? What do you do for them ?
- 16. Critical element 3: Know your value Everyone thinks knowing the value its company creates … but have an audit to see what clients would appreciate in your company. A wider catalogue or faster delivery ? A faster contact center of a web interface ? … . Personnal experience : a cybercafé in distress the first reaction was to replace the existing computers with faster and new ones and repaint the wall (nice and new !) What people wanted was better service (an area to take a good cup of coffee, information leaflets…)
- 17. Critical element 4: Succeed cross-influences ?
- 18. Critical element 4: Succeed cross-influences The corporate landscape is complicated… back-office and front-office are strongly linked with visible and HIDDEN links. Take care of the hidden relationships between people, teams and organizations, Assign full-time team members from a wide range of functions/services
- 19. Critical element 5: Monitor your turnaround manage your existing customers as they are the one that deliver you cash. Try to increase the purchase ticket Also focus on prospects that are unhappy being with your nearest competitor Create a 2 way communication channel to know what happens One from your employees to yourself One from your clients to yourself Know what you collect !
- 20. Define the critical element of your turnaround. Is it scope, time or budget ? (remember, you can only pick one… the other two are less critical) How do I monitor my turnaround It is common to change the way to monitor during the turnaround process. Is it working ? Are the results on target ? If no, how to correct If yes, are we sure we are on the right track ? Critical element 5: Monitor your turnaround
- 21. Critical element 6: Thinking out of the box You could be the same Obelix doing different things ! - Doing the same thing… but serving 3 different markets
- 22. Critical element 6: Thinking out of the box What organizational drivers will determine the success of a redesign? Does the front-office understand back-office and vice versa Does everybody understands business ? Do salespeople know what they are selling and what it takes to deliver ? Does everyone has the attitude to improve daily operations ?
- 23. Critical element 6: Thinking out of the box Create several WHAT IF scenarios What if a new competitor delivers my products at half price ? What if I start selling my products in another country? What if I change operations so I can reduce staff by 50% Personnel experience: 2005 A new market entrant delivering my products at TOP250 companies for FREE (while my average ticket was 40.000 euros). Solution: as we blocked the market early 2005 with a unique service offering, 90% of our existing client-base stayed with us.
- 24. 5 most frequent pitfalls the wrong team (or underpowered team members) preview only the impact of the plan itself and not the impact to the whole company (or even customer relations) settle for a status quo (we turn around not to loose our world… versus we turnaround to win the world) overlook communication and buzz burnout of the executive (out of magic potion)
- 25. Don’t hesitate to contact me… Erik Van Rompay [email_address] Tel. 33+(0)6.79.91.06.87
- 26. Turnarounds need to combine the 4E+4C+4P Product Price Place Promotion Consumer Cost Convenience Communication Experience Exchange Everyplace Evangilism 4P 4C 4E + +