How to turn around any business?

So you just got your promotion to the manager or director level, or moved to another company with bigger scope and higher salary. You are supposed to turnaround the notoriously declining business and all the eyes are on you. Yet, as you enter the business, you understand the problems are everywhere. Your brand is losing market share, profitability is down, latest innovation is not working, your organization is demotivated and management’s only smart move was to bring you in, as your predecessor was shown the door. Be it taking over a declining brand, under-performing division or total company, one thing I can say for sure is that it’s very easy to underestimate the challenge and overestimate yourself by directly jumping into problems as they occur and expect fast turnaround. Your team reacts like they buy-into your solutions, pretend to go along with you, yet you somehow sense that there is something wrong. As you tend work more overtime and even make some changes in your team, nothing improves significantly and soon enough your management gets impatient with your results. By the time you recognize you are on the wrong way, it’s already late. Your team abandoned you and started questioning the plan as they have less to fear now. If you paid attention, you’ll hear comments such as, “That was not the real problem, we knew it wasn’t going to work etc.” Sounds familiar? How to turnaround any business

I faced this problem over and over in my career and learned to step back and start by identifying the problems first. While it sounds simple, it’s not easy. What follows are some practical tips to achieve real, sustainable turnaround in a declining business, proven by experience.

  1. Start with your customers, not with your employees. Everyday, your customers are making decision to choose your brand over competition. They are the ultimate decision makers for your brand’s success, unlike your employees. So if you are losing market share, it means they are not convinced that you are worth the price. However, your employees tend to have a more biased view of the problem. They might sit in the office all day long and speculate over customer problems without necessarily being in touch with them. Plus, they are invested to the current strategy which is not working. So you can’t expect your employees to give you a very objective assessment of their own work. Therefore, once you meet and greet your employees shortly, throw yourself to the place where your customers are making decisions i.e. to the shelf, to the store, to the restaurant or to the website where they interact with your brand and make a purchase decision. Identify the main problems by asking two main questions to purchasers and rejectors respectively : Why did they chose your brand? Why did they chose competition over yours. By simply listening to them, you’ll get incredibly useful insights to the problems that are stopping your brand from being competitive today. Ask your team to participate in this insight gathering process as if they are new to the business. Once you are more or less clear on the issues, gather your team for an honest conversation about those customer barriers and what you need to do to overcome them in the short and the long term. I call this “Working from outside to inside”. You start your assignment with a learning journey by getting yourself out of the office and once you get back in, you are 80% clear on main problems which you need to solve by working inside the office. Make sure that you align this approach with your manager as I often faced managers asking me where I was in the first few weeks as they thought I disappeared. My point being, even your manager may not be used to this approach so it’s important that you align your learning time before making big decisions.
  2. Bring a bold but justifiably reachable vision. What a cliché!!! Yet, lacking vision leads to activity without results. That said, don’t forget that your team has already heard it before, most probably from your predecessor who’s enjoying his leave now. So what’s the secret of developing a vision stretch enough to inspire your team, but vaguely reachable that still motivates people to rally around it. How do you set it? The best approach is always setting a benchmark from competition, similar industry or different country where your brand has already achieved that vision in case you are working in a multi-national company. In case your brand is local, then take your portfolio, channels or selling points and break them out as best and worse performers and find out the bright spots where you achieved the desired results within a specific segment, channel, region or even one store. What you are looking for is a real example of success which your brand has already achieved somewhere. By breaking your business out across segments, channels, regions, stores, you are avoiding the “Average trap” which the skeptics in your team will throw at you when you ask them to grow 20% when the historical average growth has been 5%. So what you need to demonstrate is to find a micro spot of your business which grew 30% and show it to the others that if it could be done in one part, it could be done in the rest of the business, yet with the help of them. In my experience, I faced more challenges breaking internal paradigms rather than breaking the customer (external) barriers. But once your team believes in the vision or vaguely thinks it’s possible, you will have their support beyond reason.
  3. Study your financials to achieve profitable growth. I am amazed how many people who work in respectable organizations forget about the #1 reason to be in business: To make profit. Buried within the layers or the KPI (Key Performance Indicators) driven bureaucracies, people tend to lose focus on what’s the end goal. While you need to satisfy the customers to choose your brand over competition, if you are losing money with this approach, you are going to go bankrupt. In other words, growing your market share at the expense of your profits is not desirable because it’s not sustainable. Which business would you prefer to run? 20% market share with 5% profitability or 5% market share with 20% profitability? Despite equal profit in amount, many people prefer the first, but in my experience, it’s more easier to grow the latter rather than the former assuming scale of economics are already factored in the first one. Why? Because the latter business model is addressing a much bigger challenge i.e. satisfying consumers while taking in higher profit margin. Therefore, it is easier to expand and grow behind investment, innovation and marketing spending rather than the former. While this is a big topic in today’s recessionary economy, I recommend you to read Profit Zone for a more detailed view. So what are you trying to achieve by studying the financials? Another simple question but not an easy answer: What part of the business is making profit and why? And vice versa. Answering these questions will give you the insights if your growth strategy (driven by addressing customer barriers) is profitable, hence sustainable. In other words, if you decided to grow in Segment A where you are making the highest profit margin, you will get better return for your investment and better alignment from your organization. But often times, the challenge is not that easy. It’s the unprofitable segment that you can grow more easily, so what do you do? While it’s tempting to grow for the sake of market share, I recommend a big caution. Either improve your profitability behind product or cost innovation in the segment before investing for growth or drop the segment. I have been often challenged not only by my management, but also by my team when I suggested to stop investing into unprofitable segments but it earned me respect and discipline of my team to deliver profit ahead of everything else. at the end of the day, your salary is paid by profits, not the market share. That said, this sort of provocative action is recommended only if you know what you’re doing with leading a business turnaround so apply this with caution.
  4. Align, align, align. I repeat it three times, because each addresses a key stakeholder relevant to your success. Your management, your team and your external partners. Once you identify your customer barrier, put a bold vision, find out a profitable way to grow, the next thing before action is to align this plan with your stakeholders. Why? because failure is the most probable outcome if you miss this step. For example, one of the most common mistakes is that the new turnaround leader prepares a great plan and it is often well sold to the management, as profitable growth in a declining business is music to their ears. Yet, it lacks the team buy-in, so execution becomes a challenge as the leader spends more energy dealing with internal barriers. Another version of this is, well aligned plan within the team but without management buy-in. In this case, the turnaround leader struggles to get the resources and support from the management to make it happen. Furthermore, if the business relies heavily on outside partners i.e. agencies or partners, their input and participation is key in development of the plan. Even if you miss the alignment of only one party, I can bet that it will come to haunt you in the execution stage. But this is not the only reason for aligning broadly. Getting alignment is like buying yourself an insurance policy in case your plan fails. If you sincerely complete the alignment process with all key stakeholders, they will be less likely to blame you as you gave them the chance to input and more likely to give you another chance or help you to correct it in case it doesn’t work. I can not emphasize the importance of alignment enough as it’s one of the best ways to earn the trust of your management, to build respect among your team and to build motivation for your partners to follow your direction. In any day, I prefer a good but well aligned strategy over a great but unaligned one.
  5. Create momentum. Technically speaking, momentum equals the mass times the velocity. It’s difficult initially to move a car by pushing it but it’s easier to keep it going once it’s moved. That’s the explanation behind giant man moving 5 tone trucks. The difficulty is to gather and apply enough energy to make the initial move. It’s not different in business. It’s often very hard to turnaround a brand in decline, but once you set your vision and start executing your plan with full internal and external force behind you, chances are, you will get enough momentum to make a difference with customers and start achieving small successes such as stopping the decline, gaining profit for a product segment or achieving growth in a sales channel. When this happens, you need to work like a newspaper editor to publish the news. I highlighted the importance of internal PR in my other article on “How to get promoted despite the crisis”. Shortly, you need to create an aura of early success around your plan, your team, your business and ultimately your leadership. Success breeds success and the stakeholders will start leaning closer to help you because EVERYONE WANTS TO BE PART OF SUCCESS. And this is when you are in the strongest position to ask for more investment, resources or simply help or advice because stakeholders will see it as positive ROI (Return On Investment) to invest in you, your team and plan. You should be careful not to let this early success go to your head and best way to do that is to shed this light to your team by making them feel successful due to their own contribution. This will turn even the biggest skeptics in your team into allies because, the biggest professional motivator in the world is the “sense of accomplishment”.
  6. Measure progress, incentivize results and revise your plan. One of my favorite phrases  is: ”I have the right to be smarter today than yesterday”. New information, freshly gained insight or trial-error experience will come along your way that will challenge the effectiveness or the validity of your turnaround plan. When that happens, mediocre leaders often ignore them to maintain the credibility of the plan that they have put in place because they think if they change it, it will look like they don’t know what they are doing or they put the wrong plan in the first place. I say, there is a better way to deal with it. I welcome the fresh insight or information to challenge the plan together with my team and ask the hard questions on the validity of our assumptions and demonstrate sincere intellectual curiosity to understand how we can improve. To my surprise, I often find my team already owning the turnaround plan and rejecting to incorporate new information because now they are invested in it. This is the moment which differentiates great leaders from mediocre ones. Being able to admit to mistakes or challenge the status-quo on a widely accepted plan sold by yourself takes guts to change because you have to go over “alignment” process once more. Yet, you should welcome such changes because it shows that you, as the leader, are not married to your plan but to the facts. It once more demonstrates your character as the leader rather than skill-set. The former is a more long term driver of success in leading an organization to success through tough times. However, to realize that you are not on the right track, requires you to get constant diagnose through objective measures of your progress. Imagine you want to improve customer service and doubled the number of trainings in service department. While it’s a “feel good” measure i.e. “number of trainings” as an indicator of better service, it is much more accurate to measure “customer satisfaction” level to see if the trainings really work. I have seen many management meetings where the turnaround leaders create an aura of false success with activity driven KPI’s but fail to deliver real impact on business. It eventually comes back to those, often negatively, if the measurement system is not based on results but activities. Having done all that, another issue you might risk facing is that despite clear case for change, bold vision, good strategy, aligned organization and result oriented objective measurement systems, the organization doesn’t deliver on the execution. This means the people, your team, partners or executors are not incentivized on executing the turnaround plan. In this case, all you’ll get is gradual change which is not good enough to make you succeed with the turnaround timeline you put in place. Each incentive system has two main elements. What will people get when they do what you want them to do and what are the consequences if they don’t do what you want them to do? Having clear reward/correction systems in place will ultimately align your organization and partners to follow the direction you set.       
  7. Substitutions are unavoidable, but take advantage of them when you have to. Once, one of my ex-managers told me that, “Statistically speaking, there is always 5% of the population who will keep nagging no matter what. You will not please them so better avoid them.” You may know it from your surrounding. Everybody has one person in their circle who is known for his/her negativity. While you need to keep one or two healthy skeptics in your team to bring balance to decision making, you can’t let the nay-sayers to sabotage all the positive momentum you are trying to build. Left unchecked, these people tend to spread negativity and criticism and ultimately poison the others. Therefore, it’s much better to spot these people early on – which is not a difficult task – and then deal with them i.e. correct behavior or replace. If your solution is the latter, then do it loudly with transparent justifications, no matter how skilled they are. “Attitude eats skill for breakfast.” This will send a strong message to the organization and help you build a strong, positive, result oriented, team work driven culture on the way to the turnaround.

Lastly, you can’t do it alone. So avoid the temptation to act like the superman/woman. Over-working is a sign of under-thinking. Manage your mental energy, health and family life well and avoid compromises on them. Happiness brings success, not vice versa.

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2 Responses to How to turn around any business?

  1. Pingback: How to unlock the potential of your people? | STAR BRAND MANAGER

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