The easing of the lock-down from COVID brought relief and joy to many. They got to see their loved ones and friends again and were able to open their doors to customers. But many business leaders are still filled with great anxiety about the future.
Why? Because they know the furlough scheme is due to end shortly. There are still restrictions in place making trading economically difficult. Customer confidence remains fragile, given the uncertainty around a possible future full-lockdown. If that wasn’t enough, Brexit is just around the corner, and they will soon have to start repaying the bounce-back loans!
For the majority of business leaders, they are going to have to face implementing new ways of working to reflect the ‘new normal’ and try and generate income to pay their staff! Perhaps reluctantly make compulsory redundancies, face increasing pressure to pay their bills from empty coffers, and navigate the health & safety challenges of making the work environment safe for customers and employees. Who wouldn’t be anxious!
Overwhelmed with fear and anxiety, it is easy for business leaders to look to quick-fixes or rush through strategies that haven’t been properly thought through. Fear tends to cloud the mind (and our judgement), leaving us feeling very negative. We just don’t see things clearly when our glass is half empty!
We, therefore, explore some of the common pitfalls business leaders should avoid as they develop their “turnaround strategies” and recovery plans to overcome the impact of CV-19.
What is a turnaround strategy?
It means different things to different folk. For the purposes of the blog, I am talking about developing strategies that will turn around the fortunes of a challenged or distressed business. COVID will have challenged most businesses to one degree or another. In fact, some will be in jeopardy despite the easing of lock-down restrictions.
When do I need a turnaround strategy?
If the survival of the business requires radical change, then you need a turnaround strategy. Examples of when radical change is necessary include:
- Exceeding bank funding levels. Going overdrawn (without an agreed facility) or over overdraft limits, regularly. Perhaps the bank is stopping payments going through or threatening to withdraw overdraft and banking facilities.
- Losing key customers or seeing a material increase in complaints.
- Sales are in steep decline.
- Robbing ‘Peter to pay Paul’. You can only pay one person at the expense of not paying another pushing liabilities beyond agreed terms.
- Legal action from creditors or the registering of County Court Judgements (CCJ’s) with the threat of bailiffs.
- Can’t pay the rent and the Landlord is threatening action.
- When a lack of resources means vital equipment or facilities are not maintained
- Key staff are leaving to take jobs elsewhere, robbing the business of vital skills. New staff may also be hard to recruit.
- Can’t source vital supplies to meet customer orders
- Stock is increasing or becoming obsolete
- Staff are demoralized and disengaged.
- There is a pervasive atmosphere of negativity. Everything is too much trouble or a problem. Relationships are breaking down and internal conflict is rife.
- Board room bust-ups. Relationships in the senior management team become fractious or toxic with deadlock on key decisions.
Why is changing the way things are done so important to my turnaround strategy?
We are all using the much-disliked term ‘the new normal’. By definition, this highlights that things have changed. If we continue to rely on pre-COVID strategies there is every likelihood that they will no longer be appropriate or effective:
- They won’t address the challenges we are and will face
- They may not exploit future opportunities adequately
- The strategy or historic approach may no longer get the support of key players inside and outside the business (e.g. demoralised employees worried about their jobs, suppliers refusing credit, banks withdrawing or refusing funding facilities, customers can’t pay/won’t pay).
- Key resources are no longer adequate to implement the strategy (e.g. cash, supplies, manpower, skills, etc).
Whether caused by COVID, Brexit, digitisation, globalisation, or competitive and industry pressures generally, our transformation strategy needs to reflect the ‘new normal’. It must be:
- acceptable to the key players
- solve (or be likely to solve) the challenges faced
- capable of being implemented, with the resources available.
Experience tells me it is very unlikely to succeed if it doesn’t!
What are some of the key pitfalls to avoid within my turnaround strategy?
As an expert dealing with the affairs of troubled businesses for over 20 years, I have seen my fair share of strategies adopted to solve a crisis and overcome existential threats to the business. Years of experience tells me that for a turnaround strategy to succeed, business leaders must avoid these pitfalls:
Implementing quick fixes
Quick fixes are ‘solutions’ that lack the support of key players, are not based upon evidence, and fail to reflect challenges of implementation. They waste time, resources, and squander opportunities. If they do work it is only through blind luck which is hardly strategic! More often than not, they cause more problems then they solve or just push problems on to others or a little further down the track.
Blind panic often compels action without anyone checking that all the proverbial ducks are in a row. Weaknesses in the recovery plan are not identified or ignored. The belief is that the risks of ploughing on regardless are worth it. We are doing something at least! If paralysed with fear, we know the mind doesn’t think clearly.
Becoming overly crisis focused
Don’t get me wrong, if the barn is on fire it needs putting out. However, focusing exclusively on a crisis (putting the business on a “war” footing with the shutters down) over a prolonged period is exhausting and demoralizing for everyone involved.
Too much “crisis”:
- Stifles creative thinking and innovation
- Reduces problem-solving capabilities
- We miss other important challenges and opportunities
- Risks losing great talent as good people leave as a result of overwhelming stress and anxiety.
The key is to create a positive atmosphere and ensure that we keep a keen eye on the future. We give adequate time to explore life beyond the crisis. I accept this is not easy and takes great leadership, though. Without hope, though, people lack purpose and there is no motivation to act without purpose.
Allowing the pruning knife to cut too deep
Cost-cutting is often seen as the first step in overcoming a downturn in performance. For most businesses, wages are usually one of the highest fixed costs and an obvious target for the hatchet man. However, the skills, knowledge, and experience within the team are often one of the business’s greatest assets. They are also essential to developing and implementing a recovery plan that works. So, it is vital that the strategy avoids cutting so deep that the skills and experience needed to achieve long-term success are not lost.
Also, consider carefully the impact on the ‘walking wounded’. Those that have avoided compulsory job losses. You may think they will be grateful. But, they will fear further job losses, and be sad that they have lost their friends and colleagues. Potentially blaming senior management for putting them in this position. There will have been an erosion of trust. Morale will be low. So, we should not assume they will engage with the recovery plan.
Treat causes not symptoms
I have asked many times “what do you think has caused the problems”, and received the answer “we don’t have enough money”. But, the shortage of cash is symptomatic of an underlying cause. These underlying causes might include poor leadership and management. Failing to keep pace with the changing needs of customers. Poor service or quality of products. Absence of financial controls. Failure to invest in new technology or skills (or all of the above!). The list goes on.
To deliver long term success, the recovery plan must deal with the causes of the challenges faced. There will be more fires in the future otherwise!
This is not easy mind you. Especially as many will argue that the issues around COVID (and Brexit) is something they cannot control. It involves:
- Asking tough questions
- Accepting that things could have been done differently (even if they are your idea!)
- Addressing underperformance and cultural barriers
- Resolving conflict
- Making change stick despite strong resistance.
No one ever said that recovery strategies are easy!
Less communication rather than more
Highly effective communication is key to business success under any circumstances. It motivates and engages the team, makes sure people know what they should be doing, when and how, strengthens relationships by building trust, and generally inspires loyalty and support for the organisation’s goals and objectives.
But, it is very often the case that the more challenges the business faces, the less effective communication becomes. In fact, it can pretty much dry up completely. There are many excuses. ‘There isn’t enough time ’. ‘I may not be able to answer a question asked’. ‘The less they know about the challenges faced the better – I don’t want them to panic’. ‘These issues are too complicated for the rest of the team to understand’.
It is essential, therefore, to put communication at the very heart of the recovery strategy. Engage everyone in the solutions, tap into their valuable skills and experience, build trust so they will support rather than resist change, and give them purpose, by allowing them to see clearly that what they do is making a distance.
The winds of change are blowing
Build effective recovery strategies on the basics. Avoid assumptions. Focus on what drives value. Maintain quality and standards. Take time to communicate well, and getting the key players on board.
The more complicated you make it, the more difficult it will be to avoid the pitfalls I have highlighted, the more that can go wrong and the harder it will be to adapt and change direction when the inevitable ‘unexpected’ arises!
I have mentioned CV-19 but this is not the only threat businesses face as the final stages of Brexit are only just around the corner! However, the pitfalls I have set out above apply whenever radical change is needed within an organisation. Keep it simple, get the basics right and avoid the pitfalls and you will find the process of change becomes a much more successful and satisfying experience for all those involved!
So what should I do next?
Having supported and guided businesses through choppy waters for nearly 20 years, the points I have raised above are based upon hard real-life experience as well as a big dollop of respected theory and best practice. A blend of art and science if you like.
So, in my next blog, I will look at the next stage of the journey – practical steps to implement your turnaround strategy, the challenges you are likely to face, and the benefits of getting help from an expert (yes that would be me!).
If you have any questions in the meantime or would like to find out more about developing and implementing a turnaround strategy, please email me at [email protected].