Six Key Strategies for a Business Renewal
How to Find Your Way When The Odds are Against You
Nothing is going your way. The sky is falling. You’re not sure what to do next. No one else seems to have answers, either. All you get are more questions. A business turnaround is one of the most complex and challenging experiences a manager will ever go through in his or her career. Renewing a business and digging it out of the ditches is a high stakes situation, as it not only affects the future of customers and employees, but also the company as a whole. For these reasons, some firms will go so far as to hire turnaround specialists to help oversee a major overhaul or corporate restructure.
And while there is no one-size-fits-all recipe for successfully renewing a business, you will find that effective turnaround strategies do share some key elements and common themes. Equally, these themes are universal and can be employed to various degrees, from an entire company, to just a small team or a department that is struggling. Here are six such themes that will help you stabilize a team or business.
1. Simplify First
More than likely, one of the reason’s you’re in a turnaround situation in the first place is because something changed over time. Maybe the market changed and you did not react fast enough. Maybe a competitor introduced a new product which has undermined your position in a niche market. Or perhaps your firm had been doing well and got comfortable, only to fall asleep at the wheel. Regardless of the reason, inefficient and obsolete practices are almost always prerequisites to finding yourself in a business renewal situation.
When it comes to your strategy to turn around an entire business or just part of an organization, the most immediate decisions you need to make pertain to the complexity and layers of activities of doing business. Particularly when a business has been successful in the past, making decisions about what is important and what is no longer value added can be difficult. Why? Because you are changing something that was a good thing at one point in time. That said, the first rule of any business renewal is to narrow focus and simplify core business functions. If a process is making you inefficient, change the process. Maybe you stop bidding wildly on new opportunities and focus instead on your most dependable, high valued customers. In addition, look internally at things like transactions, shipping, or marketing. Whatever it is, your ability to quickly cut out the fat and simplify your business operations immediately is essential to your ability to turn things around. Keep it simple, go back to basics.
2. Eliminate Waste, Stop the Bleeding
So how do you fix it? Well, start by eliminating waste. Stop the bleeding. Waste can be defined as excessive resources, antiquated processes, as well as inefficient management systems. Do you really need that brand new office furniture? Or should you pay off some of that debt, first? If you have bad contracts with terrible profit margins, renegotiate what you can to save some cash. The key is simply to use your cash wisely. Case in point, during the 2008 global financial crisis, there was a well publicized story about 3 automaker CEOs who flew their corporate jets to Washington DC, on their way to request money for a government bailout. As Tom Schatz, President of Citizens Against Government Waste, said “This is a slap in the face of taxpayers. To come to Washington on a corporate jet, and asking for a hand out is outrageous.” Overcoming the turnaround will require you cut out what’s not helping, reduce expenses significantly, and concentrate on the few fundamentals that will help propel you out of the downturn.
3. Prioritize and Communicate
After you have simplified your operation and eliminated waste from your business, the next thing you need to do is prioritize change. Prioritization is vital when trying to stabilize a business because it helps you align your resources and teams behind key initiatives or as you introduce new management systems. It helps you clearly identify what is actually important, and what is not mission critical. Part of this prioritization may include the removal or deferral of activities that are non-essential. For example, if your employee evaluations are typically required in December, consider deferring this standard plan until the end of February to allow your managers and employees to focus on more critical, survival-oriented tasks. Allowing standard activities to overtake you in times of crisis can be crippling. Once you figure out what the priorities are, invoke a crystal clear communication plan to ensure your troops are with you every step of the way. Maybe you use weekly conference calls with the CEO to keep people informed. Maybe it’s stand-up meeting every morning to announce the day’s critical must-do list. Whatever it is, be deliberate with cascading and communicating priorities.
4. Emphasize Repeatability and Predictability
When you’re on the road to recovery, one of your key areas of focus should be getting the company into a mode of repeatable and predictable execution. Even if your business involves designing highly customized products for customers, you will find that some aspects of that are still universal – your bid and proposal documentation, your design process, your back office functions, seasonal spikes, etc. Regardless of the type of business you’re in find ways to make your business less volatile and predictable. A great example of establishing predictability is the moves that airlines have taken in recent years. Compared to just 10 years ago, airlines are flying smaller aircraft on the same routes to avoid having empty, unprofitable seats. To hedge against fluctuation in fuel prices, Delta went so far as to purchase its own oil refinery, which has helped the airline and its rivals obtain cheaper fuel. Simply put, a good business model is one that allows a firm to more easily predict outcomes, and not one that leaves things to chance.
5. Map The Route Ahead
Once you’ve successfully stopped the bleeding, prioritized activities and established some stability, you can then shift gears to outline your longer term strategy beyond just the turnaround phase. Your strategy to renew your business should start by refreshing your long-term goals and redefining best practices for the organization. If you stopped bidding on new projects early on in the turnaround to focus on what you already had, how do you plan to start growing your business again in a safe and controlled manner? What staffing model, organizational structure, or markets best suit your needs? A solid long-term vision and strategic plan will help you navigate the months and years ahead, and act as your compass when presented with future challenges. Revisit your plan twice a year to ensure it remains relevant to your organization, and doesn’t become obsolete.
6. Evaluation and Reflection, by Everyone
No business turnaround is complete unless you’ve taken time to sit back as a team and think about what you’ve just been through over the past months. Once you are stable, and are well on your way to becoming healthy again, take time to ask yourself some tough questions. How did you get there? When did you discover things were not right? At what point did you take action? What signs did you miss along the way? One key point here is this conversation should not be limited between those who sit in your board room, but also held with those who serve as your company’s engine: customer service representatives, assembly line workers, engineers, your sales force, and anyone who might have feedback on where things went wrong. Your working level staff is a great source of information about how the business is run, and what can be improved. All too often, there is no validation of the decisions made in the board room. By answering such questions and gaining feedback from multiple levels of your business, you will be able to ground yourself and understand the things that got you into a challenging situation to begin with. This information is vital to helping you preventing a similar situation in the future.