Why Most Turnarounds Fail
Most turnarounds fail because the company’s leadership (often the entrepreneurial CEO’s) business strategy is hope; a more socially correct way of saying that the company’s leadership/CEO is in a state of perpetual denial. (And, the company’s failure to reach its potential is not their fault). What is the reality?
The company is not properly funded and there is no plan on how to raise cash.
There is no business plan. (Oh, there is a budget – but, there is no plan on “HOW” they are going to get there.)
There is no go-to-market plan.
There is no sales plan.
There is a dearth of research to back up their assumptions.
IF they measure, they measure results – not the activity that produce results.
Many CEO’s would rather be king (or queen) that make money.
Many CEO’s do not delegate.
Because they do not delegate, there is a void of professional management.
There is no process of professional development for their employees.
Best practices do not apply to their company. They are unique.
Many CEO’s do not want or like to hear the word, “No.”
The Swirl
If this CEO wakes up one morning (after many a sleepless night) and opts to get help; it is because the company is out of cash, cannot make payroll, is way behind on its payables; and/or there is no appreciable pipeline. That one big deal did not happen, those P.O.’s never came, and/or the hope that white knight is not dumping a wad of cash into a failing company with an unrealistic valuation.
Once you flush, there is no stopping the swirl.
There are times, in a salient moment, this CEO steps out of denial and asks for help when there is a bit of runway. (Or, the investors make the CEO ask for help.)
So, what must be done?
First, triage the patient and stop the bleeding (of cash).
Quickly assess the offering. Does it have value to the market place?
Build a short-term plan (a real plan) to grow revenues and control costs.
Share you plan with your employees. Set short-term achievable objectives. CHALLENGE them – especially employees who you see have real potential.
Work with your vendors. Getting something is better than getting nothing. Getting all of it over time is even better. Be honest. You will be surprised how cooperative they will be in many circumstance. (By the way, stop lying – especially to yourself.)
Measure everything and share that information with the managers – and these managers with their employees.
Invest time in training and retraining your employees. Train them to an inch of their lives.
Put a plan in and start hiring more competent people when you can.
Build and execute a 3-year business plan.
CEO’s …Beware
Most entrepreneurial CEO’s are true visionaries. And, that vision should be your role. Go out and evangelize. You already have proven you are not a great business operator. Be the person who hired good people around you and let them do their jobs. Stop drinking your own Kool-Aid (and stop giving it to your employees.)
Your plan is your safety net. Stay the course, but do not stop inventing or being the idea guy. It is what you do best.
Investors do not care about your valuation of your company (often based on your emotion). They look at your financials. They compare your company to your competitors in the market place. They do not care about your blood, sweat, and tears. They do not pay for what the company may be worth in the future. That’s why they are making the investment. Stop worrying about control. Your company is about to go under and you will have nothing. Sometimes, less than nothing because you may have debt. And, often you end up in litigation with everyone because they come after you personally.
Once the turn begins, many of these CEO’s literally say to themselves, “I can do that.” “I really do not need this guy.” Answer: NO, YOU CAN’T. IF YOU COULD YOU WOULD NOT BE IN THIS SITUATION. (A reminder: It is not their fault and, often, would rather be king/queen.) You will go back to what you know, and … Flush – the swirl begins.
How does one develop a collaborative culture of success?
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