Turnaround management has become a hot topic recently. As businesses large and small continue to feel the effects of a global recession, bringing a business back from the brink of collapse has become an art form.
But what if the red flags of real business problems could be spotted long before a company has to consider closing its doors?
According to turnaround management specialist, Garrath Rosslee, a good working strategy can help a business remain profitable – even during tough times. The key is for business owners to remain focused on the bigger picture.
“Entrepreneurs in particular forget that they aren’t employees, and that they shouldn’t be doing the daily tasks of employees,” he explains. “As a business leader you are a people manager. You need to give your managers and employees key deliverables, monitor that these take place, and then review how they impact the business. Your business is strategy.”
Your business’s strategy doesn’t need to be a huge file compiled once a year after a weekend-long planning session. It should be a short two-page working document that reminds you to keep your eye on the ball.
Here are six key areas that you should be on top of at all times.
1. Know your business’s lifecycle
“All organisations follow a lifecycle, and as they grow and their owners learn more, so the business evolves,” says Rosslee. “The problem is that business owners don’t always change with their businesses. They believe that if something has worked before, it will continue to work. They don’t align the way the business operates with where it is in its lifecycle.”
According to Rosslee, if business owners want to avoid this trap, they should be constantly evaluating:
- Where their business is in its lifecycle
- What they are currently trying to achieve
- Whether their key measures are relevant.
2. Know the details
According to Rosslee, many business owners are so busy with operational issues that they don’t pause to ensure that they’re working on the right things. “First, business owners should be working on the business, and not in it.
The problem is that even if you’re working at the right level as a business owner, if you don’t have the right information, and you don’t know the details, you can’t make the right decisions.”
Owners and managers should sit back and critically evaluate all facets of the business on a regular basis, including:
- Evaluating where the market is and where it’s going
- Measuring key processes and evaluating where the critical points are
- Understanding the full supply chain
- Understanding all touch points with stakeholders and where things could be improved
- Understanding cash flow: what is in the bank, how much is owed by whom, and how much the business owes to whom.
“An example of a key process is a company that relies on trucks to get product from point A to point B,” explains Rosslee. “Does the business owner know how efficient this process is? How long does the trip take? How long is the truck parked at various borders? Is there a way this can be sped up? This all sounds obvious, but at the end of the day it affects billing practices, and the business owner has no idea if the process is efficient and cost-effective or not.”
3. Agree with your management team about what’s relevant
This can be a bit tricky because it involves everyone being completely honest in addressing problems the business faces. “Once a business reaches a point where it requires turnaround management this becomes crucial,” says Rosslee, “But if a business just followed this practice earlier, they might avoid making poor decisions, or pick up on issues earlier.”
For example, does your management team have monthly meetings to discuss what is and isn’t working in the business? As long as problem areas are ignored, the business cannot operate efficiently and cost-effectively.
4. Focus on your people
This goes beyond simply hiring great talent. The best performers will often be the first to leave – particularly if they are unhappy with the way the business is run. If an employee leaves, ask them why. Create a safe, comfortable, non-judgmental environment where they can share with you exactly why they have chosen to move on.
It might have nothing or everything to do with the business, and if the latter is the case, more great talent might be on its way out the door.
If their reason for leaving isn’t because of any company negativity, you still have a great opportunity to understand what your business is doing well – and not so well – from their perspective. Use this opportunity to gain insight into how your employees feel from someone with nothing to lose.
5. Talk to your customers
When Rosslee starts a turnaround management project, he first speaks to the business’s suppliers and customers. He wants to know what the company does well, what it does poorly, and what their overall experience is. He asks questions like “How would you improve their service?”
“How do the business’s employees treat you?” And for suppliers in particular, “How regularly do they pay you?” and “Do the business’s owners and managers communicate well with you?”
“How a business treats its own suppliers is often a good indication of how it treats its customers,” says Rosslee. “Company culture has a lot to do with how employees conduct themselves. If they’re open with suppliers, they’ll be open with customers. If they respect their suppliers enough to pay them timeously or at least discuss any issues, the same respect will be given to customers.”
The important point to note however is that this culture starts at the top. Respect for everyone: employees, colleagues, suppliers and customers need to be a part of the business’s overall values.
6. Review, review, review
This is not only the most important point, but it relates to each of the points above. In a turnaround situation, reviews can be done daily, if not hourly. In a normal business situation, weekly reviews should suffice.
What should reviews entail? Rosslee says, they should tick the following boxes:
- They should be short and to-the-point (this isn’t a weekly two-hour meeting)
- They are designed to make sure the owner and managers all agree with what the business is currently focusing on
- Are targets being met? If not, why not?
- Are managers meeting key deliverables?
- Are teams meeting their key deliverables?
“Without constantly reviewing your progress, you can have no idea where your business is and where it’s heading,” says Rosslee. “This is the single most crucial role of a business leader – and one that too often doesn’t happen.”