Three things I learned as a turnaround CEO
This is a personal story. I’ve been hesitant in publishing this because I was not sure that other people could get value from it. But on the recommendation of a few trusted advisors I am publishing it now – the lessons apply broadly to anyone in a leadership position. The story is set in 2001-2003 when I had just joined a company as Chief Technology Officer. About 2 months into the gig the CFO approached me and asked if I wanted to do a turnaround – the company was heading for a cliff and there were no skid marks in sight. I didn’t know what would be waiting for me so I said yes, and entered one of the most difficult times of my life.
If you’ve ever been laid off, downsized or right-sized you will know just how tough it can be. It’s tough for the people who get laid off, it’s tough for those that remain and it’s tough for those that have to do the downsizing. Irrespective of the company’s situation the recovery is going to be difficult – you’re starting from a position of weakness and not all turnarounds succeed.
I don’t claim to be a turnaround expert – I’ve only done two (depending on how you’re counting). But I’ve seen enough of it to have learnt valuable lessons – here are three that I would like to share with you.
Lesson 1: You can never please everyone all the time
Turnarounds – by definition – require restructuring and laying people off. This is tough on everyone including the team that remains and you can’t blame anyone for being upset, worried and unhappy.
We were fortunate that we had to do only one round of layoffs. The team that remained were the bare-bones staff we needed to operate the company and deliver services to our clients, and we went to great lengths to ensure that people were well informed of what was going on.
The great majority of the team were real troopers. They settled in, worked like never before and maintained a positive attitude most of the time. The transparency we adopted was a key element in keeping everyone motivated, engaged and in somewhat good spirits.
But no matter how hard you try, someone is always going to be really unhappy. No matter that everyone is in the same boat and everyone took a pay cut, they feel as if they’ve been treated unfairly and should have gotten more.
This is not only a major time suck – it is also an emotional drain.
You probably can’t fix their unhappiness because you have very few options. If they feel strongly enough they will eventually leave, but until they do (or make a major adjustment in their world view) you’re stuck with having to deal with them.
If you have to deal with something like this your particular circumstances will determine what options you have. But be prepared that this will take up your time and it will be an emotional drain.
Lesson 2: You have to maintain a brave face
As we entered the recovery phase we had to negotiate bridge financing from our shareholders – two venture capital companies. These talks were protracted, tough and sometimes felt like they were going to fall through, leaving us no option but to close the doors.
The prospect of failing – again – was hugely unsettling. I would sometimes walk out of the conference room like a doomed man – until one of my colleagues pointed out that I was bringing everyone down with my long face.
I hadn’t realized just how much I was showing. And worse – I hadn’t realized how much it affected everyone around me. The staff knew we were negotiating the financing that would give us enough runway to get back on our feet – but they were not privy to the details. And when I walked out of a conference room like a thunder cloud they assumed the worst, started worrying and lost their focus on servicing our clients.
We could not afford this. I could not afford to look as if the world was going to end the next day. I was on an emotional roller coaster but it was the worst thing I could do to display that openly. We would not hide anything from our staff – they had gone through enough already. But while the talks were under way I had to maintain a brave face.
You will be amazed at how your outward appearance can affect people.
You will be amazed at how your outward appearance can affect people. Be honest, but keep a brave face. If bad news has to follow you can deal with it then – but don’t take your team on the roller coaster with you.
Lesson 3: Your team makes all the difference
The turnaround was successful. We turned cash flow positive in less than 6 months and profitable shortly after that, doubling revenue two years running.
But I’m not the hero here. The hero is the team – everyone from the front-line staff through to the executives. Although I led the effort the success was thanks to everyone who pulled together to make it through.
All the turnarounds that I’m familiar with require that the company gives up everything that is not essential to generating revenue. Overheads have to be reduced to the minimum – and yes, staff have to be reduced to the point where you’re just barely able to service existing clients.
What you’re left with is the minimum you can get away with and still have an operating company. The team that remains is all you’ve got – and they are going to make the difference between succeeding and failing.
Your team will make the difference between success and failure.
Choose your team with care, and then treat them as best as you possibly can. You may not be able to reward them with bonuses or give them pay raises just yet – but you can trust them, be open about what is going on and share all the successes and failures. As long as you can do that they will know they are being treated with respect and do their best to make it work.
Use these lessons even if you’re not a CEO leading a turnaround
As you know by now this turnaround was a success. I’ve shared three lessons I learnt and of course, there are many more. A quick check of Amazon reveals over 500 books in Business with the word “turnaround” somewhere in the title. So there’s a lot of material out there if you need it (and I would be happy to answer any questions if you have them).
But the three lessons above are not just for CEO’s in turnarounds. The principles hold for any leader in any situation. I can attest to the value of the lessons, and I hope that they will help you whether you’re starting out, building a company or leading a team.