Business Rejuvenation and Turnaround
Consumer preferences & demands keep changing. Responding to these changes innovatively and tweaking our business concept accordingly is the only way to stay relevant in the market. The key is to decide on what kind of change is required, when, how and to what extent.
Sharp businessmen anticipate market changes before they actually occur and become known as trendsetters. The rest follow suit, keeping pace with the market while the change occurs. These two categories are considered either good or safe to be in.
If however, a business is lagging behind the market by a few paces; its success may reduce and it will need rejuvenation to bring it abreast with consumer demand. If a business is many paces behind, it usually faces survival issues and more often than not needs a turnaround.
The telltale signs of a business in trouble are generally its financial condition and brand perception. Some companies feel that if they are doing well financially, the “hocus-pocus” of a brand doesn’t matter, but they slowly realise that competitors soon follow their business model and the only way to survive the threat is differentiating themselves through their brand. Others become complacent or even smug about their goodwill in the market and soon discover that even great brand equity will not allow them to get away with a mismatch of their offer.
If your business is in such a position then you need to develop a rejuvenation / turnaround plan that will give you the best likelihood of coming out of it.
I believe the order of tasks for a rejuvenation or turnaround exercise would be: Finding a change agent, Assessing the situation, Developing a business plan, Executing the plan, and Creating an ongoing monitoring & communication system.
- Finding a change agent: Albert Einstein once said, “Insanity is doing the same thing over & over again and expecting different results.”
With a view to having a project “owner” working “on” the business who is not burdened with the day-to-day activities, it becomes necessary to have a dedicated person in charge of this change management exercise. A change agent may be either an external individual / organisation like a consultant, or an internal senior employee / director who can undertake the job of Chief Restructuring Officer (CRO). The best would be to have a combination of both – someone from the outside and someone from the inside working together. In this manner, between the two they will jointly have the technical knowledge, people skills & trust, objectivity and drive necessary to conduct the exercise successfully.
- Assessing the situation: The best place to start assessments is with the people – consumers, employees, vendors and other business associates.
Consumers would obviously be the most pure source of information about your “product / service offer” and its present & future relevance in the market. Their perception of your brand and what it stands for in terms of depth and flexibility would be a good indicator of the way forward.
The employee’s direct daily contact with the consumer and the business processes can well be the basis of identifying gaps in the delivery of your offer. Their mindset, that of their leader (business head) and his relationship with the promoters will also inevitably provide leads for your exercise.
Likewise, you can speak with vendors and other business associates to understand the business from their perspective.
Subsequently you should look inward at the company’s practices, processes & policies and seek opportunities to improve efficiencies. For instance, an exhaustive product mix that is not practical to manage can be reduced / altered accordingly or an existing inadequate Management Information System can be effectively improved.
Essentially the assessment exercise must bring to the forefront the company’s Strengths, Weaknesses, Opportunities & Threats. It will form the basis of our business plan.
While speaking with these various parties one must remember that each of their views on the same aspect of the business might be different. Sometimes it may even be contrary to that of the promoter’s perspective. This is where the objectivity of “what is in the best interest of the business” can be our guiding light and must be kept sacred.
- Developing a business plan: Having collected all the relevant information, the change agents must analyse it and develop a holistic plan that will progress the organisation suitably.
Since we have cited financial condition and brand perception as indicators of the company’s health, they could be our scoreboards. You thus need to list out all possible initiatives that would help enhance the ratings of each of these scoreboards.
So, how you can increase sales (through the acquisition of new customers & the retention of existing ones), reduce costs and communicate your revised avatar to the market would certainly be on the agenda. You must thoroughly analyse and discuss your internal processes to conclude where you can bring about practical efficiencies.
Customers’ habits & preferences are an important consideration as they may indicate to you which “yes” buttons you can press that might for instance persuade them to choose your brand over others.
If you are short on staff skills, training may fill the gap. Alternately, if new blood is required, existing employees may become concerned about their job security. Therefore, a communication plan to existing employees explaining the “all pervading” needs of a business is critical to co-exist harmoniously in the organisation.
Generally, using Pareto’s 80:20 principle, you could focus on the significant few (in this case issues & initiatives) versus the insignificant many. Accordingly, some areas will need to be retained or ramped up while others may need to be amputated.
At this stage, you will conclude what core changes are necessary, when, how and to what extent. You must be fully aware of which decisions are reversible and which are not.
Some decisions that initially seem irreversible may in fact be reversible. For example if you are locked into a rent agreement, which is burdensome to you but great for the landlord, you could have a go at renegotiating terms. While he obviously will not go a step back in the arrangement, he may for instance view your reliable payment schedule & tenacity favourably in a high tenant turnover market.
To successfully execute your plan, you will need to nominate “initiative owners” who will drive the initiatives as intended.
- Executing the plan: The success of any plan is inevitably in the execution. Taking the staff into confidence and sharing your new vision with clarity is thus the key to achieving your targets. Employee buy-in is critical to the progress of any initiatives in an organisation. This buy-in will come only when the management tangibly acts upon their opinion. When you act on staff recommendations, you effectively renew their flagging ownership of your brand.
Further, staff must thus be encouraged to discuss their own recommendations on the business plan as well as their own needs that are not being met currently because of the present condition of the business. The two can be linked in a manner that conveys the co-relation between business benefit & employee benefit.
Training them in skills that would bring them to a higher level than they are currently, thereby increasing their market value, may be an added incentive. The better they understand the reasons for specific initiatives being taken, the more likely they are to contribute productively toward this exercise. Provoke professional pride in employees that have it and cultivate it in those that do not.
Clarify your expectations from your team, discuss timeframes and implications of the success and failure of the plan both on the business as well on everyone involved (particularly themselves and the promoters).
Seeing this exercise through requires a high level of focus & energy sustained by strong will and backed by the necessary resources. Decisions once taken must be followed through with action.
Rather than attribute blame to people, the organisation as a whole must agree on the single-minded approach to destroy anything that blocks the path to the company’s progress / survival.
Ensuring good leadership and aligning team initiatives with the plan, gradually leads to prioritization of the right tasks becoming second nature.
On occasion, during your exercise you may encounter challenges even greater than those the business directly has to offer. Therefore, issues like promoter rigidity, union agendas etc. may render even a first-class business plan ineffective and lead to failure. But try you must.
- Creating an ongoing monitoring & communication system: Knowing about the ongoing successes / failures of each initiative carried out is something all employees who have invested themselves in this exercise would like to know. Therefore, you must devise and maintain a regular monitoring and communicating mechanism that conveys results and shares information on customer satisfaction & financial achievement.
I find the balanced scorecard a useful framework within which we can effectively create, implement and measure the success of our strategy from four perspectives:
- Financial: Return on Investment, Profitability, Sales & Costs.
- Customer: Market Share, Customer Retention, Customer Acquisition & Customer Satisfaction.
- Employee Growth & Learning: Satisfaction, Retention & Productivity.
- Internal Processes: An organisation must develop their own unique key processes based on their objective to add value to the customer.
These metrics once tracked and diagnosed provide the basis for fresh strategic decisions made.
If your company is confronted with a crisis and you are wondering whether or not your company will be open to such an exercise do remember that – When confronted with survival issues even a company that has rigidity hardwired into its DNA will recognise and respond to the need for change... or die.
Consequently, at regular intervals, all organisations like individuals either directly or through some external entity inevitably come across a variety of demons that they must confront and overcome.