The ups and downs of business can be unpredictable, and the downs are often unforgiving. Any business, from a mom-and-pop shop to an international corporation, can suddenly find itself in turmoil. When expenses outweigh revenue, when debt becomes unmanageable, when layoffs become necessary for survival — these are among the many things that keep CEOs up at night.
But positive outcomes are still possible. As this story by Fast Company details, many major businesses have experienced significant turnarounds. Among the examples in the past two decades are Apple, Starbucks, Target and Netflix.
A leadership change may be a part of righting the ship, though it’s a hefty task for a “turnaround CEO.” Here’s a look at some of the challenges that executives face in turning a business’ tides.
Analyze the finances
This is an obvious place to start, though it’s an exercise that may be unpleasant at best. Identifying just how deep the financial hole is will help a CEO understand the efforts required to rise from those depths. Doug Yakola explores the importance of cash flow in a story for the McKinsey & Company consulting firm.
“A successful turnaround really comes down to one thing, which is a focus on cash and cash returns,” he says. “That means bringing a business back to its basic element of success. Is it generating cash or burning it? And, even more specifically, which investments in the business are generating or burning cash? I like to think about this in the same way one would if running a local hardware store. By that, I mean asking fundamental questions, such as whether there is enough cash in the register to pay the utility bill, for example, or to pay for the pallet of house paint that will arrive next week, or how much more cash I can make by investing in a new delivery truck. When you bring a business back to those basic elements, the actions you need to take to get back on track become pretty clear.”
A turnaround plan won’t necessarily be a quick fix. New leaders will need to seek information and ideas, and weigh those with their own experiences and business knowledge. Gabriel Bristol, who is founder and CEO of customer call center Intelifluence Live, shared some of his tips to turning a business around in a story for Fast Company. He starts with “Be sure to approach the company with an open mind.”
“When you are first introduced to a business that is experiencing challenges almost every founder, manager, and employee will share their opinions on why it’s in decline, and furthermore they will purport to also have the solutions,” he says. “It may be valuable to listen to a few of these opinions but you must remember that these opinions are most often limited in scope and shared through the lens of job or ego preservation. Analyze the facts and draw your own conclusions.”
Move to the middle
There can be value in gaining advice from the various levels within the company. A lower-level employee may share valid points that a high-ranking manager may not. Richard Lindenmuth wrote about this as part of his experiences as an interim CEO in a story for chiefexecutive.net. Like Bristol, he acknowledges that not all opinions may contribute to positive change. His recommendation: “Focus on the middle.”
“Experience has taught me to listen to every level but focus my attention on the middle,” he writes. “The VPs are like the company’s elder council: their own survival in mind, they may just tell you what they think you want to hear. The bottom are less focused on strategic issues, but you need their confidence, trust, and input. … But it’s the middle managers that translate a CEO’s vision into daily practice. Without them, you can’t effectively implement change.”
As part of the learning process and gaining information, a new CEO will need to anticipate the uneasiness that employees may be feeling. Will the new leader start a round of layoffs? Bring in a brand new team of people? Change job duties to an unrecognizable degree? Communication is key in helping to ease concerns, as Lindenmuth wrote.
“When I walk into a company in crisis, I expect many people will be scared and angry, entirely natural given the conditions,” he writes. “But fear and uncertainty are fertile grounds for doubt and resistance. So act quickly to quell it, or you’ll have an entirely dysfunctional situation on your hands, where you can’t get anything done.”
Make the plan
Once the research is complete, and the CEO has heard all the necessary opinions, a plan will need to be formulated. A SWOT analysis — examining the business’ strengths, weaknesses, opportunities and threats — can be instrumental in getting this process started. Joy Chen, CEO of H2O+ Beauty, describes tackling the challenges in a story for Entrepreneur.
“Don’t be discouraged if your research points to the need for significant changes,” she writes. “Owning up to your company’s shortcomings is essential for a successful turnaround. The best way to move forward is to tackle your biggest weaknesses by devising a strategy that addresses those challenges head-on.”
Share the vision
The list of tasks for a turnaround CEO is extensive, and it can create a heavy burden. Each major part —investigating the problems, seeking feedback and organizing a plan — is vital. The same goes for how the CEO delivers the overall message. As John Baldoni writes for CBS News, “A leader must be able to describe in clear, vibrant language what the organization can become.”
“And when it comes to bringing a business back to life, that task amounts to more than restoring the status quo,” Baldoni writes. “The goal must be to describe the future in terms employees can embrace. How? By helping them understand their role in making that ‘future’ a reality. In short, it is about making a leader’s vision relevant to the people tasked with executing it. Strong visions are made stronger when people see themselves in the picture. They contribute to the vision and in that way it becomes shared across the enterprise.”
There may be a constant dark cloud seemingly hanging over a business in need of a turnaround. That can then create the need for positive moments as the new leadership’s plan takes effect. When the business makes successful steps forward, Chen writes, “Be a cheerleader.”
“By being transparent about how the business is performing and celebrating successes, no matter how big or small, you’re sending an important message that you’re moving in the right direction,” she says. “Confidence will grow and your team will feel more motivated and invested knowing that their hard work is paying off. Great leaders are great communicators: the team should know and be acknowledged when progress is being made.”