There is nothing worse in today’s competitive business world than to realize current strategies and products or services are part of a declining market. However, as an incoming executive facing this dilemma, all is not lost. It goes well beyond that old cliché that, if you can’t sell lemons, try making lemonade. As an incoming executive charged with taking action to make changes in a failing division, the initial priorities are (1) to hold meetings with key managers and supervisors to find out what is right and what is wrong about current production, distribution, sales, and market share; (2) to asses the strengths and weaknesses of the work-force (i.e., where is it top heavy, where is the core of effective and efficient workers; and (3) assuring them that when changes occur, when there is down sizing or even closing of some plants, it will be done in a fair and equitable manner, which includes providing assistance in relocation or even re-training for other jobs. As an executive, I will also pledge to tell the truth to everyone, which mean s either a newsletter (or a series of updates) or possible a video conference where the changes will be spelled out once agreed upon.
One recent example worth noting is that of Mark Hurd, brought in to revive Hewlett-Packard. “Hurd is a guy who’s going to do things from a business perspective and try to accommodate and keep as much of the culture as possible…But to keep HP truly competitive against his competitors, he needs to get the organization right. Analysts said HP, in essence, would have to choose which businesses matter” (Jones C 1). Choosing which businesses matter: that is the key. This means, I need to examine competition and pricing, the market and its potential. More questions may need to be asked than quick answers provided: For example, can we cut costs and reduce prices? Is R * D able to improve the product, or create some innovative design or use that would jump start new consumer demand? What sort of time period could that take? What is our competition doing to survive, given that this may be a mature market? Is our administrative segment top heavy? If we reduce personnel, might that be the easiest place to start?
Bob Wood, a so-called “turnaround specialist” has some key points to make when turnarounds are necessary: “Here then, are the key qualities and actions necessary to be a successful turnaround leader: ü Demand that all temporary help be terminated immediately and re-deploy existing staff to fill gaps ü Require CEO approval before any action is taken on the recruitment of any personnel ü Require CEO approval of all capital expenditure requests above a defined minimum limit ü Have all redundant inventory identified and, if possible, disposed of at whatever price can be obtained ü Cut back sharply on the replacement of office equipment ü Check expense accounts to ensure that any entertaining of clients is not overly lavish…Turnarounds are intensive management exercises that focus a bright, glaring light on an otherwise normal business activity, question and challenge everything” (Wood 4).
So far, as executive, I have dealt strictly internally. The next step is to meet the company’s major customers and/or distributors. I want to find out why they buy, or stopped buying, why the ultimate consumer has bought in the past and now no longer wants our product. I want suggestions for either improving or changing the product line. I want to know- is our pricing fair? Is our product line broad enough or too broad? If they could sit with our R & D people, what would they recommend we work on to get their business in the future?
Next, I would visit every single department in every single plant. I want to k now what’s working best, what is economically feasible, what is old and can be discarded, what is new and can be improved uypon, what is new and has not yet been sufficiently tried out. I want to gage worker attitudes and commitment. I want to listen to their problems and success stories. I will give them the truth that changes may be needed and it may affect where an d how they work- even IF they work.
There is nothing that equals this persona hands-on approach. “In many cases, the difference between companies with cash flow trouble and those that are truly world-class organizations is management. The long-term solution must include improvements in general efficiencies and the quality of the company’s services and products, led by hands-on management” (Vackar 4). That requires a healthy attitude that the end is not near. Changes is management structure, in downsizing,, in who reports to whom- even in budgets are vital to the turnaround process, but it is not failure. It is, in my words, re-adjustment to realities of a changing market place.
Now, with first-hand information at my finger-=tips, I can start to make immediate decisions: I want to revise the reporting structure of the organization: R & D now reports directly to me with weekly updates and budget requirements for me to sign off on. HR Directors and I will sit weekly to determine downsizing- who, where, and when. There will be a budget set up for separation and severance pay. Advertising and Sales will report to Marketing, and Marketing will report directly to me. I expect daily updates on new approaches for me to approve for moving product, building the market share, and finding new advertising that improves consumer demand and satisfies our key distributors and wholesalers.
I will set weekly, monthly and quarterly goals for every department. I will praise them when goals are met, and will want an explanation if they fall short. Every week, I shall also provide an update and progress report to the corporation of which this division is a part.
Rescuing and reviving failing business entities is not like throwing a life preserver to a drowning person. Think of saving the Titanic, where thousands are in danger of being swamped. I will have to be responsible for the fate of many- knowing that even if lemonade is not the answer, lemon meringue pie might be a viable alternative. I will not expect overnight miracles, and neither should those working with and for me. But, by slowing turning things around, that red ink might be eliminated one day soon.
Jones, Temil Yue: “Hewlett May Cut Thousands of Jobs; Cost-saving moves, which may be unveiled next week Los Angeles, Calif.: Los Angeles Times. Jul 16, 2005.
Vackar, Robert: “Why companies really fail and how to turn them around, Part II” www.thefabricator.com/ShopManagement/ ShopManagement_Article.cfm?ID=1253
Wood, Bob: “Turn Around Programs for Failing or Distressed Companies” www.criticalc4c.com/