Go in, assess the situation, determine best course of action, get buy-in, and get going. Seems straightforward enough, right? This is one of the most common mis-steps executives make when starting a turnaround. The first step is to negotiate your success.
Why a mis-step? Everyone looking at a particular business situation experiences it through their own unique lens and set of values. You first need to define not only the problem, but what the outcome needs to look like and for whom. Again, it seems straightforward, but often isn’t.
As an example, early in my career I was sent to South Africa for what I thought was a turnaround opportunity. I got to know the team and the business fairly well in all my previous visits. The South Africa entity was only making small profits and had been left intact by HQ because my company didn’t want to take the charge against the rest of the overall EMEA region to close down the local operation. Finally, here was my chance to show what I could do. This was a big deal for me, as I became the youngest country manager in the company. It also meant I reached a personal goal – to run my own business unit by the time I was 35. I literally landed and had my first day in country as the new General Manager on my 35th birthday. This was all going according to plan, what could go wrong?
Over the next 12 months I determined the biggest changes the business required: outsourcing distribution to a third party logistics provider who specialized in pharmaceutical distribution, adjusting and upgrading the leadership team who had been unable to grow the business, and right-sizing the organization for a new focus on our core strengths. Through a lot of hard work and some difficult decision making, I managed to assemble the right leadership team to help me drive change. Over the next year and a half, we changed distribution, closed our warehouse, rationalized our product line, and reorganized and trained our sales team to capitalize on our newfound focus. It worked – really well. We built a new company, a new culture of performance, and enriched our sales reps with new experiences and an effective sales compensation and bonus plan. We made money. We grew and paid back debt to our corporate entity. Perhaps most important, in hindsight, was that we reclaimed our spot as the top local company in our industry.
When I flew back to California for my annual family leave, I did what all expats are taught; I spent time meeting with all the executive committee members and division VP’s who ran different businesses or functions for the company to tell them the tale of my amazing success, and to remind them that I would be available in another year or so when my assignment ended. Who wouldn’t want a VP returning from a successful expat assignment who clearly brought significant value back to the company?
I met with one of our senior people in Corporate Finance, who was also a friend. He was happy to see me but wasn’t as impressed as I hoped he would be with my account of our successful turnaround of the business. Having always been the direct type, I asked what I was missing, and then came the lesson:
The ultimate goal was not to turn a bigger profit. The actual end goal was to find a way of getting out of the South Africa market, without major impact on the regional P&L.
Strategic discussions between EU and US headquarter management had concluded that economic slide and the devaluation of the South African Rand would continue downward, and that turning a profit or breaking-even would become increasingly more difficult. The decision to send me to find a way to improve the business had been made, and shared with me. While I knew that this had been the impetus for my assignment to begin with, I wrongly assumed that turning a larger profit would change the collective opinion of the senior team to divest the business unit.
I was stunned. I had just put together an amazing team and turned around a business only to find out that while everyone was appreciative, it wouldn’t change the original plan. I learned later that no one had expected us to perform as quickly or effectively as we had, nor that our actions would yield the level of change we achieved. How was I going to tell my team and all our employees that we still were going to close the business? I needed a plan.
My wife and I loved South Africa and all it had to offer. I knew this company could be a winner and started to formulate a plan to determine how we could sell the trading company to our largest distribution partner and award them a long-term contract to continue distribution of our products in market. Everyone wins:
- The company continues to benefit and lowers its overall cost and risk to remain in the local region.
- The distributor increases their product offering and profile with customers, and secures a long term distribution agreement.
- The employees could stay with the trading company under the ownership of the new distributor.
In the end, it took over a year to negotiate the sale of the trading company and transition the company to their new owner and management team, but everyone ended up getting what they wanted, including me. The company moved me to France to take over our foundering EMEA distribution structure. A new assignment, and another big challenge, in another great place.
Going forward, I learned to assume nothing and ask better questions at the start of my engagements. They generally cover four key areas, but as you can imagine, the possible questions are almost limitless.
- Identify the Problem
- Whom has decided that the business is needing transition and why?
- What has been done to address the issue and have those efforts helped?
- Identify Success & Timing
- What does success look like to the stakeholders?
- How and when will it be measured?
- Identify Resources
- What resources are at my disposal? (money, people, data, technology)
- Identify Authority & Communication Requirements
- What actions am I free to take? (people, spend, products, services)
- Where should I get additional buy-in, and from whom?
- When and how should decision makers/influencers be informed?
The summary of feedback from this questioning becomes the three elements I use to prepare for the negotiation of my success with the board or my sponsor:
- What is the ideal result stakeholders really want to get everyone on the same page?
- The potential options that will meet their interest and my own.
(What do we each get if I am successful delivering the ideal result?)
- List of commitments we will each of us make to ensure the result is achieved.
With good luck, hard work, and this process I’ve found success over and over in companies with ranging from $3 Million to $14 Billion in revenues.
Our Technology & Life Sciences practice at McDermott & Bull is growing fast and rapidly expanding our reach to include all of the US and Europe with offices in LA, Denver, New York, and Amsterdam. Thanks for reading, and if we can help as a search partner or just a great contact in the industry give us a call, we’d love to talk with you.