BIG CONTRACTING firms are large moving objects and hard to turn around. You must first recognize and act on the suspicion that the people who got the company into its current state are not the ones to lead an aggressive recovery.
The larger the moving object and the faster it is moving, the harder it is to make a “U” turn. Think for a moment of the geography covered when a supersonic plane is doing that “U” turn.
Another reality plugs into the equation. Like an accident victim in the emergency room, the longer you delay stanching the flow of blood or, in your business, the negative cash flow, the less likelihood that you can ever make a full and satisfactory recovery.
Big company turnarounds, big company belt tightenings are not easy. Seldom is anyone willing to admit that his bloated, lethargic staff and his department’s poor work habits are part of the problem. Never mind the possibility that those “in-denial” department heads could spare the time to be objectively and dramatically helpful!
It’s not group therapy
Turnaround management is not a group therapy problem with lots of people and lots of meetings. The most effective turnaround program is not a democratic process and it is, perhaps, as close to a dictatorship as the free world of business can experience.
The task of the board of directors is to find either internally or, more likely, externally, one industry-experienced executive who is willing to tackle the task and to develop the plan necessary to do the difficult deeds and who has the leadership skills to motivate those who are still on the team to do it now!
This is tough-minded management at its best and worst. As consultants in this kind of situation, we look hard to identify in a short period of time those who are part of the problem and those who can be part of the solution.
Firing at random
I once heard a story that I believe is true although I did not witness it firsthand. A hard-headed industrialist bought a large PHC company. On his first visit to his new acquisition he told the president he expected an immediate cut of 50% in headquarters personnel. The president said he did not know how to do that quickly. The new owner suggested he would be happy to show how it would be done if the president did not get at the task immediately.
They were standing in front of the engineering department at the time. This was a large room filled with drafting tables and people. The industrialist moved quickly to the center of the room, introduced himself and then pointed to the right side of the room and said with a sweep of his right hand, “Effective immediately all of you on my right are fired.”
He turned to the president and said, “If you can’t do it, I’ll be back and finish the job the way I showed you, and make no mistake about it, those people are fired, just as I said.”
Don’t go slowly
The dirty truth is that quite often companies in trouble proceed too slowly and fire the wrong people. In this case, the industrialist found that there were so many inadequate and surplus people that he would be right more than half the time if he just fired people at random.
- So here then are some of the rules for your turnaround:
- Stop the flow of blood. Cancel all open orders for everything not directly connected with current sales to collectable accounts.
- Cut everyone’s pay; the higher the pay, the greater the percentage cut. Remember, the executive group led the company into trouble.
- Review collections and accelerate the process even at the risk of offending some of those deadbeats who have conned your company into financing their business by their delayed, debated payments to you.
- With all haste, identify those who really are working to help get the problem solved and even give a few of them a pay raise to encourage their outstanding effort as you quickly identify those who are not helping and are leaving the team immediately.
If there is a competitive problem, it usually is internal leadership pressure that forces the company to bid to win, without exception. The top people praise and reward successful bidding regardless of the profitability of the jobs won.
This is a deadly attitude and is almost never successful. It leads to bidding low to get cash flow to cover the material for the last low-bid job. “Tailspin” bidding is easy for sharp competitors to identify and is a sure way to clear out weak competition. You clean up the market by letting those tailspin bidders get the work at stupidly low prices.
Next month we will review things you can do to improve the quality of your company’s bidding process.
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