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The Anatomy of a Turnaround, a Case Study

Contributed by David Slocum

Dripping Springs trail is a water-less 16 mile hike through thick sage brush, rocks, rattlers, coyotes, and possible mountain lions, with a total elevation change of roughly five thousand feet – all to be accomplished before nightfall so you are not eaten. Definitely not the mental image portrayed by the name on the trail head sign.

In the same way the simple label “business turnaround” does not represent the total effort required.

How Bad Could it Get? Day One:

The senior manager opened the door to a conference room full of disappointed and angry employees, gently placed his hand on the shoulder of the new manager that had been hired to turn the business around and pushed him forward while introducing him as, “Here’s the new guy”. As the door closed the senior manager remained outside and left the new guy alone – awkward does not begin to define the situation.

The Analysis:

  • A larger corporate entity had acquired an under-performing technology company that was not a good fit to their core strengths. While there was some early success, the acquired division had now been suffering severe losses for more than 4 years. There was no solution on the table, and an environment of blame was pervasive.
  • There was no agreement as to “what’s wrong” with the division among senior management, and it was palpable.
  • Employee engagement and effectiveness was so low that it was off the scale.
  • The acquired product portfolio was not competitive, and efforts to develop new product were failing and compounding financial losses.
  • Desperate efforts by salesmen were resulting in commitments to customers that could not be met.
  • The P&L indicated that the division was operating at a tremendous loss and the CEO set a goal of breakeven at 24 months.

The Psychology of Forward Momentum:

Once a decision is taken to begin a turnaround, planning and direction must replace the void caused by inaction and lack of leadership. New direction and achievement goals must be communicated through leadership. The old status and emotional baggage must become a “So What”.

Action:

  • The dysfunction between senior management was a fact of life that the new manager was not in a position to change – he would remain focused on positive action.
  • Lacking a clear plan and direction the initiative was taken, and a turnaround plan was submitted within the first 45 days.
  • Key rallying points were created around initiatives focused on customers and new product development (Accentuate the positive). While there was employee turnover, the remaining team fully supported the new initiatives and employee engagement improved immediately.
  •  A “sell what you have” alignment was achieved. It wasn’t great news, however selling beyond current capabilities would only lead to disruption to new product development – further delaying the products they desperately needed.
  • A new product development road map was developed with agreement, and all possible efforts were made not to disrupt NPD.

Great Results:

Through the sacrificial efforts of an engaged team the division achieved a turnaround. An incrementally improved product portfolio was introduced in twelve months, with an increase (40%) in revenue. An entirely new and more competitive portfolio of software and hardware products was launched 30 months into the effort leading to a significant increase in revenue (150%), coupled with improved margins to move the division into a profitable position.

David Slocum is an interim executive with 20 years management experience in Operations, Product Development, and Quality Assurance within consumer technology and industrial technology companies in the US and China.

To contact David Slocum please send an email to [email protected]

https://ceriusexecutives.com/wp-content/uploads/2016/09/Small-Business-Operations.mp3
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