Turnarounds: Dispelling the myths

It’s just not that simple. The combination of business models that comprised the commercial landscape became unsustainable and the recession formed a discontinuity not a pause. Therefore the conditions that prevailed before cannot be re-established. and businesses must now re-evaluate their activities and to formulate new shapes and structures.  Don’t think of business “turnaround” as reconstruction. Think of it in terms of “transformation”. The objective for management is to transform the business so that, in the short term, it is stable and able to move towards a new shape and objective. Firstly, this means halting the depletion in resources. Secondly, it means evaluating the direction and extent to which the business can be reconfigured to achieve a satisfactory performance. It is unlikely that transformed businesses will require the same structure as that of the pre-decline phase and for some senior people, this presents a problem. It is difficult to see elements of what they built being dismantled. For most managers, admitting that the previous business model is no longer correct suggests that they were both wrong and that their ideas were the cause of the company’s instability. Real change, therefore, is most effectively directed by a new guiding mind – one with no emotional investment in past projects or structures.   There is no standard model for transformation. Each company has a unique profile sculpted by the turbulence it has encountered and the way ahead cannot be generalised. It must, instead, be a bespoke solution founded on a dispassionate assessment of what survival looks like for this singular business. Some companies will emerge from the recession as healthy survivors. Others will be damaged and will find it challenging to resume previous levels of prosperity. Business transformation occurs in the early recovery phase of the recession, which means in the next 12 months. The journey requires leadership not management. By this I mean that imagination and novelty must be combined with inspiration and motivation to supersede the defensive programmes of control that were necessary in the decline phase.

A business that emerges from the recession as a comparatively healthy survivor may suffer later if it relies on the processes, attributes and management style that saw it to this stage. Finding individuals capable of instigating true transformation is difficult as the combination of experience and ability is rare. Moreover, many SMEs have only partial control of their destiny and, for them, the path ahead will be revealed not through the deliberations of their own guiding mind but by a leader who is in the process of transforming another company.Anthony Holmes is an international corporate turnaround specialist and transitional leadership expert. His book Managing Through Turbulent Times is out now with another, A Time to Lead, A Time to Manage, to follow.

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