So you’ve been recruited to lead a turnaround, or as a founder CEO have decided to undertake a renewal of your business? Written by an expert in corporate transformation, this post lays out a detailed 6-month urgency-based approach to rapid turnaround and corporate renewal. Running a company during a turnaround isn’t the same as running a company during “business as usual” times — it requires transformational leadership at an exceptional level. This post and the others following will help you become that transformational leader who helps your company to prosper and grow.
However, before digging into this detailed step-by-step post, you might want to first check out A 3×3 Process for Business Transformation for a high level overview, or start at the beginning with an introduction in the Leader’s Guide to Corporate Transformation and Renewal.
Urgency is Your Best Friend
You will have no more than two to three months to demonstrate to your management and peers that you were the right person for the job, and that you can create the positive cycle of change that leads to corporate renewal or transformation. That doesn’t mean the transformation is complete – that may take twelve to twenty-four months or longer – but the actions you take in the first 90 days will determine the ultimate success or failure of your corporate transformation effort. This is why the First Six Months Template provides a proven template and timeline for all the things that need to be accomplished in that timeframe. This chapter is a step-by-step guide to the leadership skills you will need to succeed during this demanding challenge as you implement your First Six Months Plan and beyond.
The First Six Months Plan
The First Six Months Plan provides a highly structured, urgency-based, top-down approach that has been proven to work in many situations requiring rapid turnaround and crisis response. This methodology is appropriate to a “hit the ground running, no time to waste” approach; however, once a level of stability has been reached, the First Six Months Plan format and timeframe flows seamlessly into the 12-Month Goal format. This drives lower level goals in a cascading fashion from the Transformational Goal, and directly ties team MBO’s to corporate goals and the desired results in the Transformational Arc.
The First Six Months Plan is a one-page summary of the most relevant actions you must accomplish in the six-month timeframe and should serve as a measure of your progress and a communication mechanism with your boss or your board. By its very nature, the Six Months Plan will be somewhat more fluid in the latter months – there will be many unknowns and inevitably surprises. Nevertheless, best practices in corporate turnarounds dictate a rhythm and timing to sets of actions that are universal across industries and situations. While the actions outlined below may appear to be extremely rapid, in most circumstances the timeframes below are completely achievable, and in many cases dictated by the financial constraints of the business.
Immediate Strategic Priorities
In any new transformational or renewal role, regardless of industry or situation, there are certain invariants that must be immediately addressed.
- Stabilize and Secure Sources of Cash.
In any transformation, it is of primary importance to understand how much cash runway you have available to effect the transformation, and if the company has a cash cow business, how quickly it is likely to decline. Debt may need to be restructured, vendor contracts re-negotiated or deferred payment arrangements made. But, if the company is in a negative cash flow situation, especially if total cash is also low, all necessary steps should be taken to reduce cash outflow and reduce overall expense burn. - Establish Trust with Customers.
Particularly in situations where there have been visible misses in terms of forecast revenue, or where there have been customer-impacting issues such as product or support problems, customers may have concerns about the future of the company, and a management change at the top may increase that concern. Therefore strong customer outreach is essential in order to reassure and stabilize, as well as open channels of communication and receive feedback on customer needs and requirements. Strong transformational leadership at the top can often stabilize customer situations and buy you time to tackle more systemic problems. - Analyze Prior Financial Performance and Issues.
Having a qualified CFO as trusted partner is essential to a thorough analysis of past financial statements. The cleanest situation will be a public company with clean financials. However, even in this situation a thorough analysis should be undertaken. Companies that have had revenue reporting issues and private companies must receive the highest level of scrutiny, and if a qualified CFO is not in place, contract resources must be utilized. Smaller private companies in particular will need a complete examination of past revenue recognition practices, reconciliation with contract T&C’s, verification of receivables and payables, as well as validation of bookings and commission payments. - Model Financial Plan, Downside Plan, and Worst-case Plan.
While the company likely has a current operating plan, an immediate responsibility is to examine the plan and make a business judgment about its accuracy. Based on this risk assessment, a Downside Plan should be modeled which reflects a significantly reduced risk profile. Finally, Worst-case plan should be developed which models situations of increased risk such as a more rapidly declining mainstream business than historical precedent would indicate, or a greater falloff in planned revenue. - Establish Forward-going Spend Levels and Take Immediate Action.
Based on the sensitivity analysis above, it will likely be necessary to take immediate cost containment actions to ensure the financial health of the business. - Examine all Functional Areas.
Since the activities cited above will be time-consuming, triage should be performed on the functional areas that appear to need the most focus. For example, support margins may have been significantly decreasing, so the support organization may need to be examined first, or product issues may be at the forefront, in which case an analysis of the product organization may be needed. Often the initial flash point may prove to lead to a different root cause; for example, support margins may be increasing because of decreased quality in the product. The First Six Months Plan should encompass deep operational reviews of all functional areas, but the timing should be adjusted so as to address the most critical areas first.
Get more tips for newly hired CEO’s here. Top tips for Founder/CEO’s see here.
Check out our next blog post in this series.
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