- Ignorant towards the facts, hence, no need to take eligible actions. A lack of managerial skills, technical access to critical information or fear to face reality, may cause ignorance in distress situations.
- Activists may be very eager, to prove their managerial skills. They may be trying to resolve a distress situation, however, without a thorough understanding of cause and effects, actions are arbitrary and results are uncertain. Hence, activists may add value, but this will happen only randomly and cannot resolve the situation. On the other hand side, activities of Activists can be dysfunctional also. Disregarding the facts may affect the business in other, but the desired ways.
- Paralyzed under the impression of the facts, unable to take any / eligible actions.
- Turnaround Executives taking eligible actions, in full awareness of cause and effect of the facts.
- Ignorants can be still in the state of denial, not recognizing the distress situation.
- Paralyzed executives may be in the state of anger, or in the state of depression.
- Activists can be in the state of a bargain.
- Only executives, who have reached the stage of acceptance, will show effective & efficient behavior
All the same data, yet different results.Under the assumption, we have all been to the same schools and are reading the same books and business magazines; executives hold the same competences and, hence, are exchangeable (within one industry). For the assessment and selection of turnaround executives, understanding what causes differences in the performance during a turnaround is essential. Technically, all Senior Executives should have access to critical KPIs. KPIs are to indicate, if the business saves and sound, or carrying increased risk for distress. Accessing the same data, the behavior of executives varies. Some remain ignorant towards the facts, others are paralyzed, some create a lot of buzz without traction and others again, act early and bring the company back to save grounds (or avoid drifting into rough waters). The latter are few in numbers. Turnaround experts are specialists in distress situations. Yet, they suffer from the stress level, late nights, lack of time and resources, high degree of uncertainties and pressure, and emotions from various stakeholders, too. However, not being paralyzed or engaging in the blame game is core for their success.
“Experience is simply the name we give to our mistakes” (Oscar Wilde)It all starts with the awareness of the situation, leading to meaningful conclusions for the short and mid-term future. Formalizing this requires:
- a KPI universe
- regular reporting
- thorough discussion and challenging of the relevant data
- scenarios of what the near term reality could be for the firm
The know-how and the do-how for turnaround managementOnly after understanding the crisis situation as an immediate reality and the interdependencies as the cause and effect of actions, the executive, will be able to start acting accordingly. Many executives believe being prepared and skilled, to deal with (any) crisis situation. With regard to the very special requirements of a turnaround situation (more on that in another posting), very often, this self-estimation is wrong. Also, the management team at the helm might be responsible for the immediate distress situation, hence, they would not be the first choice, to fix exactly that situation again. An effective & efficient Turnaround Professional is adding value by having a reliable toolbox for distress situations at hand, and also a thorough understanding of
- her own impact to improve the situations (and its limitations)
- access to useful partners and networks outside the existing eco-system of the firm
- achievable low hanging fruits, that can help to improve the situation immediately.
Take away: Transparency is key for the successful management of turnaround situations. Knowing the numbers and understanding the numbers are two different things. Experience is core to understand the underlying and the cause and effect of possible actions to address the distress situation. Scarce resources create additional complexity. Turnaround Professionals are experienced, to deal with distress situations under the rule of constraint resources. Coming up: All good things come to an end – lack of strategy is the major cause of death in the corporate world
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