Strategies for Turnaround CEOs
By Tom Ryan
While new CEOs in turnaround situations need
to move quickly and decisively, they shouldn’t come off as a
“know it all” and need to make friends quickly, according to an
article in The Wall Street Journal. John Challenger, president
of Challenger Gray
& Christmas, stressed the need to “find some people you can trust
to really tell you the way things are and give you the lay of the land.”
The article offered four suggestions for
new CEOs handling the transition:
Conduct a review and consider worst-case scenarios: Thomas Lutz, a senior partner at Boston Consulting
Group’s consumer and retail practice, told the Journal that new
CEOs “must account for every penny of cash flow in today’s economy,” and
personally review monthly cash-flow statements to make sure costs are aligned
with revenues. Once the thorough review is completed, action must be taken
to cut expenses.
Set an agenda and be decisive: Jim Citrin, senior director at Spencer Stuart and co-author
of “You’re in Charge, Now What?,” recommends new CEOs identify
three distinct themes to focus on and organize efforts around for the near
future. “A new leader really needs to have some quick wins, as people
are looking for some evidence of progress,” said Mr. Citrin.
Communicate constantly: Actions and direction must be continually explained
to get employees to buy into the turnaround plan. Kimberly Till, who became
CEO of Harris Interactive, the market-research firm, last October, told
the Journal, “I keep all the employees in the loop through
weekly emails, town hall meetings and forums, video clips of big decisions
and visits to the offices.”
Be aware of personal habits: Taking over a front-row parking spot may be taken the
wrong way by rattled employees. But just the way a new CEO engages associates
in hallways helps define how employees respond to any turnaround plan.
Said Mr. Lutz, “These interactions make up how your employees feel
Discussion Questions: What steps must a new
CEO in a turnaround situation make to help assure a smooth transition?
What common mistakes are made?
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8 Comments on "Strategies for Turnaround CEOs"
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CEOs are primarily hired to be decision makers. They need to step in and decisively take charge. Be sensitive to the things that are working. Take the right amount of time to analyze what is good and what is a drain on the company. Look at telltale signs on the P&L and balance sheet. Cash flow is king these days.
In our business, look at days inventory on hand, and other key metrics like operating income per employee, SG&A per employee and COGS per employee. Then compare these metrics to your own company’s historical performance and that of you industry peers. See how you measure up. See how much short-term cash flow you can generate just by getting to best in class of your peers in only one of those metrics. You will be surprised at the impact a CEO can make personally. I didn’t even touch on the culture yet, but enough good things have already been said about that in previous posts here.
Back in the “good old days” a new CEO could work slowly and methodically to connect with their new team and learn the business from their perspective. There’s no time for that in this market.
First the new CEO needs to demonstrate confidence in the employees and the future of the company. They should integrate themselves quickly and decisively into their new team and begin to drive change.
Quickly build the team and go!
A new CEO should be humble, yet project an air of being in charge. He/she should be inclusive and demonstrate this by being a careful listener. Finally, he/she should be open to listening and learning from customers. Frequently someone from outside the organization can see things more clearly. By putting oneself in the shoes of the customer, one can see what is needed from the company (goals) and then can figure out how to get there.
With goals in mind, the CEO can then work with the team to craft clear priorities and then find practical solutions to complete each priority. The results of this exercise should be shared with all employees and become the mantra for moving the company forward.
I think believing incremental change is best is a flawed strategy. If the diaper is full you need to get rid of it. That’s what change means.
Taking measured, controlled steps can make the process much longer and less effective than taking stock of where you are at, finding the number reasons and plotting a course. There’s a reason for the old saying, “A new broom sweeps clean.”