Turnaround in business. Part 3

 

According to Michel Treacy and Fred Wiersema company strategy must be focused on one of the three value disciplines (operational excellence, customer intimacy or product leadership) while meeting industry standards in the other two disciplines. The experience shows that leaders in their industries have usually done focusing business rather than broadening it.

The three value disciplines

• Operational excellence: Reliable products or services at competitive prices and delivery with minimal difficulty or convenience.
• Customer intimacy: Detailed customer knowledge with operational flexibility so they can respond quickly to almost any need, from customizing a product to fulfill special requests.
• Product leadership: Produce a continuous stream of state-of-the-art products and services that consistently enhance the customer’s use or application of the product, thereby making rivals’ goods obsolete.

The Three Value Disciplines

From the supply chain point of view is very important to have a clear strategy definition because each value discipline means a different and almost incompatible supply chain. For example, customer intimacy strategy would likely push a company to create “important” stock points in order to serve customers better and faster. On the other hand, an operational excellence strategy would probably look for a lean approach using more intensively cross-docking rather than distribution centers to reduce stock.

From the turnaround perspective, usually the approach is going to be operational excellence because of first at all it has to be guaranteeing the survival of the company and be avoiding the insolvency risk in the short-term. Be aware that customer intimacy and the product leadership are long-term strategies and in turnaround situation time is a scarce resource.

System Thinking and Shared Vision pillars in the Turnaround Change Management process

Many organizations fail to approach problems because they do not understand system thinking and/or lack of a shared vision. So in those underperformance companies quite often we find departments with a narrow focus, when system thinking is required. For example sales departments in slow growth markets or industries to turnaround the situation could try to maintain or increase sales taking unusual risks of sales orders (e.g. orders with high risk of cancellation or postponement). They fail to understand that trying to solve the sales problems with “low quality sales” add a new problem to the current sales problem.

Sales orders cancellation and/or postponement system impact

Therefore, system thinking is important but additionally we need a shared vision. Problems could be solved using different ways, but companies need a clear shared vision in order not to neutralize actions of one department with other. For example, let imagine a supply chain function trying to reduce stock to improve the working capital, and a sales department building stock to close sales faster. Both approaches could be valid, although the firm needs to define a clear shared vision to move in just one coordinated direction (stock reduction or building stock).

From Strategy to Execution: Strategic Themes and Initiatives

The balance scorecard brings to strategy some new strategic concepts that complement the traditional ones. Thus, the main strategic concepts used in balance scorecard projects are the following:

• Mission: What do we do? and What is our business?
• Values: What is important to us?
• Vision: What do we want to be?
• Perspectives: Usually four perspectives (Finance, Customers, Processes, and Resources) are used to describe the strategic creation of value.
• Strategic map: It is a visual representation of the strategy showing the cause and effect chain of objectives among the four perspectives.
• Value proposition: What value we deliver to the customer?
• Strategy: It is the differentiated value proposition for customers. There are four well-accepted strategies: Low cost, Product leadership, Total customer solution, System lock-in.
• Strategic themes: There are hundreds of processes that create value. However strategic themes are just a very few critical processes important for the strategy chosen. It is said that the art of the strategy depends on the identification of those strategic themes. The strategic execution is around those themes.
• Objectives: It is what an organization must achieve to make its strategy succeed.
• Balance scorecard: Translate the objectives into key performance indicators and goals.
• Key Performance Indicators (KPIs): Measures to evaluate the success. Usually a balance scorecard has five to seven by perspective.
• Strategic initiatives: Those are specific actions that create the results. So the strategy execution depends on the strategic initiatives.

Strategic Initiatives Template

We have to stress two concepts from the turnaround point of view. Strategic themes is an important concept because means identified the key process, I mean the leverage process that are going to produce the expected turnaround results. The second concept that we would like to highlight is strategic initiatives because in order to be success with the implementation of the turnaround strategy the initiatives are the actions needed to move from strategy formulation to strategy execution.

Are We Misunderstanding the Three Strategic Levels?

It is well accepted that there are three strategic levels: corporate, strategic business and functions.

The Three Strategic Level: Adapted from Javier Gimbert and Luis Vives

Common mistakes defining strategies

• Corporate Strategy: There are some firms that create the corporate strategy but they do not drill down to the other strategic levels. If we do not cover the three levels, most likely execution will fail. We can find companies with a well-defined corporate strategy, but they have a poor or even an un-existing functional strategy. Other important mistake is that companies feel that strategy is being to be “easily” copied, and they communicate it only a few company top positions. Obviously, if the strategy is not well communicated to the whole company execution is going to fail.
• Business Unit Strategy: Many companies used to ask themselves the “wrong” question. So they ask “Do our businesses have different customers?” in order to create business units. But probably the right question should be: “Do we need special capabilities/resources for any business?” While the first question quite often pushes firms to create SBUs (Strategic Business Units), the second likely shows that we would need less SBUs. From global headquarters point of view likely make sense create a few SBUs in order to reduce management complexity. However, at local level quite often subsidiaries assume that they must be aligned at corporate level replicating the corporate structure regarding SBUs. That replication many times mean massive investments in overheads with unclear ROI.
• Functions Strategy: We can find Functional Directors very much focus on day by day or monthly tasks without a clearly formal and structured department/function strategy. Thus, we have Sales & Marketing Departments what only strategy is reactively waiting for customer calls rather than defining formally strategies for customers’ acquisition, retention, and so on. We have Financial Departments what main focus just on legal accounting formalities or monthly financial report packages rather than defining formally strategies to improve days of sales outstanding, local taxes payments improvements, and so on. Moreover, we have Supply Chain Departments focus on stocking or managing urgent shipments rather than creating formal strategies for stock reduction, lean supply chain, and so on.

Why do we need a specialized Turnaround Team?

One of the most common reasons to need a turnaround situation is ineffective management. Usually the people who create the problems, they do not know how to solve them.

Many people think that just changing the Managing Director is enough to get a turnaround. However, turnaround situations need many initiatives around the whole company as quick as possible, and that use to need more than one person in order to get results in the very short term. Additionally, change management is one of the pillars of turnaround and that activity is unlikely to be performing for just one person.

Moreover, ineffective managers used to hire and maintain ineffective people. Turnaround situations demand urgent action, and looking for new managers in the market place mean time and risk of hiring unknown people.

The gurantees of using a high performance turnaround team

• Team members know each other from previous projects and the risk of hiring incompatible team members is very reduced.
• The risk of hiring wrong people as well is reduced. When we are talking about wrong people we are talking about people without the right capabilities, or people that are not able to work on turnaround stress situations.
• Turnaround is a discipline that solves problems in a very different way from companies performing well. So using inexperienced turnaround people did not use to work.
• Quick results (“there is not time”).

Turnaround way of thinking: Turnaround vs. no-turnaround management

Many people think that a good manager could perform a turnaround project, but in reality among other abilities they need to know turnaround technique or way of thinking. For example, many people who do not have experience in turnaround think that turnaround is just about cost reduction. We will see that in many situations we must use oversizing in order to solve problems quickly.

Other example about turnaround way of acting is that turnaround people think of very short-term (weeks) while most of the people have been taught to think of long-term (many months or even years). Thinking of log-term likely avoids taking some complex short-term decisions that must be taken to guarantee the firm survival.

Moreover, in turnaround projects we act “quick and dirty,” while usually we have been learnt to perform a good work without very strong time constraints. In turnaround it is better to be 80% right and act than 100% right and late.

We must remember that in turnaround the situation use to be much deteriorated. So we have just “one shot,” I mean there is no time for mistake choosing inexperienced turnaround people.

Leadership in Turnaround

Nowadays, most of the training courses assume that there is just one best leadership way (universal approach to leadership). So many people assume that turnaround leadership can be managed for that just one best leadership way. However, the current state of leadership field shows something different. Thus, the contingency approach to leadership assumes that the best approach to leadership depend on the situation.

Source Rue/Byars: Contingency approach to leadership

• Fiedler’s contingency study of leadership shows that in both highly favorable and highly unfavorable situations, a task-motivated leader was found to be more effective than the relationship-motivated leader that was found to be more effective in just moderately favorable situations.
• The transformational leadership is clearly more effective in order to implement change management methodology in turnaround processes than using the transactional leadership.
• Analyzing the path-goal theory of leadership the role-classification leadership probably use to be the leadership style that matches much better in turnaround. Just in the first stages of turnaround (crisis management or emergency stage) time pressure makes difficult delegate and the autocratic leadership style could emerge until crisis stabilization is in place. The participative leadership could be effective once that the firm has been completed stabilized, and the turnaround team is entering the transition phase to the new management team (the return to growth stage). The supportive leadership is likely a style that will not be used for turnaround teams.

Unconventional Leadership Characteristics in Turnaround

Donald B. Bibeault in his best-selling turnaround book offers us a reflexion: “We used to assume that the best managers are those whose people are happy, that happiness comes from encouragement and praise, and those consistent demands for better performance are bad for morale. With this conventional wisdom often come the simultaneous toleration of ineffective subordinates.”

I would like to highlight a few of the turnaround leader characteristics that Bibeault mentions and probably are not very well understood according to “conventional wisdom”:

• Turnaround leaders do not tolerate ineffectiveness. They clearly and substantively differentiate between outstanding and mediocre performers. They have the courage to “act on people”.
• They step on a lot of toes, but if they do not step a lot of toes, they have not probably done their job.
• They are impatient to get something done. They are implementers.
• They are highly competitive men that enjoy a fight. They are fighters.
• Turnaround men move decisively but do so base on facts, not fantasy.
• They used to be tough people that demand as much from their subordinates as they do.
• In a tough turnaround, the turnaround leaders used to decide that business needs come first, people come second. Be aware that if business is not turnaround, business can be closed down and everybody gets fire.
• They used to be too controversial, argues too much, wants too much, demand too much.

Probably it is wrong to try to use the leadership characteristics of custodial managers (“they do what has to be done. They run the business like it is supposed to be run”) for turnaround managers that it looks needs “unconventional” leadership characteristics.

What Are Our Core Competencies? Improving Business Focus

Core competency is a well-known business concept (C.K. Prahalad and Gary Hamel. “The Core Competence of the Corporation” Harvard Business Review, May 1990). However, sometimes the core competency concept is misunderstood, if we assume that any important/strategic activity is a core competency. From that approach almost any activity is important/strategic for the company and should not be outsourced. For instance warehouse and distribution are important/strategic activities because the delivery of products to customers depends on those activities; legal activities used to manage important matters as well; and so on.

To be sure that we have a core competency, we should ask ourselves three questions regarding that competency or activity:

• Do we have enough resources?
• Do we have enough expertise?
• Does this activity fit with our company strategy?

What is a core competency?

If any of these questions has a negative answer, we must consider outsourcing that activity. Any activity that is not a core competency should be analyzed the convenience to outsource.

Some activities of the supply chain are core competencies and source of Competitive Advantage (CA) for global leading firms: Walmart, Ikea, Dell, Amazon, Toyota, Inditex/Zara, FedEx, etc.

From the turnaround point of view, knowing our core competencies is even a more important matter because the firm is probably underperforming in some of the non-core activities which are adding complexity. So, those activities are able to be improved quickly by outsourcing, and we would be able to focus on fixing the threatened and real core competencies.

Creating High Performance Teams

Without a good football team, league cannot be won; without good professors, university cannot get well-trained students; with the wrong staff, a company or department cannot deliver good results. So creating high performance teams is an important key success factor for any team.

We could use many characteristics to define what a high performance team is. Although, I would suggest reducing to a couple of them: vision and execution. Some authors mention other dimensions like alignment, influencing, relationship building, and so on. However, we can consider that those characteristics are implicit into the two main ones mentioned.

Classification of team members

Classifying Team Members

Question marks

Those people do not have the capability to vision, neither to execute according to their current position for the project/department/firm. Many teams underperform because they have a few questions marks; they are not able to move them to other quadrant or out the project/department/firm. Firms’ objective should be having zero questions marks. We are reviewing two main problems regarding performance in “question marks”:

• Aptitude: If the problem is aptitude, the solution could be training. Unfortunately, sometimes we have workers that even receiving training they are not able to assimilate it. That is the situation of staff that is not ready for the current position. Moreover, very technical profiles without “almost any managerial education” when they are promoted wrongly to managers can create the situation of losing a good technician and having a bad manager. However, the worst aptitude situation is when the worker has important qualification gaps to perform his jobs, but he is not able to be conscious of his limitations.
• Attitude: If the problem is attitude, the solution could talk about that with the employee expecting a new and positive attitude in the short-term. Unfortunately, many times change attitude is a very difficult task.

Builders

Those people are not visionaries, but they execute activities assigned well and on time. When we are talking about people that manage teams, builders align and support teams in order to execute activities properly. Companies need many Builders to do things happen.

Designers

There are specific teams like marketing that this profile is very worthy because they just perform creative tasks. On the other hand, we have visionaries and/or creative people in positions that execution is extremely important. In that situation they have problems executing because they do not like day to day tasks, or they do not know how to transform the vision into tangible and measurable initiatives and tasks. So people with execution problems must be learnt quickly to focus on delivering results (what is quite difficult to get), change the positions, or unfortunately “get out of the bus” (out the project/department/firm). Organizations used to need many fewer designers than builders.

Architects

This is more complex and unusual profile (having vision and execution capabilities in the same person). Those people used to be the leaders of the organization because they know where must go and they materialize it. Most of the top management staff should have this profile. These very high performance people used to search for high performance members in their teams. When we do not have good people at the top, it is difficult to get right and motivate people downstream.

Key Sucess Factors to create high performance teams

• Perform a good selection process. If the decision was wrong, we must correct the mistake in a few months rather than in a few years.
• Analyze team members (see the team members’ classification)
• Coach the team.
• Offer feedback to team members.
• People with aptitude and/or attitude problems that “cannot be solved” must be replaced for “the right people.”
• I have to stress some “obvious” but common thing; we should not maintain people in the team just because they are nice, funny and so on. But at the same time we should not “get out the bus” people that we just do not like but they are good performers.

Creating a high performance team is not an easy task. We are going to try to do great things with normal people, but sometimes we are realizing that apparently normal people are “not very normal” (we cannot get tasks assigned properly done; even it is worst, future tasks will likely have problems too). In many occasions team members are a consequence of past wrong decisions, and unfortunately sometimes the “only” solution is “getting out the bus some passengers”. That is the most difficult and unpleasant task for any manager, but sometimes training, speaking, etc. are not solving the performance problem. “Getting out the bus” solution is not enough used in many underperformed teams especially in times that firms are achieving “enough” results. Many companies wait for “bad times” to execute unpleasant tasks, and that time could be late and even put in risk the company and all the jobs (e.g. many turnaround situations).

Human Resources Myopic: How Firms Are Losing the Human Capital Battle

In 2014 the Spanish football league champion has been Atletico de Madrid. How is a club with just the 30% of the budget of Real Madrid and Barcelona able to over perform those huge teams? The answer could be playing like a team rather than rock and roll stars, having a well-motivated team rather than just motivating a few people, and creating a challenging environment taking risk offering opportunities to potential outstanding players. And something similar happen to companies, so there are huge organizations that are losing the human capital battle because they have Human Resources Myopic. So let’s review some of the commonest Human Resources Myopic:

1. Misunderstand experience

Confuse future success with experience in large multinational companies and/or key positions

Many people assume that large multinational hire “always” the best people. Indeed, there are many people working for multinational firms that they are not outstanding. Many times experience is used as a leading indicator of success. In my personal point of view using experience as an indicator of success is leading many times to hire the wrong staff. I would suggest analyzing one by one the eight secrets of success that Richard St. John teach us:

• 1. Passion (do it for love, not for money): Does the candidate loves/enjoy with his job? Why?
  2. Work (it is all hard work, nothing comes easily): Does the candidate work hard? Any example?
  3. Focus (focusing yourself): What is the focus/objectives of the candidate?
  4. Persist (persist to failure): Can the candidate show any example of persistence?
  5. Ideas (generate and bring up ideas): Can the candidate show the last idea that brought to his organization?
  6. Good (put your nose down in something and get dam good at it): What are the strongest points of the candidate?
  7. Push (push yourself physically and mentally): What does the candidate do to push himself to the next level?
  8. Serve (serve others something of value): Can the candidate show any examples serving the organization or customers?
     

     Believe that mastery is equal to experience

     Mastery is the desire to get better and better (Dan Pink). Unfortunately, you can find people with experience but they are not able to get better and better, or at least at the speed required. For instance, there are a passive staff that they expect to get better and better without a proactive approach to self-improvement (people without continuous learning habits like reading).

     Over weight experience

     Experience in an industry and/or position can be something good because accelerated the implementation time and risk of executing initiatives. However, many times experience is the enemy of creativity and over performing, because experience used to push people to replicate the same strategies that competitors. It is amazing the number of firms that they are not able to growth properly for many years, but if they are not the industry leader and just copy the industry leaders is complex to win leaders using their own strategies.

     High average length of employment is good

     Amazon does not think that they have to retain all their workers. In fact, Amazon is paying employees to quit, because they do not want old employees rather than dedicated ones.

2. Hiring/Promoting

Human Resource leads hiring processes rather than supporting

The hiring process is a key process that must be led for the person that needs the position. Nerveless, we can find managers that they think that HR is going to facilitate they work although they do not understand the risks leaving the HR department to filter candidates rather than generate candidates. Could you image a good football trainer that delegates the task of deciding who players are hiring? Good managers take advantage from HR Department to generate more candidates for the open position and receiving support to understand the personal skills and coherence of the candidate. But they do not delegate the task to filter people. Why? Because it is difficult that HR understands better than managers the complexity of the position needs. For instance just in supply chain the Supply Chain Council has identified more than 160 job descriptions that need a very deep area knowledge in order to manage properly. That means that a firm can have closely to 1.000 potential job descriptions that HR is unlikely to manage properly. So the only way for HR to lead the hiring process in today complex job description environment is looking for professional profiles that exactly fits the current professional requirements which used to mean over weight professional skills more than personal ones and that decision should be taken for the manager leading the process.

Unbalanced outside hiring versus inside promotion

In this case organizations used to perform poorly because having the tendency to overvalue external people used to demotivated good staff and they will likely leave the firm. On the other hand, over promoting internal people means rejecting to bring “new blood” to our company. I mean giving up new knowledge, new experience, new ideas, and so on.

Hiring/Promoting much more extroverted than introverted staff

There are still many people that get very easy impressed for extroverted. For instance, there are studies that show talkative people are rated as smarter, better-looking, more interesting, and so on. Thus, we could assume that extroverted are better prepared to create and lead teams. However, introverted are quiet, work more slowly and deliberately, cerebral people, reflective and good listeners. I mean they are thinkers/introverted that could bring very good ideas. Having a quite unbalanced number of introverted could generate “lack” of good thinkers and new ideas.

3. Leadership style with Human Resources Myopic

The main issue of poor performance is not having bad “soldiers” rather than bad “generals”

Companies underperforming most of the time have “bad Generals,” I mean bad top management. Good top management teams create high perform teams and build strong middle management staff, while weak top management teams used to be promoted until their level of incompetence and they do not know what they need and how to create high performance teams. “Bad Generals” create poor performance teams in which people are unmotivated for being managed by mediocre people. We have to stress that there are HR departments that they do not pay enough attention on top management and they used to focus on middle management. Having 360 degree feedback for top management would be a good approach. In order to identify mediocre top management, it is important to know the profile of mediocre top management:

o   They do not lead the team because they are not confident enough in their competencies.

o   This people do not take risk challenging people because they are not prepared to coach the team.

o   They cannot lead by example because they are not better than their team members.

Aggressive versus soft leadership

Nowadays “aggressive” leadership like the 70 – 20 – 10 Rule of Jack Welch is considered too strong leadership approach and poor HR oriented. Thus, many firms move to the opposite side, I mean they used a soft leadership and acquiescent HR approach. Likely the best approach is a balance between the aggressive and the soft management. We have to mention that companies underperforming are more likely coming from a soft management period rather than an aggressive one.

Confuse communication skills with leadership skills

Good communication is a desirable skill for leadership. Nonetheless, communication without strategic thinking and executing skills, it is not working at all. We could use any leadership model in order to be sure that we do not over or under weight any leadership skill.

“Business politics” staff vs transformational leaders

It is amazing the amount of promotions of “business politics” because they are politically correct (they take decision that people like, although it hurts the firm) and they did not use to assume high risks (they do not have impressive results, but they do not make noise). On the other hand, we have transformational leaders that used to be “fighters” who take tough decisions and do what they must do rather than what could be expected. Unfortunately, transformational leaders did not use as popular as “business politics.”

A new transformational strategy and the same team

There are organizations that try to implement a new transformational strategy, but they “believe” that the staff is able to implement whatever strategy. Unfortunately, transformational strategies used to need the new blood/staff with new capabilities to implement the new strategy at least in a few key positions. Crafting the firm strategy is not easy, but properly executing the strategy is even more complex. And one of the complexities is that not everybody fix in a new transformational strategy.

4. Motivating staff

The unchallenging environment

They are people that limit the challenging concept. They believe that challenging is doing the same tasks but bringing higher results. This is a challenge, but the “real” challenge is allowing staff to perform tasks that they have never done before (manage people, having complete responsibility for the profit and loss account of a Business Unit, etc.) This “real” challenge means motivating staff at the same time that push managers to perform the tasks of coaching,  supporting the staff, making people growth, motivating and so on. It is amazing the amount of companies that are not prepared to offer “real” challenges to their employees, and those unchallenged have to leave the firm. Many people know the concept of empowerment, but how often the concept is in practice in our workplaces?

Omit autonomy motivator

Companies like google show us the importance to lead staff by objectives and offer them autonomy to direct their lives. I mean flexible timetables that allow workers to combine professional and personal lives, and time to think and bring up new ideas.

Bad implemented talent or leadership program

There are much talent or leadership programs that rather than discover the real talent of the organization are based on assuming that top management know where the potential talent of the firm is. So there is not a formal process to motivate staff and discover the real talent rather than a discretional process to decide who potential talent has. There are firms that do not use these initiatives to motivate staff to show their best and offering the opportunity to win a position in the talent/leadership program. Many organizations decide by finger who potential talent has what used to unmotivated many people that will leave the firm.

5. Rewards

Focus on HR complexity reduction rather than on implementing flexible salary

I have heard in many firms that they do not implement a flexible salary because it creates a lot of complexity in the HR area. Flexible salary is a very powerful tool to retain and motivate people at the same time that organizations are able to influence much better on productivity and total payroll. It is amazing that there are companies that they would say that they have successfully implemented flexible salary for top management, but again they are quite myopic to realize that we are motivating generals and unmotivated the troop. The business battle is impossible to be won without the unconditional commitment of the troop.

Invest on people is training the staff rather than offering new opportunities

Training is a necessary investment, but the “real” investment o people is promoting people.

6. Structure

Multinational firm rather than a true global company

Multinational firms used to have a powerful headquarter that centralized most of the important decisions. They used to have presence in other countries in order to increase sales and profits. But they did not use to take advantage of human capital from other countries beyond selling and producing. True global companies used to have several regional headquarters, a more decentralized structure, and they used to look for taking advantage of people diversity to create a more powerful organization. A good exercise is analyzing the percentage of each nationality in the different company organizational layers. Multinational firms used to be attractive in the long-term for people with the same nationality of the headquarter.

Vertical centralized structures rather than horizontal decentralized ones

They are managers that prefer vertical structures with two or three direct reports because it is less work and “responsibility.” Although having five or six direct reports should be perfectly managed. The good point of horizontal structures is that there are more positions of middle management which must be the skeleton of the firm. Middle management is going to be more motivated for reporting directly to a higher level in horizontal structures. At the same time we are building a more flexible and agile firm with less dependency from specific people.

7. Innovation in HR

Innovation is using new HR tools rather than bet on people

We can have many wonderful Excel and Word templates in our HR area, but the real innovation should probably have staff from other industries, having a true global organization, having introverted, having different leadership styles in the same company, etc.

The balance scorecard presents us that the pillar of business is the learning and growth perspective which is very much focus on HR. Therefore, having HR myopic is not just generating an important issue in that perspective rather than affecting the whole business model and likely having an underperforming organization.

Turnaround Team: Building the Internal Team

The first thing and probably one of the most important in turnaround is building the turnaround team. I mean dealing with people issue.

The external and internal turnaround teams

Normally in turnaround there are two teams. The external team that is a temporary project based team in order to facilitate and accelerate the turnaround process. This team must have experience in turnaround methodology and related disciplines like change management, cash flow improvement and so on.

The internal team is the company team executing and leading the changes. They must bring on board the rest of the staff. The internal team is at least as important as the external team. Without the support of the internal team, changes will fail in the implementation phase. In this post we are reviewing the turnaround internal team.

Organizational chart review

Mapping/Reviewing the organizational chart is a good exercise  when the turnaround project start. This task will allows us to know who anyone is and what his/her role in the organization is. We are going to identify some “internal team members question marks.” I mean important team members that according to the organizational chart:

• They are bad organized and get into the chaos to their team. They used to make underperform the team.
• Those unorganized teams used to try to solve problems adding extra people to the team. So they used to be oversized.
• Centralized decisions used to show the inability to build strong teams and delegate decisions.
• Analyzing second level of the organizational chart, sometimes we could find a better staff than their bosses. We could find the people that really perform the job with the limitations imposed for the poor management that they have.

“Active” and “Radioactive” people

My friend and expert in turnaround Keith Wiedersheim calls thess active and radioactive people “squirrels” because they are people quite self-incentivized to get up in the organizational chart of the company. Thus, they used to have their professional development as one of their life priorities.

Those high motivated people in important positions of the firm can make success or fail the turnaround process. I used to identify two profiles for those people. The “active” people who are good managers and leaders who understand and support the turnaround process. They see the turnaround process as a professional opportunity. Then, we have the “radioactive” people that they do not understand or they do not want to accept the turnaround process.

Most of the time, “radioactive” people do not accept the changes because the turnaround process is reviewing the current situation, challenging people and status quo. They are willing to have more power playing the same “game” in which they feel comfortable but they are not well prepared to be challenged. Those people do not prepare for challenges and changes will realize soon that the turnaround rather than being a professional opportunity is a status quo threat. They will try to sabotage the turnaround talking with people close to them to get the opposition to the turnaround process. For those people every change will be a problem, and they will try to delay any action.

My recommendation is identifying quickly the “active” and “radioactive” people. Focus on “active” people to materialize quick wins. At the same time we can work “slowly” with radioactive people in order to communicate the new company direction and why. I mean given some time to get on board. I used to do this for three reasons: first, I believe that everybody merits an opportunity; second, it is faster to work with people that already know the firm that search for outside employees; and third, is quite unpleasant fire people. Unfortunately, my experience shows me that in the best case “radioactive” people can try to show you that they are on board but they are not. So they will take any opportunity to sabotage the project, even after the turnaround when the external team get out of the company.

Some organizations use the well known 360 degree feedback questionnaire once per year. In my experience the best 360 degree feedback is received Managing By Walking Around (MBWA). MBWA allows you to take a coffee, or having lunch, or just walking inside one department to see and talk about what is their point of view about the firm issues or improvement opportunities. Just when you get the trust of people and they are relaxed enough, you can get the true 360 degree feedback while 360 degree feedback questionnaires fail many times.

"Active" versus "Radioactive" People Profiles Review for Turnaround Teams

To avoid misunderstandings, we have to explain better the point of report the mistakes of other people. In some activities like turnaround, reporting mistakes is important in order to explain why we must change and being able to track the benefits of the implemented changes. When we are reporting mistakes, we do not add names because we used to focus in processes’ error rather than in people error.

Internal conflicts

Solving internal conflicts should be an essential task for managers. Nevertheless, it is amazing how many managers focus on managing their internal conflicts with other areas, with the mother company, and so on but they avoid getting involved in the internal conflicts of their teams. Many managers expect that conflicts are going to be solved peacefully and quickly between the parties. However, the word conflict means that the situation has been deteriorated importantly and the intervention of someone with authority is needed it.

Companies cannot allow internal fighting situations for getting more organizational power, blaming rather than solving problems, and so on. Those internal fightings reduce the productivity of the teams and create a bad workplace environment. If those conflicts are not managed quickly and properly, it will affect the company services and even the profitability. For instance, you could find people who know there are some issue with the invoicing process. But they do not act because they prefer showing that their invoicing colleagues are doing a bad job rather than supporting them and solving the issues.

Decentralized organizations

Companies that need turnaround used to need new ideas, and organizational challenges. Decentralizing an organization challenge the status quo, promote some people to higher positions, and bring new people to the company. Well-implemented decentralization strategy used to raise firms’ agility, flexibility, responsiveness and creativity.

Some people could question decentralization for two reasons: first increase the salaries cost, and second control is more difficult. Inexperienced turnaround managers used to optimize part of the system like salaries costs rather the entire system. I mean many times expending a little bit more in salaries can bring important profits and accelerate the process to materialize those benefits. However, experience turnaround managers do not use to increase salaries cost importantly because they hire new people or make some promotions but at the same time they get out of the bus “radioactive” staff.

Old versus new blood

Turnaround is a transformational process. It is very difficult to transform a company or department without changes in the team. People used to listen to the “wake-up call” when they realize that the organizational chart is changing, some people leave their positions, other get more responsibilities, and new people with much energy and new ideas are arriving. One of the objectives of “new blood” is to reinforce the message that things are changing. Usually, new people in management positions are coming with a lot of energy and new ideas what can be a good “cocktail” mixed with some well-recognized company managers fully committed with the firm and the turnaround project.

We use many times “new blood” to decentralize the organization or to replace “radioactive” people.

One of the main reasons why many times the achievements of the turnaround process are not sustainable in the time are because the external turnaround team probably failed to build a strong internal team. The internal team has the mission to continue working in the new strategic direction defined in the turnaround project. So building a strong internal team should be one the main turnaround priorities.

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