Breathing life into a company to begin its next cycle

Jonathan Faurie
Founder Turnaround Talk

Once a company is in distress, things can spiral out of control very quickly causing massive damages on the way.

Often, these damages are so severe that the company never truly recovers from what has transpired. Other companies are a little bit more fortunate and are able to try and stop the bleed salvaging some value in the process.

Is stopping the bleed an easy task to undertake? I recently read an article by an author writing for Fobes which discusses this in a bit more detail. The answer is not as clear cut as it seems.

Iconic turnaround
The author asks us to look at the iconic turnaround of Apple.

In 1997, Apple was on the verge of bankruptcy. In June of that year, Wired magazine published an article with the headline 101 Ways to Save Apple. Steve Jobs, after co-founding Apple in 1976, agreed to return as interim CEO. Many business experts expected Jobs to introduce new products.

Jobs did quite the opposite since the company was bleeding cash. He reduced the number of Apple products by 70%. He pared down the products to just four. Perhaps even more difficult, he reduced the workforce by 3 000. The cuts were deep, akin to a doctor amputating a leg to save a life.

An organization that’s bleeding cash is in critical condition. Leaders must immediately cauterize the wound, cutting products and people.

Jobs explained his actions like so: “A friend of the family asked me which Apple computer she should buy. She couldn’t figure out the differences among them and I couldn’t give her clear guidance, either.” The bottom line was that the product lineup was too complicated.

Transformation decisions are hard but often necessary for survival. Avoid multiple rounds of cuts. It only prolongs the agony. Just like a doctor would not amputate a leg one slice at a time, business leaders must cut deep and only once.

Empathy goes a long way when reducing staff numbers
Photo By: Getty Images

Empathy is key
The author of the article points out that, as with major surgery, it is paramount that you are empathetic with all impacted people. Help those who are let go transition to new positions and pick up the pieces. It is hard and involves tough conversations.

The authors adds that when he took on the general manager of solutions business unit role at a large Fortune 100 company, it required a major transformation. He had to cut operational expenses by 30% and eliminate 40% of the products/solutions. It required downsizing hundreds of people globally, plus shutting down several sites/offices.

He had to notify those affected since we were reducing several layers of management. He with teams in China and moved on to Hong Kong, Europe and North America, round-the-. The author had individuals and teams gather in conference rooms for notifications. In real life, he was doing the job George Clooney did in the movie Up in the Air.

He heard many gut-wrenching stories. One employee I notified in Hong Kong said, “Kash, I was inspired by your leadership. I believed in you for the bright future of the business. I still do, and I am sorry I cannot be part of it.” He also shared, “I just had a new baby, and my wife and I are on a work visa in Hong Kong.” Their world was upended. It ripped hurt the author out to hear his story. He called HR to delay his exit by six months.

Non stop
The author pointed out that he could not stop there. He called other business unit heads to help affected members find new homes, or he helped them find jobs outside of the company and offered very generous severance packages. He treated everyone with the utmost respect.

Such deep cuts are very hard because good, talented people lose jobs. Stopping the bleeding with deep cuts is the hardest thing. Equally hard is that you will be left with a team in shock. Just like a doctor consoling a patient, continue to communicate with the people who remain, and explain why you made the cuts. Explain that this change will lead to a better, stronger company that can choose a new direction.

Silver lining
The author of the article points out that there are a couple of silver linings here. First, you will become a stronger, battle-hardened leader. As the saying goes, smooth seas do not make skillful sailors. Second, if you do it right, the remaining people will likely appreciate your leadership. Right after the cuts the author had to make, he was rated as a rock star manager in the company’s annual employee survey.

So, back to his discussion of how a company is a living entity that goes through stages just like a person. Transforming an established business is often like getting a grown-up person to change. To say it can be hard is an understatement. But it is the first step to breathing new life into a company to start its next life cycle.