The business decisions to make after the implementation of a turnaround are critical

The recent Medium Term Budget Policy Statement (MTBPS) confirmed one thing: the South African economic climate is highly volatile, and there are minimal signs of it significantly improving over the next five years. Financial management at the highest level in the Land is under pressure to maintain uneconomic social policies ahead of an election.

This is creating a perfect storm for companies. They may need to enter into business rescue or business turnaround. In my last editorial, we discussed the decisions that you need to make when assessing whether your company needs a business turnaround. While implementing a turnaround is an exhaustive and emotionally driven process, the moves you make in the wake of implementing a turnaround are vital.

You Face Three Tough Challenges

The Forbes article points out that when a reorganisation or restructuring occurs, these statistics can be exacerbated by immediate pressure from three inevitable challenges:

• Higher voluntary employee turnover: There’s often high uncertainty among employees about the company’s future. They quickly become unsettled about their personal future with the company — both how long they might have a job or the opportunities for them. They’re tempted to look elsewhere for the next steps in their careers. In the short term, you must to keep your most promising talent from jumping ship;
• Inexperience: Your organisation suffers from a lack of talent with solid experience to move into leadership roles, ready to hit the ground running. Most of your experience has left the company. Your remaining industry knowledge, business cycles, operations, customers and financial drivers is limited. There’s a genuine short-term operational risk of mistakes, missteps and stress on the company that could be detrimental not only in the short-term but also hard to recover from long-term. You will likely experience further erosion of your employee base, operating revenue and margin; and
• Changing needs: You’ve got to rebuild your pipeline for the longer term. Your needs will be different in terms of both numbers and the type of talent you need to carry your organisation into the future. So, you’ve got some organisational “soul-searching” to do.

Five Critical Moves

How do you address this dilemma? The Forbes article points out that there are five critical moves that your executive team, human resources leadership and organisational development staff must take to come out swimming on the other side of a restructuring:

• Move on talent decisions. Move quickly in making decisions and reseating your best talent. You’ve got to begin to stabilise the organisation and keep operations running smoothly. This movement also will minimise turnover of the leadership talent you need to maintain your business and operational execution;
• Over-communicate. Ensure your leadership team is communicating often, sharing what it can about stabilisation and how these leadership moves are strategically supporting the future health of the company. Candour and transparency are important in these communications;
• Provide a support structure. Create collaborative networks and support systems for the leaders placed into new roles. Make sure they are not isolated to figure things out on their own. They’re not only dealing with the operational dynamics but also an unsettled workforce that they need to inspire and retain. Establish quick market intelligence (QMI) meetings for early input and rapid feedback. Provide a framework for these new and promoted leaders to engage employees. Support for all people leaders dealing with this type of situation will be needed;
• Encourage risk-taking. Appreciate the rewards of failing fast. Senior leadership must allow for some risk-taking and resulting mistakes. You need learning to occur quickly. Use the collaborative networks for a quick review of lessons learned so that the negative effects are minimised and opportunities exploited; and
• Build growth leadership capacity. Align your talent needs with what will be required to revive growth. What got you here will not get you where you need to go in the future. The company will be redefining itself. You need leaders who can lead through the short-term chaos and guide the organisation in both redefining business and operational strategy and achieving aspirational results.

Setting the tone

How do we rank the above decisions in order of importance? Reseating talent is the biggest move one can make as employees are often on the frontline of what makes the business tick. Top talent is also able to identify subtle changes to the business environment that could turn into risk factors and how the company should respond to these changes.

Once you move staff around, you need to provide them with the support structure they will need to thrive. This is important because, while the C-Suite make decisions that will impact the company’s direction, implementing these decisions is up to senior management and other employees. They need to be empowered to realise your vision.

Finally, companies need to become more accustomed to a revised view of risk management. With the risk landscape changing rapidly, being conservative may turn out to be counterintuitive to companies. A company that has gone through a business turnaround has already stepped out of its comfort zone, this approach needs to continue.

Why are the moves immediately after implementing a business turnaround so important?

While not financially distressed, a company only implements a business turnaround if there is a critical need. In this environment, company shareholders will be anxious for the company to return to profitability. Significant effort needs to be put into restoring confidence within the company with shareholders, stakeholders and the public, who are ultimately the lifeblood of the company.

Agility is one of the core competencies that is central to most business turnarounds. The inability to react to a changing business environment is a significant distress factor and is a red flag when it comes to distress. This has always been a challenge. However, with the influence of technology and the rapid pace at which it changes, the business landscape can turn on its head in a matter of months as opposed to several years. Companies need to be prepared for this.

The moves that need to be made in the wake of a turnaround will be discussed during the implementation phase of the process. However, it is up to the company’s leadership to take the lead when it comes to this. It’s about taking the hits and dealing with challenges while continuing to move forward because that’s how winning is done.

These issues are the basic challenges that you will need to address with your internal stakeholders. Without internal buy-in and engagement, facing clients in turbulent times will see an even greater loss in terms of your sales and customer base. This is in our next issue.

Set aside cadre deployment

When we examine the National Development Plan and the strategic turnarounds in the State and the SOEs there is no evidence of the urgency this internal stabilisation deserves. Eskom, the SABC, PRASA, Transnet are all in trouble and is a long list that shows a lack of depth. Expecting the same groups of local comrades to deal with multiple crisis that would floor even the most seasoned executive will lead to further deadlock.

It is time to set aside cadre deployment and return to excellence. Appoint the best you can find and afford. Develop the next layer of managers. Do not deploy untrained staff into these positions. You will simply sacrifice your future.