The Starting Place for the Business Turnaround

In turning around any business, I have learned there are priorities which have to be considered. You may be going, "Sure. Priorities. I get it. Of course. So what?"

What's “so what” is that many executives don't realize that priorities in any turnaround is not what the turnaround artist has to do to turn the business around, the priorities relates more to the case of the problem the business finds itself in. The experienced turnaround artist knows he has to understand what the problem is before he can turn the business around. 

The First Question

The First Question to ask in any business turnaround, usually isn't ever asked. Or if it is asked, it is asked too late. But usually, nine times out of ten, if not more, it's not asked at all. I am not exactly sure why it isn’t asked, but it’s usually because of a three things: not experienced in business turnarounds, too busy (the executives have other day-time jobs), or because they rush to judgement. 

So the question is this: What is causing the business to slow down? 
  • Is it the leadership of the organization? (are they inept, can't market, aren't client friendly)
  • Is it a bad culture of the organization? (no quality, performance, excellence attitude; slow, sluggish; not caring, no empowered workforce, topdown management; or something else)
  • Is it bad processes that create multiple problems? (order processing, proposal timeliness, delivery of product, and other process related items)
  • Is it a missed opportunity during the period when the market was hot for services or products that the company missed?
  • Is it bad marketing?
  • Is it bad sales people?
  • Is it a bad product or service?
  • Is it a bad reputation of the firm?
  • Is there too much overhead causing the price to the customer/client to be too high?
  • Lack of cutting edge products or services? (lack of innovation)
  • Is it a combination of the above items?

Or has something happened outside of the organization?
  • Is there increased competition?
  • Is it commoditization of the products or services? (competitors willing to sell it cheaper)
  • Innovation from competing firms?
  • Is it a new regulation?

A Rush to Judgment

Here's the big thing--the first thing management tells me when I get the phone call or when I sit in the board room: "Our sales organization needs to be replaced."

It doesn't matter what industry, what day of the week it is, whether the person is the CEO, CFO, or President of the Division, it always boils down to this: "Our sales people aren't selling enough. Therefore, they all need to be replaced. Fired. Shot. Killed. Let go. Riffed."

The first time I walked in the organization, the very first day, I right after I get the orientation from HR (there is always this "scheduled" hours or a day of so-called training or orientation--which is nice--but in utter chaos--it's always lost on me) I meet with the sales management or what's left of it. 

The Magic Potion (aka the cure)

Because most organizations have down some "fixing" of their own before I come in, the organization is shell shocked. Everyone is looking over their shoulder, looking for other employment or the organization has been decimated. The "fixing" a lot of organizations undertake is like taking some sort of magic cure. The belief is, If we drink this magic potion, everything will be all right. 

Stated another way, more specifically, the cure looks like this: “If we fire John, we can replace him with someone else--someone better."

The management of the organization then brings in another person--a sales leader--over everyone in sales--someone who has a great track record. This person is going to make everyone dance a certain way. Get people—and this is really what I hear, “Out of the office” to sell. 

Voila—magic. The turnaround is now days away. 

However, one thing management doesn’t realize in the their quest for the savior, is that not all track records are created equally. The track record of the savior is a track record due to a hot market or a hot product or because the person's previous organization has a very defined market.
 This last reason, the “defined market” requires a little explaining. The 
company the person with the track record has is because someone was smart enough to realize that the firm needed to focus and become number one or number 2 in that specific niche. Usually, that defined niche is because of someone else—not the sales leader who is brought in. 

I am not saying the new sales leader isn’t good at building sales organizations. What I am saying is that the new sales leader may not be experienced in turnarounds. These are two different solutions to two different problems.    

A sales leader that is brought in, is only qualified for arounds, if the sales leader established a new market or performed a turnaround previously. And here is something to note: the best turnaround specialist is a specialist who has failed at a turnaround before.

But back to the point. Replacing people needs to be done with precision, and for the right reason.

Replacing a Sales Leader and Sales People

No one wants to admit this of course, but finding a replacement for a previous sales leader or a new sales person takes weeks, no, strike that, months. And usually the replacement person/savior who is brought in takes another two or three months (usually six months if you want to really know the truth) to get their feet somewhat firmly planted on the ground. This means they understand the organization, the people, how things work, the market, the services and products, and who is who. Not the least of importance—the clients and what they are buying. 

In the meantime, sales people are jumping ship and service delivery and product people are all antsy ("When is the new guy going to do something?" they say to each other).

In addition, the executive team is wring their hands. Executive management goes through a period of “Wait, let’s see what the new guy does” and then to “Wait, did we hire the right person?” and then to, “We need to push this new guy, things aren’t happening, we need action, we need performance, we need a business turnaround.”

And your competition is picking off your established based of “loyal clients.”

Back to the Basics

To put this all into perspective, let me ask you a question, a question that is a little off the beaten path here relative to this issue—but I find makes my point. 

You have been out to eat. I know this about you. You have been to a restaurant too. And I know this too, you are probably smart. And because you are smart, you know that owning a restaurant is a lot of work. There is more than meets the eye in running a restaurant. Running a restaurant goes from having serving staff, to preparing and cooking the food, to getting customers in the door and back again, and spreading the good news. But there is even more. It’s getting the right food, hiring the right serving people, the right location, as well as having nice seating, background music, lighting, and a whole host of other things.

Let me boil the complex business of owning a successful restaurant down to something simple. Something we can digest—if you don’t mind the pun. Which of the following three, would you rather have in terms of a restaurant in order to be successful?    
  • A line of starving customers
  • Great serving people (waiters/waitresses, hosts/hostesses, busboys
  • Great food
The answer is, 100 times out of a 100, is a line of starving customers. 

You Always Want to Find the Line of Starving Customers

You  always want to start with a line of starving customers. If you have a line of starving customers, you can get your business going. Your meals can even be mediocre. If the customers are starving, your meals can be less than mediocre. Your serving people can even be rude.

Of course, as people satisfy their hunger, they may want better food and better service. But without a group of hungry people to feed, the business is doomed. Of course you could argue that people come in to restaurants for the ambiance, the pleasure of the date, the business meeting. But that’s important only if people aren’t hungry, which we will get to in a minute.

But if I were to open a business, I’d want to place my restaurant in a place that had very hungry people.

If you take this analogy or metaphor, you see that the business that you need turned around, first needs to be a in a place where there are hungry prospective customers. If no one is hungry, you can have the best product that no one needs.

If you have identified a place where there is a hungry line of people, the next thing you do is you get food for them. The next thing you do is not find the best serving people. 

Remember, if the people (customers) aren’t hungry, the best waiters and waitresses cannot make people eat poop or even mediocre food. Even the most polite and considerate waiter (or waitress) cannot make up for crummy food, small portions, burned food, or late food.

So this means the second thing you have to have is really good food. This may mean niching your food to a specific cuisine. You may have to cater to people who like Italian, Chinese, fast-food, or seven-course dinners.  You have to specialize. To specialize means you build a reputation to a degree. It’s “Hey, let’s go to Joe’s. I am in the mood for some Italian tonight.”

It is never, “Hey, let’s go to Joe’s. I’m in the mood for something general.”

Now, if you have crappy serving people, and there are other Italian restaurants, you are going to have to spice up the serving people to create part of that dining experience. 

Don't Get It Backwards

This is where you start. You start with the market. Most businesses that are in trouble, have it backwards. They start with  trying to find the best serving people. 

If you have an underperforming restaurant you don’t say, “Let’s fire all the waitresses and waiter. They suck.” They can’t sell the bad food the chef prepares. They aren’t the once causing the food to be burned. They aren’t the ones who are causing the food to arrive late to the table.

You start with the questions above of course. You look at the market questions first. Second, if there is a market, the second question is the services and products. If you find you have great services and products, you may have an internal training problem and a marketing problem. Perhaps the differentiators are not defined clearly. Perhaps the products and services need to be refined. Once these things are done, you now turn to the sales people.

I Am Not Always Popular

I recommend one thing that always turns the organization on its head when I come in. I ask the executives to pick five prospective clients. Identify the right person or people in those five prospective client who they are to sell to. And then call or email or network to get an appointment with those people. And then go in and meet them. in 90 times out 100, even though the executives say they will do anything to turn the business around, they never follow through.

Of those who do, the 10 out of a 100, these executives  go sure, until they pick up the phone. Then they place the phone down and instead of picking it up to call the prospective client for an appointment, what they do is call someone from sales or marketing and say, “Get up here to the paradise club, where we executives sit, I need you to explain what the service does so I can explain the benefits in order to get the the appointment.”

What happens next is that the executive learns that the messaging from marketing sucks. it’s too garbled. it’s too long. It doesn’t resonate.

What these executives learn for the first time is, it perhaps isn’t the sales team that is not performing, it may be something else.  

I hope you get this—because it is this little diagnostic—that will help you find a starting point to your business turnaround.

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