Turnarounds are tough. In my experience, turning a company around is the single most difficult thing to do in business. It is especially difficult when the captain of the Exxon Valdez is the same person who is charged with cleaning up the oil spill. Sophisticated Boards of Directors tend to terminate the CEO who was leading the company when it got into trouble for two reasons:
- It’s a good P.R. move to crucify the “guilty” party at the stake. Fixing the blame is always easier than fixing the problem.
- The emotional IQ, perspective, and skill set of the current CEO is rarely up to the task of making the hard decisions, abandoning the sunk costs, and whacking all the expenses required to stop the bleeding, stabilize, and start rebuilding the business.
Problem #1: The Leader
The momentum has vanished, and the trajectory is down. What used to work doesn’t and almost everything seems broken. Cash is low, expenses are too high, revenue is declining, morale is suffering, key employees are jumping ship, creditors are noisy, bank covenants have been breached… there is blood in the water and everyone is a shark. In a nutshell, the house is on fire and there doesn’t appear to be either enough firemen, adequate water or even a plan on where to start squirting. No one seems to be in control. Arguments erupt about whether to use the blue firehose or the bright orange one… Meanwhile, the house burns to the ground. It’s chaos. Most business owners who were the captains of the ship when it ran aground don’t have the requisite tools, experience, muscles or emotional detachment to make the hard calls.
When you are in a growth or a scaling mode, with normal operations and no Life or Death crises (i.e. business as usual), there's a skill set. This skill set is a really important one to have. Turnarounds require a different tool belt than “business as usual”. When things are normal, you're not thinking about survival, you're thinking about growth. When things go south, most leaders can’t control their emotional prejudices, which overpowers their better judgement. The result? They want to hang on to stuff that doesn't really support the primary outcome, which is survival. If you don’t extinguish the fire and save the house, it doesn’t matter how pretty you hope your garden might be next year.
Switching hats from General Contractor to Fireman requires a mental adjustment in addition to a different set of muscles. A GC is oriented to building things. A Fireman is oriented to minimizing, controlling and containing the damage. If a homeowner was manning the firehose to put out the flames of her house, chances are her mind would be filled with all kinds of extraneous considerations on where to avoid pointing the hose, such as the new couch in the living room, or the open laptop in the office or the family photo album stored in a hallway closet. She would subconsciously attempt to protect these treasures by avoiding the areas vulnerable to water… and in the process be ineffective at putting out the fire. Professional firemen really don’t care about your new couch or family photo albums. Their only concern is stopping the fire as quickly as possible… and if some stuff gets ruined in the process, tough luck… Get new stuff.
An ancillary problem is the timing on making the switch from GC to Fireman… It is rarely abrupt, even though to the inexperienced eye it would appear that way. What usually occurs is the patient gets the sniffles, so the CEO buys a box of Kleenex and some Robitussin. The patient develops some new symptoms of congestion and a cough, so the CEO prescribes MucinexDM, bedrest and lots of fluids. About a week later, the patient is running 102 degrees of fever and is too weak to get out of bed, so the CEO takes prescribes Codeine and Tamiflu. Within days, the patient is wheezing and short of breath and the CEO diagnoses double pneumonia and prescribes Levofloxacin and Doxycycline. Three days later, with the patient’s condition continuing to deteriorate, the CEO does an X-ray and an MRI and discovers Stage 4 Lung Cancer.
Here is the message: The CEO typically does not vacate the GC role and get truly serious about the patient’s condition until it’s Stage 4, and then the fireman’s hat is officially donned. The patient had Stage 4 all along, but the diagnosis was missed, the patient continued to decline, and the problem wasn’t really addressed until it was life threatening. Had the CEO been more observant and less optimistic, the problem might have been discovered when it was only State 2 and the chances of survival were much better. (I have been asked 100 times how I went broke in the 1980’s and my answer is always the same: Slowly, then suddenly.)
Incumbent leaders tend to get attached to certain core assets/people, the way it used to look or what it will cost her in the future to spray the lifesaving water on the brand new living room sofa. They are erroneously still committed to sunk costs and the “loss” if a project is abandoned. Dumb! That money is already gone and spending more to “save” the project when money is scarce is simply not smart. Here it is on a Bumper Sticker: It is really hard to accept that stuff that has never happened before is happening now and therefore, the wise choice is to face reality.
If you stop and think about it, there are numerous parallels in other professions… for example attorneys and doctors. A lawyer who gets into legal trouble will never attempt to represent himself. His perspective is contaminated, his judgement is questionable, and his emotional IQ is nonexistent. A brain surgeon’s child requires neurosurgery, but the doc will hire another brain surgeon to operate on her kid. The rocket scientist who envisioned and built the space shuttle is not the person who helps the Apollo 13 astronauts out of a jam.
Different skill sets and perspectives are required to fix versus build, and in turnarounds, emotional detachment is mandatory.
Problem #2: The Clock is Ticking
With turnarounds, you have a limited amount of time to get things stabilized. The plane is headed for the dirt. It takes time (and extreme effort) to get it stabilized. Most turnarounds are short on fuel, (money) and if you don't have the fuel to power out of the decline, it will continue to fall, and usually at an ever-increasing rate of speed. Here it is on a Bumper Sticker: In a turnaround environment, time is your enemy… speed is your friend. Cash is the oxygen that makes everything else possible. Run out of cash and the game is over!
There are two kinds of time: Vertical Time and Horizontal Time. Vertical Time is 24 hours. Horizontal Time is a lifetime. If you have something that requires lots and lots of time and intensity, it’s called a crisis… an emergency… a disaster. Emergencies and crisis respond to an extremely heavy allocation of time and effort. Intensity and speed are your friends in an emergency room of a hospital. Emergency rooms are chaotic, everybody's moving very fast with extreme focus, lots of drama and commotion, nothing is neat and tidy.
Management and leadership in an emergency room are command and control. Someone is barking orders, tons of communication, real time monitoring results with constant feedback and no debates or PowerPoint presentations. One person is in charge and her job is to stop the bleeding, stabilize the patient and prevent the patient from dying. Emergency Room doctors know that patients in trouble might require 6, 8 even 12 hours of continuous effort if that’s what is needed to save the patient’s life. That’s very different from a standard health and fitness regimen in a normal environment. An emergency room does not rhyme with a gym.
Horizontal Time is measured as a lifetime and is especially effective for the things you want in your life… such as wealth, or health or a great relationship. Thirty minutes per day of exercise will not make you ripped in one day, but over the course of a lifetime, is critical for pants that fit and preventing a premature heart attack. On the other hand, if the problem is you are twenty pounds overweight, massive action and treating your health and fitness as a crisis by going to the gym for twelve straight hours in a single day will only make you sore, not fit.
Wealth has the same attributes as health. Consistency in small doses creates significant wealth. (Investing $100/month at a 7% annual interest rate for 20 years will produce $400,000 in fifty years… total contributions were $24,000… TOTAL!) Attempting to get rich fast requires taking extreme risks and ignores the value of compounding. On a Bumper Sticker: Ordinary things, consistently done for an uncommonly long period of time, produce extraordinary results.
Being able to quickly shift from a Horizontal Time perspective (business as usual) to a Vertical Time perspective (crisis) is one of the superpowers for successfully dealing with and exiting a crisis, and most business owners stumble and struggle with this transition.
As a footnote to this section, keep in mind that the less time you have, the fewer the options available. In a crisis, you will not have the luxury of a full array of options because most of the best choices will require significantly more time (and cash) than your circumstances will allow.
Bumper Sticker: In a turnaround environment, time is your enemy… speed is your friend.
Bumper Sticker: Cash is the oxygen that makes everything else possible.
Bumper Sticker: Ordinary things, consistently done for an uncommonly long period of time, produce extraordinary results.
Up Next: How to focus on the problem that is—and why clinging to the wrong plans will kill you. Read it here.
