Hope is key to turnarounds

In a discussion about turmoil and the likelihood of an organisation getting into trouble, I was asked what’s the most important thing to do once you’ve established that there is a mess and figured out what to do about it. My answer was simple: “restore hope“. I could have used other words like confidence or faith or belief or trust. The point is that you need to get the support of many people if the turnaround is going to work, and giving people hope is the first step in the journey to recovery.

Don’t get me wrong here. I’m not talking about pussy-footing around the harsh realities. You need to be upfront and honest. But you have key constituencies who need to feel hopeful about what you’re doing:

• The board: The first people that need to have hope that the business can be turned around. If you can’t convince them, you may need to work with owners to replace them (or give up). Your relationship with the board chair will be crucial.
• The banks: They need to be certain that you will do an even better job of managing the situation than they could if they sent in the administrators. And they’ll need constant reassurance - setbacks spook them, and there will be setbacks.
• Shareholders: If you have dominant shareholders in a position to take drastic action, you need win their support.  With small shareholders, a confident, straightforward message of decisive action and progress should suffice, with strong backing from your board.. Basically you need them off your back, so you and the team can get on with the job. Use the board chair to run interference, although you will need to keep involved with the powerful ones, especially if board changes are necessary.
• Key staff: These are your core team, the ones you need to stick around to make things happen. They’ll be vitally important in restoring hope in the rest of the organisation and outside.
• The rest of the staff: Yes, even if massive redundancies are likely. This might sound naive, but people respond better when they know what’s going on, why and that they will be treated fairly, that at least the business may survive and some jobs with it. You also may need to persuade them to stick around because you’ll need some/many to continue to operate the business; and you'll want to reduce he likelihood of industrial unrest, personal grievance cases and unsought leavers. Staff are also important in keeping customers, suppliers and channels onside. And don’t forget that staff have families and friends both as influences and as informal communication channels to the wider world. If the staff don’t have hope, then their personal networks will be even more negative.  I’ve sometimes had to lay off over half the staff in companies I’m turning around, which is hugely devastating to the organisation’s morale. You’ve got to rebuild it quickly to get people energised about saving the business.
• Customers: This might sound bizarre, but customers are often the easiest to restore hope in. They will be unsettled, but if you can assure them that the plan will work and their needs met, then it’s down to performance.  Staff hope is vital in restoring customer hope, which is why I mentioned it ahead of customers. (NB. Banks and their ilk are a different case when their customers get spooked).
• Suppliers and channels: Your suppliers and channels are businesses too. They’ll want to know about continuity and about getting paid. It’s a bit like customers - unsettling but performance will assuage their fears. Even if you are in receivership, they usually still want your custom, although payment terms may get somewhat harsher! Again your staff have a key role.
• Communities: I’ve done a major restructuring of the largest employer in a small town. You’ll have the local mayor and councillors, the local MP, and the local newspaper all over you, desperate for news and out to hang you if they can. They’re a bit like staff. You can’t give them guarantees (especially if you’re closing down in their patch) but you can actually enlist their help in alleviating the problem. Getting them hopeful that some good (however small)  will come out of the process can help keep them off your back.

This isn’t a simple process done once at the start. It’s a continuous communication exercise, with setbacks and achievements along the way. Of course, the best way to restore hope is to get the tough stuff over and done quickly- preferably cut once and cut deep, if you can. That’s harder to do in a large complex organisation but you can still apply the principle within each affected unit. Restoring and maintaining hope is vital - early on and all the way through.

First posted July 24th, 2008