Burnarounds: Unlocking The Double Digit Profit Code

Burnaround Warning Sign # 5-**XX&& You Jack!

Boy that factory is a snakepit! Lots of salty old dogs working back there. Sometimes you feel its best to stay out of there. Vulgar language is a way of life in your factory, has been for years. You see no real harm in it because everyone expects it and can dish it out as well as they can take it. And you see it as a release for the tedious and repetitive tasks in manufacturing. It seemed like harmless banter until recently when it lead to fisticuffs. You ended up firing both of the people involved. It was a shame too, because they had been around a long time. Well, that will teach everyone a lesson in behavior. At the end of the day the language bothers you, but since it’s been going on so long, how could you put a stop to it now?

BURNAROUND WARNING SIGN #4-Silos In Paradise

Your senior management team has been around a long time. They know exactly how to do what they do. They don’t meet with each other very much, but you figure that is because they don’t need to. After all, why would manufacturing need to meet with engineering except if there is a problem?

Your staff meetings are infrequent. Once a month tops. You don’t see the need to get them together more often, because who wants to meet to death? When you see an issue in a given area, you meet with that person independently. Why bother all your managers with a problem in one area?

When you do have staff meetings, your managers are preoccupied with their own areas. In fact, if you happen to be discussing a marketing issue, the other managers will be checking email or may even leave the room. That bothers you a little bit, but on the other hand it shows the concern and dedication they have for their own areas. You wonder if that is to a fault.

Burnaround Warning Sign #3-Schmooze and Booze

Your sales people have been around a long time. Decades, in fact. They have forgotten more about your industry than your competitors’ sales people. Which seems odd because the bad guys seem to be getting their share of your sales. But your salespeople have deep and personal relationships with your customers. They know the customers wives, ages of their kids, even their religious preferences. They often entertain the customers as evidenced by the hefty expense reports.

Your sales people are “old school”. They believe the old adage that “the customer pays the bills”. And if they pay the bills then your company should pay homage to them. They identify with the customers more than they do with your company. When it comes to a conflict between the two, your sales people almost always side with the customer. In fact, sometimes you wonder who’s side they are on. They seem to have a constant bad attitude about the company and you wonder if this rubs off on the customer.

Burnaround Warning Sign # 2-Cool, New Features

Product development has been a little slow for a while. Used to be your company cranked out a blizzard of innovations all the time that the marketplace just loved. These days, most of your product developments are minor enhancements to existing lines. And these enhancements don’t yield better margins. But that’s o.k. because the customer expects product improvements. But it bothers you that while they expect improvements, they won’t pay for them.

Your engineers like to design cool, new features and they like to tinker a lot. One time you asked them if a customer asked them for one of these cool, new features and they looked at you like you were from Mars.

Burnaround Warning Sign #1-Life of Riley

A few posts ago I promised to write about the warning signs that your company may be headed for a turnaround and could benefit from a Burnaround. Here is the first of the series of warning signs.

You think your company is humming along just great. You hardly ever hear of any problems. The balance sheet has a little too much debt but you’ll work that off over time. Earnings are usually solid, but during the last recession, things got a little shaky. Your customers seem happy, although a few of them have switched to your competition because of price. Fine, you think. Let them go with a cheap brand.

Your employees seem content, as well they should be since you pay the highest wage around. You feel good that you’ve finally got the business on automatic. You can play golf while your people run the show. You don’t need to make any changes because everything is going along just great.

If this sounds like your company, you are in trouble.

Ignoring Warning Signs of a Turnaround

So you read my last post on what the warning signs are. And you found that your company has 2 or more signs. Truth be told, you probably have more than two but since you may not be in touch with reality, you can't see it. Your people are probably telling you everything is fine. That is because either they don't see it-or more likely, they don't want to admit to the boss that everything is not fine. Why? Because then they have to accept responsibility and fix it.

But you haven't done anything about these warning signs have you? Got a big long laundry list as to why you can't (or don't need to ) do anything about these warning signs? I thought so. Go directly to jail. Do not pass Go and do not collect $200. You are part of the problem. Actually, you are the problem. Better hope your Board doesn't find out, or you may not be the problem for long. This is the reason Board's bring in new CEO's. Because the old one either can't see the problem, or won't do anything about it.

And why is it most CEO's won't do anything about impending disaster. They are afraid. Afraid things will get worse if they mess around. Afraid of the reaction they will get from their employees. Afraid their senior managers will ignore them (they probably already do that). Get off your duff before it's too late! Take action! The British Are Coming! The British Are Coming

Warning Signs of a Burnaround

A Burnaround is like pre-hypertension. You don't have high blood pressure yet, but if you have "pre", you will very likely develop high blood pressure unless you do something about it. Think of a turnaround as the high blood pressure. If your company needs a Burnaround, you will very likely need a turnaround very soon. And keep in mind that many companies never survive a turnaround. A turnaround is like cancer. The patient can die from the disease, or the treatment can kill him too.

The disease of a turnaround is poor or non-existent profits driven by a host of operational and organizational practices. That can kill a company. The cure is major organization and operational surgery. That can kill the company too. You don't want to get in a turnaround.

The good news is the pre-Burnaround warning signs are easy to spot. In the next few postings I will tell you all about them.

Entering the Burnaround War Zone

You can’t build a career, or a company by maintaining the status-quo. If you want to maintain the status-quo, you should get a government job. They are good at that. Well, maybe not so good. And if you want to make huge gains in your career, or your company, you have to make huge change. Sometimes it needs to be massive, gut-wrenching, nail-biting change. Other times it is vast, sweeping change, but not so gut-wrenching.

And the companies that need change the most are the ones that have changed the least. I speak from experience here. In one case I was in a turnaround situation of a 100 year old company. The genetic coding in a company that old is unbelievable. I have to tell you changing a culture that old and that entrenched is damn near impossible. And no matter what the B school profs tell you making sweeping changes in a culture like that takes years. Long, hard, painful years. If you ever sign on to a deal like that as the CEO, make sure you get yourself a multi-year contract. It will take at least that long.

And make no mistake. A Burnaround is a war zone. Just about everyone will be against you. So buck up and get ready for a rough ride. A ride you, or the company might not survive.

Ask About The Elephant In The Room

CEO's have to ask the right questions to get the right answers. That may sound simplistic but by that I mean the penetrating, below the surface questions to peel back the onion and expose the real issue or the real answer. There is an elephant in the room and often nobody sees it, or wants to recognize it until the CEO does.

It's your job as a CEO to ask the questions nobody else is asking. The questions that reveal the soft underbelly of the organization. The questions that need asking. Questions that are potentially embarrassing or controversial. In fact, the more controversial the question, the better. Don't ask the what's-ask the how's. And then listen really hard for the small voice that will alert you to a problem-or an opportunity.

I Hate "Either-Or" Decisions

It's your job as a CEO to force your people to make the right decisions as opposed to the expedient, easy, or "either" "or" decisions. Once in a while someone will propose an "either we do this or this happens" decision. As an example, "either we lower our price or we lose market share, or my favorite, which is "either we lower our margin or lose customers". I hate "either-or" decisions. And as a CEO you should too. Whenever I hear "either-or" my guard is up. People who think in "either-or" terms aren't thinking at all-they are taking the easy way out.

When they do, it is your job as the CEO to reframe the question. It's your job to be unreasonable. Here is what I say-"Guys, we are not going to lower our price and we are not going to lose market share." Once you put that stake in the ground it forces the organization to look harder at the problem and come up with more creative solutions. And yes, sometimes you will be forced into an either or choice, I understand that. But make that is your last, not first resort.