Strategy : The Pre-emptive Turnaround
A bottom-line oriented, business catalyst, Tom FitzGerald is a CEO coach and consulting management engineer. Specializes in corporate renewal, preemptive turnaround and effecting major and sustained improvements in profitability, performance and growth.
He is also an accomplished writer and speaker. He is a regular contributor to national and international business magazines like American Banker, CEO Refresher, The Journal of The Turnaround Management Association, Corporate Renewal, The Professional Journal, Association Management, The Forum and others. Over the years he has spoken before hundreds of CEOs and senior managers in environments both pragmatic and academic.
By education, a physicist. By birth, Irish. By instinct and experience, a business catalyst.
For 80 years it has been known that organizations that go right to the brink of disaster and then pull back - almost always under new management - experience a surge in profits, in performance, that can last two, three or even more years. Not only that, but by all measures, those turnaround companies revert to a younger, more competitive, more entrepreneurial stage of their corporate life cycle. A renewal and rebirth takes place. In the crisis of turnaround, something important within the organization is touched and changed.
What is not so well known is that, under the impetus of turnaround, units that never were in trouble - high performing, even world class units - also experience the same surge in performance, the same renewal, the same "turnaround". Just by being in the vicinity and sharing the same intense experience a renewal response is triggered. This response is derived from a place of strength rather than weakness, and from ambition rather than desperation.
Of course it is not feasible to revitalize a company by forcibly bringing it to the brink. But in the discovery that strong high performing organizations can measurably surge in performance and experience a spontaneous "turnaround" with the same management and at essentially no cost, we found a clue to a buried treasure that exists within every company: Its innate instinct to renew, to heal, to thrive.
The Triggers of Renewal
During an actual crisis-driven turnaround a host of organizational drivers and behavioral triggers come into play, many of them unequivocally destructive. But from our research into the "spontaneous" turnarounds we found that in these cases much fewer drivers are involved. Of these drivers (seventeen in all) four overwhelmingly dominate the process. They are:
- A profound simplification of politics;
- A palpable discharge of emotional energy, corporate as well as personal - Catharsis;
- An investment, and a deep commitment, of this same energy into a simple, clear, picture of the future of the company - Cathexis;
- Immediate action!
Finding a way to cause a company to create and to experience these drivers, especially the dominant four, became our challenge.
It took a while, mostly of trial and error, but eventually we succeeded. We created a simple and predictable approach and process that triggers the renewal response within healthy companies. And it works for entire companies or units of companies.
The approach is based on truths that senior line managers know intuitively, but seldom talk about:
Every organization has an essential core, a corporate spirit. This spirit is not the CEO, though the CEO is and must be part of that core. Nor is it the corporate culture. It is something much, much greater.
When the essential core, the spirit, of a company is touched and changed, then the company changes. When the core of the company changes, its people want to change, its units want to thrive and grow. If reengineering needs to happen, its people cause it to happen. If a fundamental new attitude to selling is needed, then its people will adjust, willingly, even eagerly. (Well 80% of them.) If quality needs to improve, they will see to that too. Whatever is hurting the company will be brought to the surface and there, in the bright light of day, dealt with. Whatever is needed for the survival and success of the company will be brought out also - and obtained.
Under the right conditions, renewal happens very quickly and with almost no effort.
Renewal must be led by the managing officer. This need not involve a lot of time. At its simplest, the approach can be stated as:
A. Identify the essential core (or what is to be the essential core) of the company;
B. Have it recognize and acknowledge itself as the essential core.
C. Take this core through a process that will create within it the triggers/drivers of renewal: Simplification of Politics, Catharsis, Cathexis and Action!
This may sound too simple. But the reality turned out to be almost exactly that. The great complexity and expense of traditional corporate "improvement" programs from reengineering on back, often seems to be not really essential. They work from the outside in hoping that by changing the body the soul will change. Occasionally they work.
The Spirit of the Company
The spirit of the company - the essential core - resides primarily in the relationships between its senior managers. This is typically the CEO/managing officer, immediate reports and a few others, perhaps a dozen in all. The remainder resides in the subordinate teams. How they relate, how they view themselves as a group, and how they behave as an entity, shape the spirit of the company.
All it takes is that they see and acknowledge and empower themselves as that core, and - then behave as one. It may be easier when there is a charismatic and inspired leader, but it will happen anyway under the right set of circumstances.
Fortunately, under the right stimulus, individuals instinctively form themselves into such entities. If they are the senior managers of an organization, they become its spirit.
So how do you get the managers to become the spirit of the company?
Frankly, by just talking with them collectively, as if they were already an entity. Expecting them to behave as an entity. Turning up the heat (more about that later) and having them/it face and battle and decide about the real GUT issues of the company. It is that simple.
As the individual managers work the issues of the company in concert with their peers - they become its core, its heart. Expecting it to act that way, and causing it to act that way, brings it into being.
And how do you get the core to change? That is relatively simple too. The same stimulus and the same conditions that cause the essential core to come into being, will change it. It does not happen instantly but it takes just hours.
For an individual to truly change is difficult, perhaps even impossible. Relationships however can change very easily. Small events can sometimes drastically change relationships. Usually it is for the worse. But under the right kind of stimulus, under the right conditions and controls, it is easy for relationships between managers to change positively. And as the spirit of the company resides primarily within the relationships of the senior managers, when their relationships change the core changes too. And then the company changes.
So how do we provide the right stimulus and create the right circumstances? How do we get the company to create the drivers of renewal?
A financial crisis of course, can provide the discharge of energy - catharsis. But in a real crisis, with real danger, a huge amount of energy is released and does a huge amount of damage. It traumatizes the entire company. True, turnaround management can use some residual part of that energy to break barriers and change direction. But in practice they can use only a tiny fraction. All the rest works its way destructively through the organization. The condition of everyone being in a survival mode can provide the other three drivers: Simplification; cathexis; action. But not all crises have a happy ending.
It took us a long time to create the process. Research provided insight and the four key drivers were identified early. But the process eventually required trial and error with scores of organizations.
The process turned out to be very straightforward. Only two people are needed to begin it. The first of course, is the CEO or the Managing Officer. It does not necessarily take a great deal of time but he must be involved as the initiator, periodically through the process, and as the final decision maker. Without his leadership and follow through nothing much happens. Charisma is optional.
The other is an outside Catalyst - unless the CEO is brand new and has the right experience. The process works so quickly that “facilitator” is inadequate as a descriptor. He works intimately with the CEO to identify the issues and drivers of the organization, to develop a plan of approach so that the managers can not slide off, to be seen as truly objective and acknowledged as the counterbalance to the CEO’s authority and a fierce advocate of the company’s success. The qualities needed in a catalyst are:
1. Experience with many companies, our experience suggests more than 50;
2. Broad expertise in hard consulting projects across all functions of business;
3. Ability to handle group dynamics;
4. An instinct for transmuting a negative issue to a positive thrust, to the bottom-line;
5. Ability to fly with the corporate eagles. The management team.
There are Just Seven Steps to the process:
Put the senior managers in a room, those who are, or ought to be, the soul of the company. And create an emotionally safe place. Common sense will tell who the key players must be. The top 12 or so, usually. And a CEO who is committed to making a safe place for all his managers and all points of view will find he has done so. In our work we find it useful to have in the room no desks or tables behind which people may hide emotionally. An arc of chairs works best , facing very large computerized screens to display and record commitments. We use a special software - MaxThink - for this.
Cause them to identify as a group and individually, at the emotional level, the real issues and motivators of the organization, particularly the GUT issues that suck the life energies from the company. Intellectual identification alone is not enough. Cause them to see and accept the company as it really is, and themselves as they really are. The CEO is allowed to acknowledge some limitations here. In case of perfection he can lie.
Allow them to feel and express a revulsion at each issue that they do not like. They must do this individually and as a group. This is a lot easier than might be imagined. People do it instinctively, and it is never traumatic, though it might seem scary in anticipation.
Create a catharsis on each issue. Cause the energies that have been bound up in these issues to be released. Again this is not difficult, people do it instinctively. If the issues are the real issues, if the group and the individuals do not slide off (so don't let them), the catharsis happens.
Cause the energies to be transferred to, and invested in, an element of the CEO’s and their vision of the future, immediately on the moment of catharsis - everyone will know it.In psychological terms the investment of energy and motivation into an idea is called cathexis. It happens in moments.
At first the elements will be just the antitheses of the issues. The energies coming from revulsion and going into their opposites. But as the elements accumulate, as they begin to form a picture (blueprint) of the future, the managers begin to see and especially feel the possibilities for them and their company.
A real enthusiasm, excitement, builds. New energy becomes available and gets invested into new increasingly ambitious elements of the blueprint. As the managing officer is leading, as the senior managers are invested, each element will make business sense - that is the acid test. The catalyst will see to this. And the overall blueprint will have its feet in reality. Keeping the planning horizon down below three years helps too.
Without effort, intuitively, the business blue-print crystallizes around the vision of the CEO, even if it is unspoken, even if he is not there Each manager adds strategies, tactics, detail, color, flavor - whatever he needs. And without thinking about it the managers buy-in at the emotional level. Under other circumstances this buy-in is the most difficult thing to get. Here it is easy.
mmit to, viscerally, specific action steps to achieve every element of the blueprint. Record these so all can see. We use a special system to record and display, in real time, these action steps. They become on-line action plans on the companies' LAN.
Have the managers co
These action steps must convince everyone in the room that they can produce the results needed. And the drive and commitment of those who must perform the actions must be convincing too. Fortunately, very few people can lie convincingly under the close attention and interest of their boss (important), peers (more important) and subordinates (most important of all). So their commitment will be genuine. The catalyst, of course, wears the black hat.
Begin implementation immediately - that day wherever possible. Monday at the latest.And follow up! Follow up! Follow up!
Of these seven, Step 2, identifying the true corporate issues is the only one that requires any preparation. There are a number of ways to achieve this from third party interviewing, to requests for suggestions, to open space planning, to round table discussion.
In our work, we use a special management questionnaire, The Corporate Profile®. This shortens the process greatly. This instrument is given to all managers and supervisors ahead of time. It is answered anonymously. It addresses more than 150 factors that we have found from our experience with hundreds of organizations to underlie, cause or predict organizational performance. The instrument also elicits suggestions.
It is never possible to predict which of these many factors will be issues for any given organization, though some are found more often than others. However, we have found that "good" companies - companies that are and have been consistently successful on the bottom line and in the marketplace - will find some thirty issues that the managers don’t like, that are sucking up energy or causing serious distress. An organization that has been experiencing difficulties for some time may find perhaps sixty issues.
These issues absolutely have to be dealt with, not just intellectually, but viscerally, emotionally, in the very soul and belly of the company, before serious transformation can happen. This can be noisy but well worth while. It happens quickly and it's fun too.
Fred is president and founder. The firm makes small ticket leases - mostly automobile. He is a serious man, not prone to demonstrative behavior . Today he stands before his senior people - his direct reports and just a few others. Twelve in all. Thirteen with him. The number is unintentional but he is conscious of its symbolism. They form the essential core of the company. Their relationships with each other, the dynamic of their interplay, cooperation and conflict, he thinks of as the company's driving spirit.
One year before, they had gone through a process that had left them strangely at peace. For the first time they - as a team, an entity - had seen and accepted the company exactly as it was - warts and all. They had seen themselves as they were too and accepted that. The process had been surprisingly easy and very quick. They had formed a safe place to do their work. And just did it!
They had gathered, consciously, as the core, the driving spirit of the company. And for the very first time, through them, the company had seen itself as it truly was. The facts, the figures, those it knew already. It lived with them day-in, day-out. But its inner drives, its hidden motivations, its unspoken, unacknowledged attitudes, policies and politics - they were a revelation. Every manager may have known but the company had not. The company had at last seen itself as it really was, and accepted that. It was at peace.
After that, it had to do something about what it had seen - about its problems, it potentials, its motivations - and it did. They - the managers, had said of themselves and of the company, in almost these words: "This is who we are. God help us!" Then they had taken the energy they had released and invested it deep in corporate and personal commitments to a clear and simple picture of their future.
Fred is now going through the numbers. He says that they are not important - that the transformation in the life of the company is more important. But the numbers also tell a tale: one year later, month over month, revenues are up 110%!
In steps 3 through 6, (revulsion, catharsis, cathexis, action!) which occur over and over until all the serious issues are dealt with, a great number of things happen and a great many benefits accrue. The most tangible is the creation of a business blueprint and action steps that are deeply committed to by the managers. These, of course, are valuable by themselves. And housing them on the corporate LAN makes them particularly useful. (You get an on-line strategic and operational plan through which you can drive and monitor every aspect of the business if you want it).
The immediate surge in profits which we always find when the program has been undertaken fully, is also worth while. Greater than 20% in the first year is not uncommon. But the really important things happen within the spirit of the company. It is from these changes that the long term health and success of the company develops. The senior managers become a true team, the essential center of the company - its spirit. This spirit becomes aware and empowered. Centered on the CEO/managing officer, focused powerfully on the mission and blueprint of the organization which it has created and committed to, energized into action, this spirit empowers the individual managers including the CEO, and holds them accountable.
Unexpected things, seemingly contradictory and apparently mutually exclusive things, happen too. The CEO becomes more empowered as a leader and also as a delegator. At the same time his immediate reports become more adaptable, more responsive to the CEO and also more empowered to contribute and be heard as part of the essential core. All become more willingly accountable. Within their own areas, their power to lead and delegate grows as well. All this is not magic. When the right environment is created, that which is wise within the company and that which is instinctive within people comes to the surface and is enhanced.
In processing the gut issues of the company at the emotional level the politics of the organization become simplified and clean. Energy, that has been bound up in unresolved, unacknowledged, even previously unknown issues is released and reapplied.
The relationships between the individual managers change too. A changed set of relationships changes the spirit of the company. A changed spirit transforms performance. A changed performance changes the bottom line.
Over the last several years we have been fortunate to observe numbers of companies who have undertaken this process and been allowed to track their performance over the following two years. Those who have undertaken the full program have all significantly transformed corporate attitudes and performance. And the smallest first year profit increase we have recorded was 10%.
The only prerequisite for these companies to succeed was a CEO with the courage to look unflinchingly into the soul of his company and ask it to change - Body, Soul and Bottom Line.
© Copyright, Fitzgerald Associates,
All rights reserved. Revised: February 26, 2003
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