It’s not a matter of if we are going to experience a crisis, but of when. You must focus on whether you are going to come out of this crisis a success or a casualty—so let’s explore how to be successful. When you find yourself in a crisis, you might feel that you are the only person going through it. Understand that you are not alone and that there are others who have been in the same situation. Model the steps they took to get through it successfully and you can be successful, too.
Business Crisis
I was responsible for leading Mediq ACS (ACS) through an incredibly tough turnaround and transformation. Previous management had crippled the company. It was bleeding cash and losing millions of dollars. There was a walkout of all key sales people. We had no working lines of capital, our parent company was bankrupt and the board made the decision to liquidate the company. While everyone was running from the organization, I was selected as president and CEO to bring the company back from the brink. Within six months, we transformed into a great business. Earnings were at a 20-year company high, we completed a successful Chapter 11 reorganization and created new private label product lines and a distribution strategy. We reestablished the company image and reputation and, ultimately, sold the company to Invacare and recognized a huge payday for myself and our shareholders. To successfully transform a struggling business, you first have to ask yourself the critical question of why. Why do you need to survive? If the why is big enough, the how will come to you. For ACS, the why was the great employees who had given their hearts and souls throughout the years. We owed it to them to restore their reputations. We owed it to the shareholders who deserved their money back. I owed it to the board for having the confidence that I could create and lead a new and thriving business. The why was because we wanted to make it happen. Remember the old days and cherish them, but accept that they are over and move on. Realistically assess where you are and what you have to work from. No matter how dire your situation, the job of the leader is to find the good. Find what you can build off of and start from there. Start building a new option that is viable, exciting and keeps you going every day. This new vision has to be based on reality. It has to be compelling to you, your employees and your stakeholders. Excitement is the energy source of great accomplishments. People need to be engaged in the process. Ultimately, the process of change and transformation is difficult. It requires you to make hard and focused choices. You choose to survive, choose to thrive or choose to go down with the ship.
A Leader’s Role
To find out how to lead a business transformation, first evaluate the viability of the ongoing core business. Which part of the business are you going to focus on? Locate the positive cash flow. Not just the profits, but the cash flow that will carry the business through this transformative process. What type of infrastructure do you need? Most likely, you will need to readjust the expenses and the entity. As a leader, you need to build a new company with a new vision and new strategic direction. You also need to develop rock solid financial and operating plans. Your next role as a leader is to hire the best team in the business. You cannot have any slackers if you are going to survive a turnaround. You have to gain belief in the new spirit of the organization. You have to inspire these people with confidence. If they have confidence in the leader, they will have confidence in the business. If they see that you are committed to this process and prepared with a plan, they will be onboard to help you make it happen. After your team is in place, educate every stakeholder about the turnaround. Explain their expected contributions to the plan and how they directly affect the outcome and survival of that organization. Explain to them how they will directly benefit financially from your new plan. The investors need to know how they will be repaid and the banks need to know how they will recoup loans. You may require more capital to be infused in the company. Explain why this is a sound investment. Next, establish high standards of performance and evaluation by raising the standards of your organization. Sales people will need to make more sales calls, and intake will need to process more offers and process them more efficiently. The warehouse will have to get products out more timely and accurately. Provide reports and data so that each entity understands what they are doing and how it relates to the bigger picture. Hold everyone accountable to the new standards. When explaining these changes to your team, be honest, fair, ethical and straightforward with everyone. Respect the people in your company and realize that they have the power to transform it. As the leader, you don’t have the power to transform the company—employees transform the company with your vision and direction. When an employee does a job well, shower him or her with thanks, rewards and bonuses. Take care of them because they’re taking care of you.
Crucial Employees
People are the most important element in a turnaround, and they can make or break your company. The people moving forward with you in this crisis need to be loyal, passionate, competent and completely detached from the way things used to be. If they are stuck in the past, you have to get rid of them. Also get rid of negative or incompetent employees—people who can’t adapt to this new world. Your people must comprehend what their jobs are and how they affect the mission of the company, the cash flow and performance. They have to know how they’ll be compensated and how they’ll be measured. If you do your job right, these people will be the most productive in the industry, have the best attitude and, because they possess all of these attributes, they will be the highest paid. Make sure that people are compensated to make these changes and get the new results quickly. Employees also need to understand how they can earn bonuses and raises. I encourage leaders to institute a quarterly bonus to all employees. From the person at the front desk and the warehouse all the way up to the president of the company. They need to be paid from the net income so that as the company grows, so will their incomes. Sharing 30 percent of improvement by giving that to the employees to split as a bonus allows you to keep 70 percent to ownership. Keep in mind that you’re not handing out this money. Establish where the business is today, and share the plan to grow. If they grow, they share the rewards. You don’t grow, they don’t get paid. The beauty of quarterly bonuses is that three months goes by so quickly, it’s almost instant gratification. People learn that when they perform, they personally benefit, and they start counting and working hard for bonuses every day.
Culture of Excellence
Facilitate a culture of excellence and accountability when rebuilding. You must hold yourself and everyone in your organization to high standards. You cannot tolerate incompetence or negativity. You must get rid of company cancers immediately. When downsizing your company, make sure you do it only once. Identify who your weak performers are. Get it done so everyone can move forward. Don’t cut everyone’s pay—it destroys morale. Instead, let go of weak people and keep people who can be responsible for getting you through the crisis. Create a fraternity atmosphere. You and your staff need to wear the company logo and colors proudly. Take the New York Yankees, for example—love them or hate them, they win. They have a winning mentality with an established culture of excellence. Putting on that pinstripe uniform means that players have a responsibility to live up to the Yankee greats like Babe Ruth, Gehrig and DiMaggio. Putting on your company uniform means that employees are expected to win. Make that shift and your team can become winners, too. You have to completely accept a crisis, have a desire to survive and trust that you will make it through to the other side better than you were before. At the end of the day, the responsibility of leading a crisis is huge. The success or failure of the entity starts with one person. If that person is you, it’s time to make the decision. Are you going to be a success or a casualty?
