View from the frontline – Managing a Business Turnaround
With over 40 years of experience in the Engineering industry, Girish Trivedi has held leadership positions in his long and illustrious career. Starting at L&T on the shopfloor as a Production Planner, he eventually headed Thermax Babcock Wilcox as the MD. He has been at the helm of business turnaround at various organizations and now consults the SME business on management and business growth. In this dialogue with PeopleWiz he shares some of his experiences of managing the turnarounds and the need for managing people part of change.
PeopleWiz: In your opinion, what are the key ingredients for a successful business turnaround?
Girish Trivedi: Successful business turnaround can mean different things depending on the situation.
Sometime back I was asked to take charge of an industrial paint finishing equipment company. It had been running for two years with a technical joint venture with a large US based company. The company was in a serious problem. Sales were nowhere near target and losses were mounting, they had no working capital, to provide for growth or even for sustenance.
After I took charge, I got a notice from my US collaborator saying they want to exit and they want all accounts to be settled, whereas I had no money even to buy local materials. My senior managers and colleagues all rushed to give me advice and I found that a lot of those ideas were short term solutions.
Any turnaround situation has a serious problem on all fronts, and first thing that the business leader should do is to sit down very quietly and make a turnaround strategy and an implementation road-map. When you make a strategy your road map has to address the factors that are in your control as well as the ones that are not in your control.
In a business turnaround, everything has to be under some control. At the end of the day, you have some control over even an adversary. This recognition is important for a business turnaround.
PeopleWiz: This is a great starting point, but as one gets closer to rollout of the strategy, what poses to be the greatest challenge?
Girish Trivedi: When you lead a turnaround, the biggest challenge is motivating people at every level including your senior team, operatives and employees.
Motivation does not equal talking or even listening. It requires interpersonal skills.
Don’t just target your senior team, which most turnaround managers often do, target all the stakeholders including dealers, suppliers, foreign collaborators. You have to include them as a part of your strategy, to see what will motivate them.
Listen to ideas and suggestions but remember that what you are managing is not a normal business situation.
When there is a fire, people on the road rush giving all kinds of help and prevent the skilled help to come. People with good intention, would rush from all directions, they are all motivated however they are not helpful. This exactly happens in business, so one must be careful while listening not to get carried away.
Along with motivation there is also need for an alignment, which in any case is something that you always need but in a turnaround situation alignment or lack of it can absolutely kill you. Alignment means understanding that in the turnaround strategy there is a role each one has and you have to do your job or you have to contribute to turnaround in the company’s interest.
For example you might have to transfer people from one function to other or reject certain orders. People who are affected would think it is totally wrong. You need to convince them that this is the strategy. It may need perseverance but do what is part of the strategy, don’t do what you “think” needs to be done.
PeopleWiz: What role do you think managing people side of change plays in a business turnaround situation?
Girish Trivedi: Very simply put, any business leader has only two levers in his hands, one is money and the other is people.
Money is an interesting resource and you would realize it when you don’t have it, but money doesn’t talk back to you.
All the rest of the levers of control for any business are all derived from this basic two resource. It is another matter that in a turnaround no body will give you money and you got only people. One needs to understand that you are under a turnaround pressure as a manager or CEO, but most people rank and file operatives are not, they are working to take their salaries. Their concern is will I continue to get my salary . None of them will like any uncertainties.
Often I have seen and may be unwittingly I have fallen to that problem of arguing with people. I am charged with my own mission and I don’t understand why this clerk in the materials function will not buy plastics instead of steel. But one is to understand that operatives are not part of the turnaround unless you make them see their role and contribution. Clearly show them the contribution that they will make to the overall grand plan.
In one of my organizations, when we had suddenly more work, we loaded four hours extra to the workmen and gave them half a day off during lean time. Now this is much against the normal thinking because for overtime, workers would like double the hourly rate. We explained to them that if they insist on overtime our problems are going to get far worse and we will have to shut this shop down. They agreed despite the refusal from union. Once somebody does such thing the word spreads and then people start aligning.
PeopleWiz: What is the key to getting opinion makers really excited and committed to a large-scale organizational change effort?
Girish Trivedi: Alignment is less problematic at senior level, because as a part of management they always need to fall in line. But to get their commitment the communication to them is more important than anyone else. The whole idea of communicating and listening is a part of any normal management practice but for a turnaround situation sometimes more is better than less if in doubt.
Sharing what is gone right and what has gone wrong at every level is part of that process. I am not saying we should talk about things that are sensitive. We can convert sensitive information into something that appeals. For example, if you don’t want to tell what is the order backlog, in rupees, you could say that as on today, we have 15 days worth of work for the design group and we have 2 days worth of work for the workshop. This will be understood much better than saying turnover is 12.5% lower than last quarter.
It happened once that we were addressing a large-group of draughtsman and we decided to tell them our problem of poor collection from customer. We knew that draughtsman can do very little, their job is to convert design sketch into detail drawing. When we showed the list of outstanding receivables per customer, one of the draughtsmen on his own suddenly got up and said that one customer belongs to his hometown. He offered to collect the money using his local network and we readily agreed. And he managed to get us the entire amount. The story spread and there were large number of volunteers to go to some preferred place, stay put and collect the money and that made a big difference.
Good communication even if you feel it is not required can create sometimes interesting results.
PeopleWiz: Are there any tips that you want to give people who are leading a turnaround in their business?
Girish Trivedi: My biggest advise would be that, appraise the situation in the business, look at the problem that you have landed yourself into and think through coolly . It is funny that as human beings how foggy our thinking becomes when we are part of the problem. An external help of any kind, of some competent person will be handy. You don’t have to go to some super duper business consultants, either a finance person or an operations person can give a different perspective.
Turnaround is not fun, it is lot of blood and sweat. Sometimes solving the turnaround problem by getting rid of a business, by selling or merger or dissolving, can make sense. It is not easy for the entrepreneur to do that but give it a thought. There have been very celebrated and very important cases, when technology forced lots of businesses to close down.
Lastly, business turnaround is a tremendous learning experience. When I look back at the times when I headed such large scale organizational turnaround initiatives, may be 10 years of normal good management would not have taught me what I learnt in 1.5 years. I think no training program can teach you this, so if you are rolling up your sleeves to take on the job of turning around a business, look at it’s training value. You won’t appreciate it on the day one, but when it is over you will realize that, it was the best thing that happened to you. This could be an interesting way to look at it for entrepreneurs or owners who are faced with this problem.