Turnaround Management: How to Create and Execute Realistic Plans
Carl Lane is a Chicago-based business transformation and turnaround management specialist. During engagements as an independent consultant and interim executive, he helps companies develop, plan, and execute solutions to the operational or financial challenges they are facing. In our latest Expert Q&A, Carl spoke with us about creating and executing turnaround plans, addressing talent shortages, and creating a culture of accountability within distressed companies.
You specialize in helping companies address situations where there’s operational or financial distress. What are some of the most common reasons those situations arise?
Distress can be caused by internal factors, like weak infrastructure, or external factors, like commodity price changes, or a combination of both. Poor information systems are a common issue; executives believe they are making the right strategic decisions, but they are actually making decisions that negatively impact their company because the information is incorrect or incomplete.
External factors that can cause distress change from year to year and the impact on companies can vary widely. The financial crisis like we saw in 2008 affected everyone, but the recent tariffs and trade wars now are affecting certain sectors more than others. Large companies can often weather the storm of the tariffs and trade wars, because they are diversified and have greater access to capital. But, if you are a small supplier that sells goods or services to those companies, and the China volume is suddenly down 50%, it is going to cause distress.
How do you start to address those issues?
Consultants often focus on a specific niche where they have deep expertise. What I bring to the table is a more process-driven expertise. I know how to prioritize resources, manage liquidity and interact with outside parties like bank lenders, bond holders, and trade creditors with whom there are issues, and I know the tools you put in place for those types of situations.
Frequently, the reason companies need an interim officer or a consultant is because they are trying to do too many things at once. They lack focus. So, I help management identify which changes will make the most impact, take their to-do list from 50 down to five, and then help them make those changes quickly.
In most situation, I will do some initial analysis to gain understanding of the severity of the distress. This may be a weekly cash flow forecast or a longer-term projection along with a review of detailed historical financial performance. Doing this helps me identify the broader underlying issues, and then I can start to address them, whether by executing my own plan or just giving management direction.
Are there best practices that you’ve learned for creating and executing turnaround plans?
Often, it is about maintaining the right process—coming up with a plan that lays out the interim steps that need to get done, not just the endgame.
Then, you need to allocate those tasks to the appropriate people and have frequent meetings and status checks. Because often, what happens is that people get sidetracked by their “day jobs,” and two weeks later, you will have a meeting, and they have achieved nothing. Ultimately, you need to hold people accountable for their deliverables and provide the guidance and tools for them to succeed. I like simple tools to keep projects on track, like having weekly meetings, setting clear deadlines, and, of course, understanding where one deadline impacts another.
What other issues do you see companies struggling with these days?
Tariffs and Brexit are probably the biggest right now. How do you adapt to something that might be temporary? Should companies look for new suppliers or relocate production, which could take months if not years to implement? If companies do not take action, then they may not be cost competitive. If they take action and struggle with implementation, they could end up with supply disruptions.
The other big struggle is access to labor. The stronger companies have an easier time acquiring talent, whereas the companies that are facing financial and operational challenges have a harder time convincing people to come work for them, especially in the current tight labor market. You can work on efficiency and put tools in place to better manage your employees, but those are usually just marginal improvements. What is often a better solution is to identify which products and services you are really making money on and to shrink your workforce to focus on the most profitable products or services. This approach can have a significant impact for companies that sell a lot of products and focus primarily on revenue and for companies with poor information that do not fully understand their product/service profitability.
Before you founded your own practice, you were a Principal at Deloitte and a Managing Partner at Alix Partners. How does the work you do now compare to what those firms offer?
When I worked at Deloitte and Alix Partners, my role was to identify operational issues, then bring in specialists to get things done, so it was more of an identification and oversight process. Now, I am involved in implementing the work and developing processes to make sure it gets done. I am blocking and tackling, I am running weekly meetings to hold people accountable, and so on.
What should clients do in order to get the most value when they engage you?
I think it is important to look beyond the scope. When I am brought in, there are usually broader issues that need to get addressed. And in order to implement meaningful operational and financial change, I have to spend some time developing a deep understanding of the business. If I have gained that knowledge base and built the right kind of relationships with senior leadership, I find that they are more willing to reach beyond the scope and seek broader strategic advice that will help them succeed and help their company recovery.
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