Should You Utilize External Assistance For Your Turnaround Initiative?
You have decided that a business turnaround is needed and now the next decision point is how to best approach this “daunting” endeavor. The first question on this topic is whether to do it internally or to hire external turnaround “experts”. Based on extensive experience, both on the inside and out, hiring external, professional turnaround assistance is critical to maximizing the probability of a successful business performance turnaround. At this point, you are probably saying “well, of course you are going to recommend external assistance, that is what you guys do”. However, with dozens of turnarounds in our experience both as internal company resources and as the experts required to turn a business around, the following are major advantages of hiring external assistance:
Unique turnaround skill set and experience. Business performance turnaround initiatives require a specific skill set and experience. I like to refer to them as “one part science and one part art”. The science comes in the ability to quickly assess the entire organization from the strategic plan to financial statements to process execution using data modeling and analysis (often in environments with poor data) as well as extensive knowledge of business processes and systems, and using this analysis to drive and execute actions that give immediate bottom line improvement. The “art” comes in the experience of knowing where to look based on initial analysis and discovery. Patterns often repeat, and when you detect something in a new client, you can quickly investigate if there is something substantial behind it. This helps to quickly uncover key elements to address or to eliminate an area in the priority for improvement. Most organizations do not have the complete skill set or experience to perform this type of work which would drastically reduce the chances of success.
Objective, independent, non-emotional ties to historical and existing business circumstances. One of the key tasks in a turnaround is to quickly determine the root cause(s) of poor business performance and to take prioritized action. To do this well and efficiently, an independent and objective assessment must be made without the “baggage” that comes from working in a company for many years (something we have seen on several occasions). Emotional ties to strategy, products, lines of business, organizational structure or processes must not in any way influence actions required to improve business performance.
Available time. Turnarounds, by their very nature, are high priority and high stress initiatives where time is not your friend. Every day lost is one day closer to business failure. The initiative must be performed on a full time, intense basis, with a significant time commitment. Most organizations are just not equipped to provide this kind of time from their existing team that will have to run the business during the initiative while engaging as required. An external team can be completely devoted to all things turnaround.
Network of key entities. Depending on the specific turnaround situation, additional organizations may be required to improve business performance. For example, negotiations with new banks for credit lines, negotiations with different types of lenders (e.g., Asset Based Lenders) for financing opportunities or other entities for possible capital requirements are activities that are often required in turnarounds. A seasoned turnaround firm will have a network of organizations they can bring to the table (in addition to others the client may have) as well as the skill set and knowledge in what is required to get the negotiations successfully completed.
While the above are clear advantages that an external expert can bring, it must be noted that the internal team has a major role to play in a turnaround. Senior leadership is extensively involved in all turnaround efforts including providing knowledge and data, reaching decisions, and executing agreed to actions. The combination of external assistance and internal team capability provides the best chance for success in a business performance turnaround.