From the February 2001 issue of Entrepreneur

Leading a business turnaround is a gut-wrenching task. I know because I've led three:

In 1991, colleagues elected me manager of a two-channel TV studio in the Middle East. The bland programming our studio regularly broadcast was the focus of much viewer aggression. I didn't know anything about studio operations, so I asked the staff for the top three viewer complaints. The next day I issued three programming edicts, got rid of videotapes that didn't meet the criteria and left the well-seasoned employees to order replacements. The following week, viewer complaints stopped completely. Not long afterward, the Gulf War broke out. Despite 14 nights of missile attacks, regular air-raid warnings, countless broadcasting regulation changes issued by the government and the fraying mental stability of just about everyone, this remains the easiest of the turnarounds I've led.

One year later, I was lured to a company consisting of 12 recreation facilities scattered across a city of 2.5 million inhabitants. The business had been in decline for one decade-more than half its customer facilities either were unusable, or were so damaged or filthy, few people went near them. The board of directors, constantly arguing, offered no support. Employee morale was low.

When I arrived, irate customers swarmed around me like bees. By the end of the second year, however, most of the facilities had been cleaned and repaired, and the company was churning out twice the number of programs and activities it had in the past.

My third turnaround was an $8 million private leisure operation. The owner had built this "ranch" for his children, but they'd grown up, and he wanted to make it a business. Unfortunately, his shockingly incompetent daughter had crowned herself managing director, five general managers had come and gone in the ranch's five-year history, and employees were seething with frustration from conflicting company directives.

"Here we go again," loudly whispered one seasoned staffer at the first meeting I convened. The others rolled their eyes, wondering whose job was on the line. A year and a half later, expenses had been reduced 40 percent, the number of programs had risen 300 percent, and memberships had increased over 800 percent.

Three businesses. Three turnarounds. Three tortuous uphill climbs. What did it take? Determination and sound planning. If your business is in crisis, look to the following road map to get it back on course.

1.Determine Your Priorities
2.Be Prepared for Resistance
3.Make "Customers" the Focus
4.Don't Go It Alone
5.Focus on Ethics and Quality
6.Get on With It!

1. Determine Your Priorities

Before you begin the turnaround process, stop and consider what you want to accomplish. Sure, you want to increase revenue, but how will you do it-by streamlining systems or operations, targeting a specific clientele, introducing a new product or service, or eliminating an old one? How about improving service? Your business may require a combination of those things. If you're serious about turning your company around, it's critical to ask these questions of your staff, too. You'll likely get valuable input from employees, who can help you create a written guide of the turnaround's objectives.

2. Be Prepared for Resistance

Perseverance is key. People almost always resist change. Yet to turn a business around, everyone within it must abandon the familiar and embrace the unknown. This is a challenging concept, because it involves accepting new responsibilities as well as working in new, untried ways. For non-managerial employees, these new ways include:

  • Accepting that the ownership of problems and solutions belongs to everyone in the business.
  • Understanding that work must equal value. It's not enough to perform bottom-line duties.
  • Realizing everyone must pull in the same direction.
  • Caring about the job by displaying integrity and trust.

This change doesn't occur in a vacuum, however. As the business owner, it's up to you to help employees make these crucial changes. Here's how:

  • Share information, and provide complete and thorough training.
  • View your workers as assets.
  • Pick the right people for specific jobs.
  • Ask for, listen to and then act on others' viewpoints.
  • Reward good job performance.

Your objective is to prevent future problems, not just battle current ones. If you want the changes to take hold, the commitment to change must be shared within the organization. Barriers must be broken, and that must be done by involving everyone. The buzzword here is "empowerment"-getting workers to motivate themselves by reawakening their universal desire to excel and their craving for acceptance.

Training and motivational efforts can go a long way toward getting your employees to support you while you're trying to turn your company around.

3. Make "Customers" the Focus

Examined a little differently, "customers" can be taken to include everyone involved in your business-not just those who buy your goods and services. This includes salespeople, operations staff, designers, suppliers, shareholders and so on, because these people ultimately serve each other as well as the traditional customer. To achieve great "customer" service, owners and managers have to get out of the ivory tower and walk the business's front lines-listening, learning and formulating improvements from this new angle. Think about these questions in that light:

  • Are all your products, services and systems designed with the wants and needs of everybody, from traditional customer to shareholder, in mind?
  • Is the business concentrating so hard on one market (or department) that other potential markets (or departments) are being excluded?
  • Do all employees share the attitude that service is everyone's job and nobody is too busy to help?

The most effective business interactions come from employees who feel they're part of a team and managers who set a good example. In other words, don't force your will; you'll just end up losing-and no business runs at peak efficiency until the employees are happy working within its systems. The same goes for paying customers who take their business elsewhere if things aren't done their way. In a nutshell, revenue comes from the people who support your company, and all those people must be earned (i.e., sought, listened to and serviced).

4. Don't Go It Alone

I'm not talking about hiring management consultants. Too many of them offer nothing more than lengthy textbook material in which the name of your company replaces the name of their last client. I'm talking here about delegation.

Typically, owners and managers don't like delegating for two reasons: insecurity and risk. The irony is that insecurity and risk are reduced when the work force is allowed into the decision-making process. The result is everyone learns to recognize and eliminate the causes of problems, not just the effects.

If employees don't perform to expectations, the fault usually lies with the company leadership for 1) not selecting the right people for the job, 2) providing insufficient information and training or 3) not creating an atmosphere conducive to achievement. To avoid these pitfalls:

  • Provide employees with enough information and leeway to make decisions and formulate ideas.
  • Modify employees' ideas so they fit the business's and customers' needs and so the people who have to work with these concepts will work with them.
  • Confront-do not avoid-the inevitable conflicts that will arise.
  • Know the difference between delegation and abdication.

One reason employees of my Middle East TV studio didn't run off while the Gulf War missiles were flying was that I had made them an integral part of its operations, and they didn't want to abandon it.

5. Focus on Ethics and Quality

Ethics, schmethics, you say? Don't blow it off quite so fast. With consumers more concerned than ever about the companies they do business with, following the rules is crucial if you want to succeed. Need proof? Check out Do the Right Thing.

It's also important to respect the intelligence of customers and employees. There are simply too many choices available to customers these days to think you can get away with subpar products and performance. Few things are as crucial to a business as a good reputation, and, like customers, a good reputation has to be earned. A good rule of thumb is to always think long-term. Short-term solutions, by their very nature, are destined to cause trouble in the future.

Last year's Firestone tire debacle provides a rousing example. If quality and ethics had played an active role in operations, that business's problems, as well as the name-calling and finger-pointing that accompanied them, would probably never have arisen. When making decisions, the moral of the story is:

  • Understand and accept the real reasons behind what's being done.
  • Be aware of the outcome of any action or behavior.
  • Show accountability.
  • Comprehend the whole picture internally (among employees) and externally (among the community and the environment).

6. Get on With It!

There's a saying in the running world that no matter what the distance, the hardest step to take is always the first one. Translated into business terms, that means taking action.

  • Divide changes into manageable, comprehensive steps.
  • Communicate details clearly and often.
  • Provide all the continuous training needed.
  • Be patient and let commitment grow.
  • Don't give up no matter how alone or under siege you feel.

Perhaps I still have my ranch turnaround on the brain, but leading a turnaround is not unlike entering an equestrian show-jumping competition.

In show-jumping, a rider steers a horse (who might have other ideas) over a series of formidable obstacles while under the duress of competition. It is, as you can imagine, very difficult. When the show starts, because of an unlimited number of factors, the only thing known for certain is that the jumps will be handled one at a time.

In all three of my turnaround situations, my aim (getting over that last hurdle) was to concentrate on setting up the business so that, as much as possible, it ran itself (and wouldn't need my continued intervention). The result was a work force that could prevent problems as well as respond to them, thereby avoiding the emotional and financial drain of being in a perpetual state of crisis.

Giddy-up.


Jonathan T. Scott has a bachelor of science from Florida State University and an M.B.A. from Western International University in London. He is the author of Fundamentals of Leisure Business Success: A Manager's Guide to Achieving Success in the Leisure and Recreation Industry(Haworth Press).