CRISIS MANAGEMENT : The smartest turnaround

There comes time when everyone in an organisation accepts that one of its departments or business units has become dysfunctional and is in deep trouble. The problems have been common knowledge for some time but have been getting steadily worse.
Other departments have looked on, speculating what the final outcome of all this will be but feel powerless to do anything about the situation.
Rival factions will have developed in the business unit, each suspicious and mistrusting of the other, but united in blaming management for the problems.
A number of interventions to “fix” the problems will have been tried. External mediators will have been used and restructuring may have been tried. Several key staff will possibly have left. Things have now become so bad that the board or the CEO has no choice: something has to be done – but what?
This is not an unusual situation. For variety of reasons, particular business unit in an organisation may get into serious difficulty. Its problems may not be serious enough to threaten the whole organisation yet, but the longer deteriorating situation goes on, the more debilitating it becomes for the whole organisation.
If the organisation is prominent in the community or is publicly funded one, it is likely that the local media will sooner or later sniff out the story and the organisation’s reputation will begin to suffer damage.
Its revenue sources will start to dry up and customer spending will begin to taper off. As the problems continue, inevitably the rest of the organisation too will begin to take sides and will slowly get drawn into the department’s issues.
Internal problems such as these don’t get better over time – they just get worse. But if there have been several attempts to resolve the problems without success; what more can be done?
The first step is clear. The business unit’s leader has to go, whether he or she is responsible for the mess or not. No progress can be made until they are replaced. The next decision is whether to parachute in someone temporarily from within the organisation (another manager) or to start afresh with turnaround manager from outside the organisation.
In most cases the best decision is to go with the external turnaround specialist. An internal appointee is inevitably compromised from the start – the business unit’s staff will discount someone they already know and the internal appointee will find it difficult to discard their own judgements about the department’s problems.
What is needed is completely fresh pair of eyes from someone outside the organisation.
The turnaround manager will need to have thick skin. It will be tough job. They know this is not long-term career role. They know once they have done the job, it is time to go, with few fond farewells.
To succeed, the turnaround manager needs three things going for them:
1. Turnaround leadership experience.
2. Full backing and support from the CEO and board.
3. Time to do the job.
The first thing to do is complete thorough scoping assessment of the business unit’s position. Can it be saved?
Turning around the business unit is just one option open to the CEO and board. There are others – merging it with another business unit, reducing its size, or perhaps selling it off.
If you decide on full turnaround, then the challenge ahead is that of successful change management exercise. The main task of the turnaround manager is to get the business unit back on its feet with sound management underpinning it.
The skills needed to do this include communication skills, knowledge of change-management principles and employment law, and an ability to see clearly the end-point of recovery.
Turning around dysfunctional and conflict-ridden business unit can be an up and down business. The turnaround manager needs personal resilience and the courage to make some tough decisions. Some staff will want to hold on to grievances and fight endless battles – they will have to go.
There will also be some business unit staff who will seek support for their cause elsewhere. This is not time for the CEO or board to wobble. turnaround manager can’t do the job on their own; they need solid support – especially when it counts.
A dysfunctional business unit is not going to turn around overnight. As good management systems are put in place, the momentum will build up speed.
Then you should look at appointing long-term manager for the department.
Not all turnarounds succeed and other backup options for the business unit should be kept alive.
But once the business unit turns the corner, the organisation can learn some useful lessons from the business unit’s troubles. How did things at the business unit get so bad? Should the problems have been addressed earlier?
Without addressing these questions similar problems could happen again.

Gordon Davidson is Christchurch-based independent management consultant who specialises in restructuring and turnaround management.

A turnaround manager needs…
• To know their stuff on change management.
• Personal resilience.
• Clarity on what the recovery endgame will look like.
• The full backing of the CEO and board – no wobbles.
• Enough time to do the job – it always takes longer than you think.

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