5 turnaround lessons from the trenches
There is an old saying about business leadership that goes: “If you are leading and no-one is following, you are just taking a walk.”
Knowing how to lead in times of business distress can be challenging, especially if a leader needs the staff, stakeholders and investors to come along on the mission to save the company.
Michael Dorn, a business turnaround expert and CEO of the RTgroup, has a few key lessons to share from “spending years in the trenches with CEOs and leadership teams” in Europe, the United States and South Africa. He currently also fulfils the role of Chief Restructuring Officer at Nampak, where he spearheaded one of South Africa's most prominent corporate recapitalisations.
Dorn believes there are five essential rules for good leadership during a business turnaround process.
1. Believe it can be done and communicate it sincerely“In times of crisis – if there is a viable investment case for the turnaround of the company – good leaders must have the sincere belief that the situation can be turned around. They then make a plan to make it happen, and communicate the plan with openness, honesty and sincerity to the staff, stakeholders and investors. It’s this sincerity that makes the business turnaround convincing. There is no such thing as ‘fake it ‘til you make it’ in business turnaround – people will see straight through you and will be reluctant to listen to you or follow you. Vulnerability, on the other hand, builds trust and camaraderie.”
Dorn feels very strongly that leaders should be able to speak to their audiences, including staff, with compelling conviction. “Think of the films Braveheart and Gladiator – those leaders roused their people to achieve victory against all odds. Voice your true reason to believe and it will resonate. The deeper the crisis, the stronger your narrative should be, based on the investment case defined for saving the company. Use an evocative narrative to inspire, allay fear and build a following.”
2. Know your own leadership strengths and weaknesses“Good leaders know what their strengths and weaknesses are, and are not afraid to admit where they need help. If you can leave your ego outside the door, and admit where you went wrong or where you need help, you can find the right help,” says Dorn.
“It’s important not to overestimate your strengths or to let your ego get in the way of solutions. Leaders must realise they are part of a team; they are not above the team. They must know what they can bring to the team and when to allow the team to step in for their shortcomings.”
3. Be humble enough to adopt a growth mindset“Inexperienced and insecure people will often talk over others whilst trying to sound smart, instead of being truly smart and listening. First year students often talk over their professors. One of the smartest things you can do is to humble yourself and ask ‘silly’ questions that will help you find the solutions to your challenges. You have to adopt a mindset of continual growth and learning.
“Good leaders must not fall into the trap of the Dunning Kruger Effect – the cognitive bias that leads incompetent people to overestimate their abilities, because they don’t realise how little they know, whereas masters in their field will be open to learning and listening, because they realise how little they know in the grander scheme of things,” explains Dorn.
4. Never waste a good crisis“Few people realise this, but investing in distressed companies with great growth potential is one of the best business decisions you can make. Distress companies that are turned around successfully typically yield higher returns than normal private equity investments,” says Dorn, who has been involved in capital raises for many companies.
“The higher the risk, the higher the reward – but of course there has to be a solid investment case that the right people believe in.”
5. Realise that the employees are always worth fighting for“Without fail, the employees are always, always worth fighting for,” says Dorn. “If they know you are fighting for them, in the trenches with the rest of the C-suite, the employees will become loyal allies who will help you succeed in your mission to save the business. Business turnaround is like a house renovation – if you have a great team in place, who is behind the vision, they will help you build a better house than the one you’ve had before. You can build a masterpiece together if everyone is united behind the same vision.”
In conclusion, Dorn says it is critical for leaders to have positive thinking in times of crisis. “Pulling off a successful business turnaround is all about having a positive mindset. I see it time after time. Positive thinking is the key to success in business turnaround and in life in general.”