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Recession or not, during these volatile economic times it's worth taking a look at the playbook of turnaround specialists.
And for many growth firms, who face the normal challenges of managing constant change, it can feel like a perpetual turnaround situation even during boom times.
One of my favourite turnaround stars is Greg Brenneman, founder of Houston-based TurnWorks. Credited with the phenomenal turnaround of Continental Airlines, he's now working his magic on sandwich franchise Quiznos.
In every case, turnarounds revolve around just a handful of key strategic moves:
Stop Unprofitable Activities. Brenneman immediately uncovered that Continental had 18 per cent of their routes that were badly unprofitable and draining cash. He shut them down.
What products, services, territories, or customers are draining you? Do you even know?
The first step is to analyse profitability as granularly as possible. A huge weakness in small to midsize firms is the lack of accounting data and support. It's a natural instinct for entrepreneurs, given a marginal dollar, to want to spend it on either making/buying more stuff or selling it, that is, fund sales and operations.
Accounting, in turn, is often underfunded. Hire an extra accounting clerk, have them pore over your specific numbers, and then deliver to you the calculations of profitability by product/service line, customer, territory, store, sales person, etc. Then make the tough decisions. Pruning your operation is a healthy ongoing activity.
Focus on your Best Customers/Opportunities. Neil Rackham, the famous sales researcher, studied sales teams during hard times and found that the less successful sales teams chased every deal they could, acting almost desperate at times. Instead, the successful sales teams focused on their best customers and opportunities.
As an interesting side note, his research found that customers do not buy on price during a recession but buy more based on safety. Why? Because during tough times decisions are often made more by committees and they seem to choose the safer options. And for this safety customers were willing to actually pay 12 per cent more!
Study What's Worked in the Past. It's never more important than during a downturn that you return to basics. And since the 2001 recession wasn't that long ago, take time to consider what worked and what didn't work.
Finally, communicate, communicate, communicate. Above all, keep the communications flowing. Brenneman and Gordon Bethune, Continental's Chairman and CEO, made it a point to talk to every employee they could, getting out to airports and in planes, loading baggage, and working the ticket counters.
The writer is author of Mastering the Rockefeller Habits, founder and CEO of Gazelles Inc, an outsourced corporate university with a faculty of top business experts. It is represented in the Middle East by Dubai-based biz-ability.
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