How to Turn Companies around?

The world has become more competitive that it had ever been before. And this is a trend that is constantly accelerating. The rate of change is just so fast that companies may easily become disintegrated from their environment, lose competitiveness, decline and eventually die. Corporate leaders are more and more often called upon to save organizations from death, most of the times in a fast and traumatic way. Despite their efforts, however, they are not always successful.

 

External disintegration, meaning the disintegration of a company from its environment is the result of internal disintegration, which in turn results in organizational aging and eventually decline. Organizations can, for various reasons, become sclerotic and inward looking and when that happens, it turns out that, for them, what takes place inside is more important than what happens out in the market. Under such circumstances, the organization moves slower than its environment or towards a totally different direction or even both. However, nobody or maybe just a few of its leaders seem to care. Conflicting interests and political coalitions drain out the energy and cripple the organization. Under such circumstances, the organizational leader may do his or her best but his or her efforts are in vein. He or she may make the right decisions only to find out that they just not seem to be implemented. It just feels like the organization has a will of its own. It decides and acts as if it ignores the will and the efforts of its leader. Ultimately, the organizational leader may find him or herself out of the organization wondering what has happened… Usually, until then, he or she would have possibly attempted to move around boxes in the organizational chart quite a few times, only to understand that his or her attempts did not seem to bear any fruits at all. Most probably he or she has made the problem even worse!

 

Quite often, organizational leaders, guided by their desire to win, attempt to do a lot of things prematurely. And in doing so, they often put the car in front of the horse. Most of them attempt structural changes too fast, because in this way they feel that they would control the organization better. After all, management textbooks are full of all sorts of nice models. But what works in theory does not necessarily works in practice too. Moving around boxes in organizational charts would not change the power structure so easily and of course the new organizational structure would not necessarily support the strategy that the leader has in his or her mind. The organizational structure embodies strong interests and therefore trying to change it prematurely may make the problem even worse. Structural changes in most cases at least are not the right pill for the disease of the organization.

 

Successful turnarounds would first require that the organizational leader understands that disintegration does not take place outside in the environment. It takes place inside the organization. It is simply not the market that should be blamed. It is the company itself that has the problem. It does not therefore pay any dividends for the leader to complain. He or she has to immediately take charge of the situation and act effectively and efficiently on what is directly controllable. And the first thing that he or she has to do in this respect is to establish effective communications with people in the line as well as with customers, vendors and business partners in general. That would help him or her to start to connect with them, to build trust and respect and eventually to better define the problem or the problems that cause internal disintegration. He or she would then need, along with the parties that are genuinely interested in the organization, develop a strong purpose and to start to consistently communicate it, therefore increasing engagement. Having defined the problem correctly and having the new direction in mind the organizational leader can now make sure that the right priorities be set and the right strategy be devised. However, still it is not the time to act. He or she would have to build the right coalitions, with all key stakeholders, before moving ahead. At this stage, the organizational leader needs allies to deal with all the mess that a turnaround involves! This is absolutely important. And the support should be strong. Even the most motivating corporate purpose, even the best strategic plan are doomed to fail without strong alliances. Without them, the organizational leader will soon find his or herself alone against everybody during implementation. It is after the right alliances are established that the leader can deal with the implementation details. This is the way to proceed with the necessary changes. And these changes should not start with structure. They should not start with people! Instead, they should start with understanding, communications and support. And now, he or she has a lot of chances to succeed. Decisiveness and bold action can now make a difference!