Business recovery: rally the troops

Many setbacks are experienced in running a company, but one in particular is
encountered with growing frequency: the problem caused by poor leadership or
people management. This becomes especially obvious during a period of
far-reaching corporate change, when effective leadership and inspiration are
needed more than ever. Failure to understand their importance can result in
corporate disaster and often the grim results can be read in the press.

Poor management or leadership almost always bring the same adverse results: a
disaffected and sometimes disoriented staff. These can fatally impede a
company’s performance.

This is particularly the case during a turnaround, a take-over, or other
potentially traumatic steps in a company’s progress, where communication with
staff to gain their commitment is essential to ensure success. As it is, such
events often seem to take place without many of the staff in an ailing business
knowing precisely what is happening. This can have grave results on their morale
and performance.

Military lessons
Managing people is perhaps one of the most difficult skills to master
and so when considering the question of leadership during times of corporate
crisis; it is worthwhile looking at the way it is handled within the military
services, which has to understand this quality from the very start. In a
turnaround scenario, ‘people’ includes stakeholders, banks and often creditors,
all of whom are unhappy with the incumbent management team and likely to focus
on negative rather than positive aspects of the distressed business.

Military leadership will focus on making moral judgements to do what is right
while undertaking a mission ­ planning is meticulous and detailed, training is
fundamental to success, communication is exceptionally clear at all levels.
Rehearsals prior to deployment are essential. Above all, those in leadership
positions boost morale, lead by example; manage during both the critical and
non-critical phases of a mission.

They are not afraid to make unpopular decisions, will use consensus and draw
wisely on specialist resources or experts with greater knowledge than themselves
­ all of which is incorporated into the overall plan and increases the chances
for success. The best corporate or military leaders will do all this
instinctively. Thus, companies in turnaround should call on specialists who will
provide experience of working within this type of uncomfortable environment and
have the necessary leadership skills to stabilise the business.

The Services tend to instil these kinds of qualities in those responsible for
the leadership, well-being, and effectiveness of others.

In addition, they nowadays have to be run increasingly like any other large
organisation, so you learn lessons of people management, efficiency and
organisational skills which can carry across into commercial life.

Learning from experience
While there is a great deal to be learnt from successful commercial
organisations, few senior management teams exist who could manage a full-scale
turnaround reasonably quickly because they have never been there before. Yet on
operations around the world, the Services react to critical situations almost
every day where each situation is entirely different and where failure is not
really an option.

Successful turnaround executives display leadership and adapt their style
according to business needs. They understand what can and can’t be done in these
scenarios and above all bring realism to an often distorted situation which will
restore stakeholder confidence.

Above all, it is leadership and people-handling skills which can make the
difference between the success or failure of a turnaround.

Recent case studies have shown again and again that a committed and involved
workforce will naturally be the key to a company’s performance; this equally
applies to the board of directors. Indeed, as we look strongly like entering a
period of radical economic uncertainty, leadership skills will become more and
more important.
The ultimate cost
This is a lesson which the leaders of today and tomorrow may have to learn
quickly, as poor leadership can cost you money. In a study carried out in 2000
by a team of business researchers, inefficient management was found to be one of
the main causes of company failure.

Recently, according to figures analysed by the recovery and reorganisation
practice at Grant Thornton earlier this year, corporate insolvencies were on the
increase, following 3,429 liquidations in Q1 2006, an increase of almost 8 % on
the final quarter of 2005 and of 17 % on Q1 2005.

Grant Thornton’s report also showed that corporate insolvencies had now
reached their highest level in almost three years, which, the report stated, was
an ‘increasingly concerning increase’. Concern was also felt at the dramatic
rise in administrations, up 30% on the previous quarter to 753.

Even the government’s figures for winding up and bankruptcy petitions during
the first quarter of the year show an almost 9% increase over the first quarter
of the preceding year. Let’s also not forget the issues faced by the NHS which
stem from poor leadership decisions and have caused a raft of avoidable

No one would suggest that these corporate failures were all caused by poor
leadership, but increasingly, good leaders will be needed to steer companies
through economic shoal waters and harshly competitive market forces. Current
economic uncertainties and the rapid pace of change suggest that the UK should
address these leadership issues? At the very least, we should act on these

Jon White is head of turnaround and change management at

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