Positive Control
The Art of the Turnaround

By Steve Monaghan
Director, Competitive Capital
Graduated from HSE EE in 2002

Charles Darwin once said, “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” (Responsive is the key word.) In today’s economic environment, to paraphrase Warren Buffet, lax business practice is exposed as we see the economic tide flow out. Today, perhaps more than at any time in history, companies are being exposed and the need to change forced upon them. The approach of many managers is to make incremental change at the margin. To be marginally responsive. The belief that change must be introduced slowly as it will be too much of a shock to the organization. One word, bullshit.

As a former pilot I learnt this lesson the hard way. Simulating engine failure and training for a forced landing is an integral part of learning to fly. In training, when you reach minimum altitude, the instructor tells you to go around, to start climbing and avoid hitting terrain. Sensible. As an inexperienced pilot, I didn’t appreciate the capabilities of my aircraft so I applied power and gradually adjusted the attitude of the aircraft to a climb thinking that too abrupt a movement might cause the aircraft to stall and crash.

My examiner, a former Air Force jet instructor screamed at me, as he must have done thousands of times before. Why was I flying a fully powered aircraft towards the ground below minimum safe altitude? I was compounding the problem, not correcting it. With one precise movement, he took control of the aircraft, pointing the nose above the horizon at exactly the attitude that the plane was capable of climbing at with full power. Immediately, we safely began increasing altitude. He knew the aircraft, he knew its capability and he took positive control. Simple.

In business we see this same situation played out time and time again. The company is failing and managers make changes at the margin all the way down to the ground. The employees they thought might be shocked by change are truly shocked to be out on the street and unemployed. And more than unemployed, they are stigmatized by failure. In hindsight, like an air crash investigation, the causes of failure are readily identifiable. In a majority of cases they begin with a minor but manageable failure, then it is compounded by bad or delayed decisions and a failure to take decisive and appropriate action.

Recently our team was engaged to turn around a retail bank. It was a classic situation. Great bank, great people, great brand. Only problem was that it had lost 7.6 Billion the previous year and that was just the world was entering the economic crisis. Actions at the margin had marginally arrested the rate of decline but the trajectory remained negative.

Three quarters later the Retail Bank reported a 1 Billion profit with a robust outlook. Revenues are up significantly, expenses are down, deposits are up phenomenally. Profitable customer acquisition has increased dramatically and the Bank was named the Best Retail Bank in its country in March 2009.

So what changed?

Leadership

Critically, the only thing from a people perspective that changed within our business was the leadership. The talent required to achieve amazing results already existed within the business. Our only challenge was to unlock and direct that existing employee talent and give them the latitude and motivation to contribute.

How did we turn things around? 5 Key Focus Areas.

Make physical and financial capital sweat

What would a successful business look like? We looked at the end game. We invested time in understanding our customers, our capabilities, our business drivers, our limitations and our competition. We identified what a successful business with our scale would look like. We took immediate action to align our business with that required trajectory.

Focus on the customer

It is almost cliché. Everyone says it but few do it. Actions speak louder than words. We conducted focus groups, listened to the customer and developed products and programs that delivered better value to the customers. And we measured it relentlessly.

Align the organization behind customer objectives

Understand what motivates the customer then ensure your people are aligned to deliver it. We transformed the business from a push selling model to a pull model with the customer at the center. We then retrained and retooled our sales people to focus on what delivered the customer and the bank the best results. We removed business teams from head office not aligned directly to those objectives.

Make things simple

If it isn’t simple, it is unlikely to be understood by customers. Increased complexity also means increased expense. We actively invested in simplifying our business starting with the customer and flowing that philosophy back into sales, marketing, product, operations and channels.

Execute Relentlessly

Transforming behavior must be supported by transforming incentives, measuring the key business drivers daily, celebrating and rewarding the good and surgically removing the bad as quickly as possible.

Turning around a business is a team effort. But that effort must be aligned in a way that takes positive control of the business and establishes an immediate positive trajectory. Anything less just means you are flying into the ground faster. Something I hope we can all avoid!

Copyright Competitive Capital. Used by permission.