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The Key to Surviving Hard Times

Chainsaw Dunlap was a workout guy twenty years ago, who would go into companies, slicing and dicing, laying people off, cutting product lines, and selling off assets as fast as he could. As his name suggests, he took the chainsaw approach.

Chainsaw was a pro at Turnaround 101, but he did it with no finesse. After the slash and burn lay-offs and asset sales, there’s still a company at which you don’t want everyone to be demoralized and miserable.

Not So Chainsaw

I do it slower – more sensually, shall we say, because I like to talk during.

I always make an effort to educate a company’s personnel throughout the process and solicit their buy-in for what I’m doing. This kind of interaction and buy-in doesn’t just need to happen during a turnaround – it should happen all the time.

I suggest that you regularly sit down with your team(s) and have them understand your solutions and decisions – something Chainsaw never did. I’m hardly suggesting that your team gets to vote – a business is not a democracy – but you do need to get buy-in for big ideas and especially to get through hard times or a turnaround.

Buy-in is Key

The reason you need this kind of buy-in is because, as president of a company, it’s unlikely that you’re out there day to day screwing on the wheels of a car, fixing machinery, bolting your widget together, etc. You can’t assuage the negative feelings running through a company when you don’t have access to everyone in the day to day. When you get the buy-in of your team and allow them to understand what you’re doing and why, they will help educate the survivors of the turnaround process to know that they’re going to be better off after the turnaround.

I was taking my son to school years ago, and he asked me, “What are you doing today?” I told him that I had a rough day in store because I was going to Philadelphia to layoff 200 people and close a division of the company I was turning around.

He looked at me like I was on ogre, and asked how the kids of those laid off would be able to afford camp, get baseball gloves and enjoy candy. I told him that I understood his questions and concerns, but by laying off 200 people and closing one plant, I was saving 600 jobs and keeping the company alive. It’s not that what I had to do didn’t stink for some, but it was for the greater good.

The challenge at that moment is to ensure that the 600 employees remaining are reenergized, reengaged and brought into the process of what comes next. That is, you’ve got to communicate and get buy-in.

Communicate Fully

If you go through a rough patch at your business and the people there really hate you then they will cease to fully contribute, leave, cripple your company and make you conclude that you shouldn’t have spent money on a turnaround in the first place. You should have resigned to call it a day and get on with your life because everyone else will have, too.

Companies – like militaries, countries, families and people – face hard times. As your company’s leader, it’s your job to get everybody through the hard times and make sure that they are prepared to see the good ones again.

Only the best innovators, products, companies and employees will survive a turnaround. If you insist on every social program that keeps everyone around, no one will have enough. It’s better that some do, and it’s best that they understand what’s happening and why. Open communication and buy-in will steer your company through hard times.

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If You Don’t Sweat the Small Stuff, It May Come Back to Haunt You

Do you remember that book, Don’t Sweat the Small Stuff: And Everything in Life is the Small Stuff?

I can appreciate the life philosophy, I really can, but let me tell you: in business, everything that’s small could become big if you don’t pay attention. If I have a cut on my finger and I ignore it and don’t put Neosporin and a Band-Aid on it, my finger could get infected and need amputating (gross). I’m not saying it’s common, but it could happen.

A leader, especially in hard times, needs to make sure he doesn’t overlook the small stuff.

Once, I was installed as CEO of a company, and I relied quite heavily on the CFO who’d been with the company a long time. I listened to his assumptions and projections. However, I never checked up on his assumptions or double checked the formulas in his spreadsheets. It just all seemed like little stuff.

Unfortunately, midway through the turnaround, the numbers headed south and the bankers got upset. As it turned out, the CFO knew about these mistakes and what was likely to happen.

Making mistakes is not a problem. Not admitting one’s mistakes and sharing this kind of knowledge with me is a problem. When I found out the CFO had known about these mistakes and never raised his hand, I fired him immediately. These were small things whose impact could have been mitigated a few months earlier, but at this point, I had to go crawling to the bank for an extra million dollars. Fortunately, they were pleased with my decision to fire the CFO.

The controller who had actually been prevented from checking the numbers earlier became the new CFO, and we emerged from bankruptcy.

As a CEO you have to rely on people, but you also have to trust your instincts, question assumptions and double check the world around you. It’s hard to rely on one person. I did so because it was the quickest way to move forward, but I learned from my mistake, and now I go through budgets line by line and question all assumptions, projections and spreadsheets. I take care of the small stuff (without sweating it) in order to keep it from turning into big stuff.

Many CEOs blindly listen to others without question because they need answers and they need them fast, but as a CEO it’s your job to ask twice and then thrice. Take care of your business by taking care of everything, big and small.

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Is Your Ego Still in the Way of Your Success?

One of my secrets to success is my ability to set aside my ego when I go into a new company. It’s true that I do have an ego. I couldn’t be the Turnaround Authority without one. But it’s my ability to check that ego at the door when I start a new job that lends to my success.

The first thing I do when I get into a new company is sit down and talk to my team. I tell them that I’m not going to come into their company and pretend like I understand what they do better than they do. I tell them that I’m going to need their help. I have no pride of authorship.

The overall message is that we need to be a team, and that I need them to question me and talk to me about everything they do and know. I have an open door policy, and my team gets full access.

If they don’t tell me what they know when I take a particular direction with the business, then we could lose the company. I need to know everything that they know.

There are a lot of CEOs who can’t just set their egos aside to successfully run their businesses. Half the time that’s why I end up running their businesses in place of them (read #3 on my list of 5 Foolish Faux Pas CEOs Make in Crisis).

The Lake at Rotama Park

For example, at Rotama Park, a horse-racing track that I turned around, there was a big lake in the middle of the track. When I got there the lake was empty.

As it happens, they’d already spent a quarter million dollars filling it up with millions of gallons of water – but it all leaked out. The problem was that during simulcast racing, when our track was being broadcast into every betting parlor in the country, our track looked terrible. There was a big, empty hole in the middle of it!

I needed to fill up the lake.

One guy said that there was an aquifer nearby, and we could fill the lake up and it would all be good. I couldn’t see a reason not to, so I got ready to do just that.

Boy was it a good thing I had my open door policy in place.

Someone else came sheepishly into my office and, scared of my reaction, said if I filled the lake up, all the water would leak out again. He said the wrong type of clay had been used on the base of the lake. Because I had two people with a difference of opinion, I brought in an engineering firm to assess the situation. They confirmed that the base had been laid incorrectly, and that I’d need to redo it for a half million dollars.

If the second guy hadn’t told me that I was wrong to fill the lake up, I would have wasted another $250,000. My team had to know that I had an open door policy and to challenge me at all times if they thought I was wrong. You have to set your ego aside to do that successfully.

The Gyroscopes in South GA

Another time I had a manufacturing company in south Georgia that made gyroscopes for missiles and rocket ships. The company was running three shifts, yet the cost of goods was going up, prices were staying steady, and we couldn’t figure out why. Where was the profit going?

Somebody came to me, again because of my open door policy, and shared with me that there was a new competitor that had bid on a government contract, and the government had awarded that company 25% of its gyroscope needs. Apparently, the nightshift manager on the third shift was a silent partner in this other company, and as it happens he was stealing from us and giving the “scraps” to his other company.

He could compete because his stuff was free and our costs were going up because a higher percentage of our supplies was scrap. I would never have known this without an open door policy.

Make sure to set aside your ego and let people know that you want to know what they know – even if that information is bad news. I say it’s a secret to success, but on some level it’s also just common sense.

Is your ego still holding you up? Why or why not?

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Old School Methods Yield Fresh Results

As I sat in front of my computer struggling to express exactly what I wanted to share with you today, I realized that I might be more successful if I tried writing the old fashioned way.

Thus, I broke out a pencil and paper, and instead of sitting in front of my computer, I changed up my environment and began to write. And the words flowed wonderfully.

They flowed so well, indeed, that I decided that what came out wasn’t best shared today – but you’ll get to enjoy it later in an alternate manifestation.

What I do want to share with you is the lesson my experience evoked: the value of changing up your environment when trying to accomplish something that doesn’t seem to be happening – especially when that something happens to require creativity.

This is actually something I do all the time, though the pencil/paper approach was a new take on it. I’ve spoken before of my predilection for the beach in Hilton Head in the context of the value of rest and relaxation. One of the great things I love about the beach is its effect as a creative lubricant. My job involves a great deal of creativity, and I often do some of my most creative work at the beach. The environment isn’t the usual suited, office-furnitured, formal one of every day business, and that allows my mind to loosen and get creative with solutions and opportunities.

I suggest you employ similar approaches in your own life and business. When you find yourself facing a tough situation, a complicated problem or a stalled out day, don’t keep spinning your wheels. Try changing up your tools and your environment. Try bringing fresh perspectives into your conversations. Just don’t do the same old thing if the same old thing isn’t getting you anywhere.

How do you vary things to get the creative juices flowing?

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I Want to Introduce You to a New Friend

What do you think of when I say, “The IRS?”

Does your stomach clench up a bit? Does your forehead get warm? Maybe the physiological reaction isn’t so dramatic, but I imagine that your mental associations with the Internal Revenue Service of the United States are anything but positive. Fair to say?

Maybe you got off to a rough start, but perhaps that was due more to schoolyard rumors than anything else. It’s possible, too, that you’ve hit a rough spot in your relationship. But I want you to get reacquainted with the IRS and think about the way you two could be friends.

Certainly the thoughts of being friends with someone taking anywhere from 25% to 50% of your hard-earned dough on an annual basis might seem distasteful. I don’t like the Tax Man any more than the next guy, but as long as you accept that the IRS is taking some of your money every year – and you really come to terms with the fact – you may want to get better acquainted.

There are only two business people who should be concerned by the IRS:

1. Those whose accounting is so terrible that an audit would be an unbearable nightmare, and

2. Those who are trying to cheat and break the law.

If you don’t fall into either of those categories (and a lot of my clients, I unfortunately discover, do), then consider what the IRS can do for you. Remember, the government is going to take a nice bite out of your income, but the size of the bite and the ferocity with which it’s taken might be more variable than you’d otherwise imagined, particularly if you are a business owner, CEO, president or CFO.

And I want to be very clear here that everything I am suggesting you do is 100% legal. Do NOT do anything illegal. It’s not worth it, and you will be caught. They’re always caught. Trust me. I’ve seen more fraud than you can imagine.

You might be saying right now, of course there are ways of paying taxes “better” – that’s why I have a CPA. And I bet you have a wonderful CPA, but I assure you he won’t mind you doing a little leg work yourself to figure out how to save your company some money.

An obvious way to save money is to take advantage of the Bonus Depreciation and Increased Section 179 Deduction under the American Recovery and Reinvestment Act, which allows you to fully depreciate a wide variety of assets. That’s right. No schedules this year if you don’t want them. And the IRS is happy to let you do it.

That’s just the tip of the iceberg, though, and the only way you’re going to figure out all of the ways that you could more advantageously be classifying your expenses and spending your money is if you explore www.IRS.gov. Use the search bar in the top right hand corner and start getting acquainted with the IRS. You guys could be better friends than you think.

WARNING: Obviously you shouldn’t go reorganizing your business’s books for 2011, confusing your CPA/account/bookkeeper and doing anything funny. However, since you’re bound to be meeting with your accountant again soon, you should think about all the ways you spend money – consider terms like “petty cash,” “entertainment” and “meals” for starters – and start looking them up. Go to your accountant with a list of questions, suggestions and links, and see if s/he can’t continue steering you in great directions to get, use and save more money in 2012 than you may have in 2011.

If you notice any particularly good tidbits while you’re looking around, share them with us in the comments section below. Happy hunting!

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3 Key Findings of a Major Investment Strategy Firm

I recently received an invitation to review the forecasts of an investment firm and research company as they saw things developing in 2012. It shared three key findings.

It would be weird to say that I was overjoyed at reading these findings as they’re not particularly positive, but I was justified in my own assertions that this bear market isn’t going anywhere and that we better prepare to navigate it successfully or fall by the wayside.

I want to share each of these 3 key findings with you in my own words.

1. You’re going to have to do a lot to get a little. That’s been the case for a while now, and it’s not going away any time soon. Count on four years, and don’t be surprised by six. Because it’s just not going to get better out there, that means you have to make things better for yourself by ending waste, embracing austerity and adjusting to this New Norm. As I list those three objectives, I smile to myself because they’re each different yet at the same time they’re all faces of the same die. Evaluate your situation in business and at home and take actionable steps to make your money and efforts last longer.

2. Stocks have been lousy for a while and bonds are following suit. If you thought things were going to get easy, think again. Do you know the saying, “when life closes a door, it opens a window?” Well, in this case, when life closes a door, it also nails the window shut. That’s not a reason to panic, but it does cause me to conclude the following, which, incidentally, is similar to finding 3: “You’re going to have to make your own doors.”

3. It’s trite but true: Cash is King (read parts One, Two and Three of Vic Taglia’s series on the subject). Cash is also the number one asset of a turnaround professional. If there’s no cash, there’s no payroll, there’s no business and there are a lot of angry creditors chomping at the bit to get a piece of what’s theirs. As a business owner, it’s your job to do what you need to do to generate cash flow. There’s little in this world that I’m better at doing, and I’ve even shared one of my best tricks with you before. If you want investors to stick with you and your company, you’re going to need to learn to seek non-traditional ways of staying profitable and maintaining cash flow.

I wasn’t shocked to review these findings. Heed the cautious tone, and start thinking about what you can do differently to keep your business ahead and growing. If you’re already experiencing challenges, face your harsh reality, and start thinking creatively. It’s going to be a long and bumpy ride – but I’m here for you.

What do you think about these ideas?

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Learn From Your Mistakes or Enjoy Them in Round II

I was at a presentation recently where one of the handouts included the following quote. I thought it was a great one to share:

“No one learns from success; you really only learn from your mistakes and failures.”

– John Rowland, former governor of Connecticut

I love it, because it’s the essence of what makes a good turnaround professional. Oh, no, no – those failures are long past. We’re in the business of succeeding where it was not done before us. But as I’m fond of saying, it’s the gray hair or no-hair ones who succeed in this business.

That’s because we’ve been around long enough to have seen so much. No, it’s not that we were failing and learning so many lessons from our mistakes (though we’ve all got some gems in there, I’m sure). It’s that we’ve had so much experience of our own and watching and learning from others’ mistakes and all of the business hullabaloo that goes on around us.

I’m going to encourage you to take some time to think about some of your mistakes and share them. This is a great team-building exercise and a great way to pass around your wisdom. I suggest that you ask every member of your team to think about and explain – to everyone else – one big mistake he or she made and what was learned from that mistake. You never know who’s going to need that wisdom to avoid a blunder that could cost your company big-time.

What lessons have you learned from your mistakes and failures?

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It’s 2012: Let’s Roll Up Our Sleeves and Get to Work

Happy New Year, everyone!

I want to welcome you and your business to 2012.

Unfortunately, in business we can’t just say, “Well, it’s a New Year. All from last year is forgotten. Here’s a totally fresh start. Yeehaw.” (Presumably, the yeehaw would have an exclamation point at the end, but that’s somewhat challenging in this fantasy statement since it can’t really happen.)

Despite the inevitability of continuity, some things from 2011 can be halted and considered “past problems” in some sense. For instance, though there are exceptions, by and large, the tax year of 2011 is now over. You may have concerns about what happened and spend the next four months dealing with them, but they’ve happened. You can’t change what happened – only handle it. There’s something relieving about that.

Also, it’s a new quarter. If you took a loss last quarter – or last year – that loss is definitely going to affect you and your business. There’s no getting around that. But it’s a fresh quarter and a fresh year, and that means a chance to make some changes, some positive impressions and, hopefully, some money. That is what you’re in the business of doing, right?

With the Holidays over, December – also known as the Month of Distractions – is behind us. People will return to their regular schedules. Children will go back to school (soon). If you’re in retail and prepare all year for December, only to hold onto your hat while it barrels you over, then normalcy has returned.

That all means that the New Year can be a time for fresh starts, new ideas and inspiration. I’m not one for the New Year’s Resolution Bandwagon (it’s fraught with problems, not the least of which is a total lack of stick-to-it-iveness), but there is something to be gained by using our culture’s mental break between years in order to be an inspirational leader who motivates one’s team and company to rally around strengths and successes and have a great year. If last year was a tough one for your company – as it was for many companies – you’re going to need to be that kind of leader today, this week, this month, this quarter and this year.

Business isn’t easy. If it were, everyone would be doing it. It takes hard work, dedication and a dash of luck. Whether 2011 was the best year ever or the worst on record, take the first work day of the New Year as a time to get back to business and refocus your company and your team. As a turnaround manager, it’s my job to roll up my sleeves, get down in the trenches and get dirty. If all business leaders did that, I wouldn’t have to. My advice to you is to do just that: roll up your sleeves and get to work.

If you are stuck and aren’t sure what to do and how to handle your business, your team, your finances and your general situation, then I want you to start by reviewing my five articles that ended 2011 about Resolutions for Your Business in 2012. Each of them is just as relevant in its own way right now as it was in 2011. These are ways to think about your business and get started in the New Year – an important balance of continuity with the past and innovation for the future.

Ensure continuity and preserve a feeling of consistency for your business and personnel.

Think about a contingency plan in case of an emergency.

Sit down and review your business’ financial documents.

Analyze not just your business, but also your business environment.

Engage your team in short- and long-term planning, and don’t be afraid to innovate.

What are you going to do differently in 2012? How are you going to manage and grow your business? Please share in the comments below.

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5 New Year’s Resolutions for Your Business in 2012, Part 5

My final New Year’s Resolution is one that can span both 2011 and 2012, as you no doubt have a lot of planning to do.

Engage your team in short- and long-term planning, and don’t be afraid to innovate.

The corollary to the first New Years Resolution we discussed – ensuring continuity – is engaging in short- and long-term planning. Start thinking 3, 6 and 12 months out for short term planning and 2, 3 and 5 years out for longer term planning.

Though it may seem like the final week of the year is a bad time to start doing your planning for the coming year, no time is a bad time to plan if you haven’t done any planning yet.

This is also your last week to do any quick tax planning that may help you for the coming year. Are there any big purchases you’re going to have to make in the next 30 days that you could make now to enhance your tax situation? Talk to your accountant and financial planner if you haven’t already. Make sure they know what you’re doing, where you’re headed and what your goals are. It’s the only way they can help you plan.

To make sure you know where you and your business are going as you enter the New Year, consider sitting down to a series of meetings with your key team members. If you won’t have time for that before the New Year, then take any break time you get to sit down and think through what you want and where you’re trying to take your business.

Start by figuring out what your goals are.

Is your goal this coming year increased revenue? By what percentage? Would you rather figure out how to increase profits without worrying about revenue? Perhaps there are a few KPIs in your business that could stand improvement? Maybe you’re just looking to survive. Do you want to acquire a competitor this year or make your company enticing in a buy-out?

Whatever your goals, you have to know them in order to do your planning. Map them out over the course of the year and start considering how you’re going to achieve them. Who’s involved? Sales, marketing, fulfillment, accounting? All of the above or none of them? As you consider who’s involved and how you want to achieve your goals, you should be starting to see a sketch of your plan for the coming months and year. Is what you’re developing in line with your even longer term goals?

Consider your plan and then start presenting it to your team members. Though business is not a democracy and you do not need to ask for others’ permission (pending you’re the CEO or key manager – and this exercise can work for managers as well as CEOs), it will behoove you and your business if you get buy in from key stakeholders and team members. That gets them on board, aligned and motivated. Ask for their help, input and concerns. This will help you plan even better.

Once you’ve set up your plan, consider reviewing it with your budgetary committee to make sure that you won’t hit any unfortunate pitfalls along the way. One tool I consider very helpful in short- and long-term planing is the whiteboard. Consider employing one along the way.

Don’t just enter the New Year blind. Resolve to plan with your team and make this year a calculated and successful one.

Good luck!