by

If You Want Glory, Join the Marines – Turnaround is Not About the Accolades

The greater the obstacle, the more glory in overcoming it.

  • Moliere

If overcoming obstacles of enormous size yielded glory in such volume, there would be more awards in the turnaround business.

I appreciate the sentiment, Moliere, I really do, but I have to say that I’m not with you 100%.

Turnaround Accolades

General MacArthur was certainly acknowledged  for his work in the Pacific Front during World War II, speaking of enormous obstacles and the glory that goes with them, but for us turnaround professionals, the glory is less, shall we say, pronounced.

Is that maybe because the obstacles aren’t so great?

Far be it for me to crack up the complexity of the problems that face turnaround professionals, but I think most of us can agree that restructuring billions of dollars in debt, successfully renegotiating terms with dozens of creditors, saving tens of thousands of jobs, and preventing hits to the US economy – and sometimes in the business blink of an eye – is no cake walk. And even though much of the work is on a smaller scale, jobs are still saved, money is still recovered and businesses keep going. And all of that is good for the economy.

My reflections on Moliere’s remarks have brought me to the conclusion that the turnaround profession is incredibly satisfying in its own right for the very reasons listed above – accolades be forgotten.

Be Your Own Turnaround Manager

When done right, turnaround work is not the kind of consulting that borrows your watch to tell you what time it is. Turnaround management is about rolling up your sleeves, getting into the trenches and getting your hands dirty. It’s about apologizing for mistakes you probably didn’t make and accepting burdens that weren’t otherwise yours to bear.

This isn’t meant to elevate turnaround management to unwarranted heights or make myself feel better about my work.

I want you to derive a lesson from this when it comes to your business, whether or not you’re the leader of that business.

Why wait to hire a turnaround professional? Sure, experience breeds insight and knowledge into many potential solutions, but if you could take on a lot of what I’ve already said, then you’re halfway to resolving your problems:

– Take responsibility for what’s gone wrong

– Accept the burdens for resolution on your shoulders

– Get dirty by rolling up your sleeves and getting down in the trenches; don’t just sit behind your desk and hide – get out there and make tough decisions

No, these things alone do not turn around companies, but when those around you perceive that you’ve taken responsibility, accepted the burden of making things right, and gotten your hands dirty, they will pull behind you and get on your team. They will listen when you ask them to act; they will share with you and be honest about their ideas and yours.

Conclusion

This is what much of turnaround management is about. As I said, the experience and insight allow us to have a better idea of what will work and what won’t – and how best to do it – but for successful turnarounds, all of this ground work has to get laid down first.

You won’t wind up with a ton of glory when it’s all said and done, but I assure you that it’s rewarding in and of itself. When done right, your job will still be there when you’re done, as will those of your colleagues.

Glory be what it will – I’ll take turnaround any day.

Have you ever accepted responsibility for something that you didn’t have to? What was the outcome?

by

For Fraud Prevention Month, Prevent Some Fraud

March is Fraud Prevention Month, and as far as I’m concerned, that’s a great thing to spread awareness about.

I see fraud all the time. Here’s one of my more recent forays.

So Much Fraud. So Little Time.

In my experience, 75% of fraud is committed by people who have never been caught before. That means the person or people in your business who are likely to commit fraud are not going to come up when you do criminal background checks.

Oh, and don’t forget about family. Family members commit fraud all the time. When you employ family, resentment could lead to stealing, and there’s always a certain sense of entitlement that facilitates matters.

I’ve even seen a CFO who was stealing methodically, and when I looked back I saw that his father had been the previous CFO who was stealing methodically in the exact same way.

Stupid Fraud

Most of the fraud I see is idiotic.

I’ve seen people with folders on their desktops that may as well have been labeled fraud. When I opened the folder there was a spreadsheet inside with every single perpetration.

I’ve seen a CEO who had the account statements from his bank in the Grand Cayman Islands sent right to the office.

I’ve seen a woman who everybody loved and who worked as the payroll processor at a company for 25 years check out of the hospital 24 hours after a heart attack only to process payroll and return to the hospital hours later. She never missed a payroll in 25 years. And as it turns out, neither did the three fake employees she had on the books whose social security cards and accounts she controlled.

And people love to spill the beans. I’ve had people shove USB keys filled with data and file folders and so much more under the door of my hotel room in the middle of the night.

How Do You Minimize and Catch Fraud

Be out of the ordinary.

Fraud happens when complacency abounds. People steal a little, maybe even by accident, and realize that no one was looking, noticed, said anything or seemed to care. So they took a little more. And then a little more. So mix things up.

As I’ve mentioned in another post, I once caught a multi-million dollar fraud by holding a BBQ at 1 a.m. for a 24 hour overnight crew. A guy came up and just told me about something that didn’t make a lot of sense to him. I only caught the fraud by doing something out of the ordinary. When’s your next late night BBQ scheduled for?

Always force your CFO to take an annual two week vacation in which he’s not allowed in the building and he’s cut off from business email. Sit at his desk and do his job, and you’ll be amazed at what you find.

Fraud also happens by working outside the known bounds of your auditors’ checks. If auditors only look at transactions above the set limit of $5000, then once every few months check everything below $5000 also – that’s where all of the fraudulent checks will be. You’ll discover that you’re still paying for leased equipment you’ve long since sold or that you’re paying rent on property you no longer own.

You’ll find all kinds of things. Just do what’s out of the ordinary.

Help prevent fraud in your company and raise awareness of fraud during Fraud Prevention Month and every month hereafter.

What kind of fraud have you found?

P.S. If the answer was none, you’re not looking hard enough.

by

6 Questions to Ask Yourself to Face Your Business’s Harsh Reality, Part 2

Last week we discussed the first 2 questions you should ask yourself to confront your business’s harsh reality, which you can read about HERE. This week, we’re going to ask ourselves the next two questions your should be asking.

3. Am I leading by example and delegating to the right people?

Employees follow the example of a company’s leadership. A huge part of being a good leader is knowing how to share responsibility and credit, and ensure that your managers are setting good examples for those who work with them.

All CEOs have egos. How they survive a troubled situation depends not only on their work ethic and ability to set those egos aside, but also the perception by others of these factors. If employees see you put cash straight from the register into your pocket, they will consider that acceptable. If they hear you bad mouthing clients and customers, they will consider that the company’s attitude – and follow suit.

Part of leading by example and delegating is recognizing that, at some point, all entrepreneurs need to either hire a professional manager or become a professional manager in order to reach the next level of success. Typically, entrepreneurs that don’t make this leap are those who ultimately call upon turnaround management professionals.

4. Am I constantly reacting to business issues, or am I being proactive to minimize problems?

Being a reactive business manager won’t work in the long run. You’ll be distracted and putting out fires rather than creating value. You need to be proactive about your product line, financial state, management challenges and business. If you see obsolescence of your main product line and don’t look for substitutes in order to stay profitable, then you’re not a good manager.

Consider the case of General Motors. They allowed their car lines to get stodgy and produced something the consumer didn’t want. Rather than proactively changing the way things were being done at GM, the company didn’t face the harsh reality of its situation and reacted by filing bankruptcy.

On the other hand, there’s Apple. They evolved their product line even before they saw obsolescence with existing products. They invest heavily in R&D, a very proactive approach.

Be proactive – not reactive.

Get ready for next week, when we’ll learn the final 2 Questions we should be asking ourselves in order to face the harsh realities of our business’s situation. Until then, share the kinds of questions you ask yourself about your business in the comments below.

by

What Texas Hold ‘Em Can Teach You about Business

All business proceeds on beliefs, or judgement of probabilities, and not on certainties.

  • Charles W. Eliot

If that isn’t the truth, I don’t know what is. My business is driven by businesses that believe that business is certain.

Business is Not Certain

I won’t go so far as to say that business is a gamble, because business is no roulette wheel. Roulette is entirely a game of probability. And when you add 0 and 00 onto the wheel it becomes probability that’s stacked against you every time.

Business is more like poker. You know what’s in your hand (King-4 suited, let’s say), and that hand is playable.

As the game proceeds and cards come out, you have a better idea of the conditions, like your assets, customer base, and so forth.

However, there are also things you can’t affect – though you can make educated predictions – like what’s in your opponent’s hand. In business that would translate to prevailing market conditions, natural disasters that disrupt supply lines (can anyone say Japanese Tsunami?), and so on.

Beliefs, Judgments & Probabilities

People who play poker purely based on the mathematics believe that, if they look at and comprehend everything on the table and what their opponents could be holding, poker is a game of probability.

However those who play Hold ‘Em know that they also have to follow their guts and use their instincts, taking subtle clues from the situation around them. How long did their opponent take to check, bet or raise? What was that raise and how does it compare to the blinds and the pot? Did you perceive a tell and are you sure that is his tell? What’s the pot at? Is he bluffing? Should I bluff?

The answers to all of these questions are, to some degree, unknowns, and our opponents are thinking comparable things (remember, in the analogy, poker opponents aren’t our business competitors – they’re larger issues we don’t know a lot about).

It is due to these questions, our gut feelings about their combination of possibilities and effects, and sheer probability, that we make decisions and act, both in poker and in business.

The Illusion of Certainty

Nothing is certain because we don’t know beyond a shadow of a doubt what’s in another person’s hand.

When businesses make spreadsheets and predictions, they fail to understand that they haven’t accounted for everything. There are unknowns and spreadsheets are based on assumptions. Spreadsheets are almost always wrong. And try as we might to act based on spreadsheets and these assumptions, an opponent’s better hand is still going to beat us.

But if you’re a good player, and you consider as much as you can, and act in accord with what you’ve considered – and you face your harsh reality (i.e. what’s in your pocket and what comes out on the table as it comes) – then you can act intelligently.

If you lose a hand – and you will – that’s okay. As long as there are still chips in your stack – which we’ll call your contingency plans, something every business should have – you’ve made it to fight another day, and play another hand.

Summary

Remember, the business lesson to learn from Texas Hold ‘Em is that nothing is certain in business. As Charles Eliot says, everything is based on belief, judgment and probability. It’s understanding that fact, and acting based on it and those beliefs, judgments and probabilities, that will make you a good business leader.

And don’t forget, you only get knocked out of Texas Hold ‘Em when you go all in.

Do you play poker? How do you apply it’s lessons to business? What other games in life help you learn about business?

by

The New Norm is Becoming the Norm

How long is something new before it just starts being the status quo?

It’s been three years that our economy has been like this. I predict another 5-7, which could get stretched out to 10 years before we get back to a pre-2007 economic climate.

I’ve been saying for a while that we’re headed for another recession and that the economy is going to be flat for the next 5-7 years. By definition we can’t have a double-dip because we’ve had two quarters of growth.

But we keep getting held back from further recovery due to our own folly and the interconnectedness of the world economies.

The stock market has dropped 3.5%, giving up all of its upside for 2011, and no one could predict the tsunamis or the nuclear fallout in Japan. Another episode in Europe or elsewhere could put the U.S. right back on its butt (if we haven’t already tripped and we’re just in that pre-getting it state before we wind up on our butts).

If you read the papers in the last couple of days, you heard that the knocked-out power-plants that were supposedly controlling only 5% of of Tokyo were actually controlling as much as 25% of the electricity in Tokyo. This has slowed and will continue to slow Japanese manufacturing and business dramatically. Due to the Japanese “just in time” inventory method that most modern businesses have gone to in the last 15-20 years, Japanese auto makers in the US and others in the manufacturing sector are going to be slowed down. This will only further exacerbate our own recovery.

Who knows how far the Japanese market will go down at this point, and the more problems that arise the more this market will spiral. This will affect us.

Why am I throwing all of this out? No, I don’t like dread and doom. I like facing reality, and I’m sharing this because the recovery is going to get stretched out more and more and problems compound problems.

So what do you need to do? You need to prepare yourself and your business for this situation.

It can be hard to change because change is hard. But you need to look at what you can change to be proactive, even if something’s been working for 20 years. It may not need to be the product itself, but it may need to be your manufacturing processes or something else that let’s you stay ahead of this curve.

Separate the emotions, and look for practical solutions.

And beware the alligators. They may already be chomping.

What do you predict for the economy in years to come? How soon will a full recovery be in effect?

by

6 Questions to Ask Yourself to Face Your Business’s Harsh Reality, Part 1

Over the course of the next few weeks we’ll be fleshing out 6 questions that every business leader should be regularly asking himself or herself.

These questions will help you to confront the harsh realities that all businesses and their owners face, thereby allowing you to protect and grow your business more safely, efficiently and profitably.

1. Am I adjusting to the New Norm or am I being complacent with business as usual?

The New Norm, as you may have heard, is the result of the downturn in the economy in the last 3 years. Some pundits predict a flat economy for as much as 3-7 years as we absorb severe decline in real estate value, credit card debt, unemployment, high energy costs, foreclosures and more. As the leader of your company, it’s your job to adjust your business accordingly.

In order to avoid complacency and being lulled into a false sense of security, take concrete steps towards streamlining your business to operate most profitably. Consider fewer fixed assets and more variable ones. For instance, leased or rented assets, instead of purchased ones, can make your business more flexible. On the other hand, if you can take advantage of competitors’ mistakes by acquiring equipment or inventory for $.20 on the dollar or of the tremendous amount of excess rental, warehouse and manufacturing space all over the country, this might be a great opportunity to do so.

As you think about these issues, consider your business plan and model. Should it be updated based on the New Norm? The answer to this isn’t always “yes” but it does deserve consideration.

2. Am I leveraging my banking relationship to enhance my business’s future?

Know your banker, and be prepared to call on him during difficult times. Establish credit by borrowing and repaying loans consistently, even when you don’t need the money. This way, you’ll avoid having to establish a new banking relationship or credit when you really do need a loan. In addition, it reflects well on your character to establish this credit, inducing your banker to work with you.

Don’t borrow to supplement negative cash flow. Borrow to facilitate operational needs and to establish your credit. The money from a loan could help you take advantage of a great opportunity, like acquiring equipment at a low multiple, or taking advantage of and buying out a failing competitor.

Just make sure to leverage your banking relationship now for banking issues that occur in the future.

Next Wednesday we’ll talk about the next 2 Questions we should be asking ourselves in order to face the harsh realities of our business’s situation. I’d love it if you shared the kinds of questions you ask yourself about your business in the comments below. Read Part 3 HERE.

by

Not Owning Up to Your Mistakes Is a Huge Mistake

“It is only an error in judgement to make a mistake, but it shows infirmity of character to adhere to it when discovered.”

– Christian Bovee

When was the last time you made a serious mistake? How did you react when you realized the error?

In our success and efficiency-oriented world, people often think of making mistakes as something to be ashamed of, as something to ignore or hide. When realizing their mistakes, many leaders in the business world focus more on burying the error and coming up with an explanation than trying to fix the problem they created.

I am here to tell you: these leaders are wrong.

Of course, the perception of our mistakes as leaders can be wisely managed (it’s called PR). However, we must know that while making mistakes can be harmful to our companies and uncomfortable for us personally, it is also an opportunity for us to exercise true leadership.

Own Up to Your Mistakes

Think of mistakes as an opportunity to show strength during a crisis.

Aside from the practical implications of admitting our mistakes (whether to ourselves, others or both), as people of integrity we know it is the right thing to do. Only when we take responsibility for our mistakes can we start properly fixing them. And, owning up to our mistakes is the only viable long-term solution to correcting them and learning from them.

More often than not, mistakes are discovered. Wouldn’t you rather be seen as an upstanding leader, who acknowledged the flaw in his actions and proactively did something about it, rather than one who is confronted with the mistake, which he initially denies until facts prove he has been lying?

We make decisions every day. We weigh the set of options and opportunities available to us and make what we think is the most optimal choice. These choices are often based on assumptions. Assumptions are often incorrect, and circumstances change – and sometimes we can be wrong. Sometimes we will be wrong.

So, in short, here is my advice:

  1. Accept that we all make mistakes, but don’t be afraid to take wise risks because you are afraid of making mistakes
  2. If you make a mistake, own up to it should it become known by others. Use the opportunity to grow and act like a leader.
  3. Under all conditions, be proactive in finding a solution after you have made a mistake and in avoiding future comparable mistakes.

What have you learned from your past mistakes? Let me know in the comments below

by

The Power & Pain of Social Media

When our clients call us, they’re in trouble and need help immediately; they call for triage, not plastic surgery.

If you’re taking the time to read this, I assume you aren’t in dire straights right now (and hopefully you never will be), and that’s exactly why this proactive message about avoiding huge headaches may also help strengthen your relationships with customers and reinforce your brand. I’m talking, of course, about social media.

Many businesses scoff at the notion of employing a “Community Manager” to set up and maintain LinkedIn, Twitter, Facebook and other social media, but if there’s anything we’re learned and understand, it’s that – no matter what business you’re in – your customers and employees are using these media – and you need to understand them.

Don’t believe me?

Over 35 million tweets are sent every day (a tweet is a message sent using Twitter). There are over 500 million Facebook profiles. If you don’t think social media are important or that your employees and customers aren’t using them, think again.

Have a Social Media Policy

Even if you don’t want to utilize social media for the good they can do, you definitely need to have internal policies in place to mitigate the potential havoc they can wreak when left unattended and unchecked. Make sure your employees all know the Social Media Rules of your business.

Ask yourself, are employees permitted to use social media at work? Can they mention your company on Twitter, Facebook, LinkedIn or anywhere else? If so, are they allowed to do anything more than list your business as their place of employment?

If they say anything else, your employees may be perceived publicly as official representatives. If employees say anything negative you could have a nasty situation on your hands. After all, if someone robs a bank in a Wal-Mart uniform, that’s bad for business, and it’s on the news. If employees can mention your business, make sure they do so in a consistent and positive way.

The Consequences of Ignoring Social Media

If you opt to ignore social media, that’s your prerogative, but know that your business may have profiles and pages on either LinkedIn or Facebook just by virtue of employees listing your business as their place of employment. Others who don’t work for you might be claiming they do if these pages go unregulated.

Having someone within your company monitor these pages may prevent problems from arising in the future – if they haven’t already.

Granted, these issues may seem minor, but none of us wants the hassle. Monitoring social media and implementing policies is part of being proactive rather than reactive. As you start to see their power and value – especially when harnessed together – you may even want to use them to your advantage.

Have you had any unfortunate social media challenges? Which social media do you use and how do they affect your business?

by

What Cheerleaders Can Teach Us about Big Business

 

Last night I did a radio interview (that I’ll post when the podcast becomes available), and I was asked a question that I thought I’d share my answer to with you here.

I was asked about my guiding principle – one that helps me lead my firm and other companies that hire me as their CEO.

My Guiding Principle: Be Proactive, Not Reactive.

I live by this motto, give speeches about it, and I’ve mentioned it here before.

All businesses have problems. Nothing goes as you expect it to. But if you’re proactive in your leadership, decision making and planning then you’ll have the tools, people, and ideas in place to handle much of what comes at you.

On the contrary, if you’re constantly reacting to everything, you’ll never get your feet underneath you long enough to resolve your problems.

I’ve also found that honest communication goes a long way. People try to lead secretly, and that doesn’t work. Yes, leaders run businesses, not committees, but if leaders are honest with those involved, especially key stakeholders like boards, banks and creditors, there is a much greater chance for success.

Ra Ra Ra!!!

My initial turnaround success was a Chapter 11 restructuring at a company called Cheerleader Supply, a $50+ Million revenue business with over 1000 employees. As their name suggests, they made cheerleading uniforms, pompoms, etc., and they sent kids to summer camp to learn how to become cheerleaders.

It was the spirit of Cheerleader Supply that helped get it through Chapter 11 restructuring, and I learned a serious lesson about attitude from them.

Think about football games. When your team is down, the cheerleaders cheer harder – they don’t get dejected. Seeing that attitude – embodied by everyone at Cheerleading Supply – inspired me and allowed me to be the best catalyst for big change that I could be and ultimately brought that company through Chapter 11.

I’ve applied that attitude to everything going forward. To this day I still have a pompom in my office reminding me of this original successful turnaround and the importance of cheering harder and having the right attitude even when things seem their darkest.

What You Can Do

I encourage you to go forward with this attitude, which goes hand and hand with being proactive instead of reactive.

The proactive leader is cheering constantly for his company by saying that nothing is going to stop it from being successful – especially not his own complacency when it seems like he’s up by four touchdowns and can just coast (are we good with the football metaphors?).

Learn from the cheerleaders and be a proactive leader.

What’s your guiding principle? How do you think these notions can help you in your life and business?

by

Lions, Tigers and Creditors – Oh, my!

I’ve written before about optimism, but I think this cartoon catches a different element of the word.

Note the suited man (or man-like figure) buried up to his waist in the midst of a barren desert. Another soul is not in sight, yet he declares, “Someone will come.”

Not likely, my friend, not likely.

As I’ve mentioned, optimism is important, but it requires a dose of realism. This guy needs help. He needs a bailout. He needs a rescuer.

But he’s not going to get any of that in the form of a handout.

It’s people in this situation who are my specialty: people who are, in a word, screwed.

This guy has an emergency situation. The only thing that’s different about him and the people I deal with is that those I’m dealing with are generally missing a proverbial arm, buried up to their chins, and there are lions, tigers and creditors – oh my! – coming from all directions.

Have you ever been in an awful situation like this? Was it worse or better than this guy’s situation?