Turning around a Dysfunctional Enterprise

The Myths of Turning Around a Dysfunctional Enterprise

Success does not bask in the glow of the plan, rather it multiplies in the sweat of the plan – Wangari Maina

A myth is a false belief that has been held as true for so long that when one tries to unmask it for what it is, only an open mind can digest the fact that it (the myth) is a falsehood.

Dysfunction implies that there is a structure of normalcy that has undergone disruption and it has resulted in undesired results.

Businesses, being living organisms, experience moments in time when they are dysfunctional. They stop being as per normal or standard expectations. At such times and the leadership sometimes falls back on some myths to make decisions or orchestrate strategies to bring them back to normalcy.

An example of such a myth is that when a business runs into financial constraints, the first two departments to yield some ground are Human Resource and Sales & Marketing. There’s usually a presumption that cutting back operational staff will reduce the wage bill and reducing marketing expenditure will save some the business some money.

Experience, research, and effective turn-around strategies show that this is a long-held myth and smart turn-around executives see it as such. While many business owners and managers may argue about this one myth until the cows come home, this article seeks to unravel other more subtle falsehoods that affect the success of a turnaround process in a dysfunctional enterprise.

1. Success with one enterprise turnaround process is a sure indicator of future turnarounds

Boards of Management and CEOs who seek to turnaround their companies, often make the smart decision to hire a turn-around executive to handle it all. Unfortunately, most limit the credentials of the turnaround executive to his successes in the turnaround process. Rarely do they focus on what was ailing the dysfunctional enterprise.

Enterprises have variable challenges that call for varying solutions. A pharmacy may be crumbling because of the inventory management while succeeding at having loyal employees. Another one may be suffering from a domineering CEO who takes a 3 day holiday every month on company cash.

Turnaround solutions for these two pharmacies are as different as night and day and they call for a different skillset and approach by the turnaround executive. In the one pharmacy, understanding the processes of ordering, stocking, and sales is more critical than setting up expenditure approval structures to limit access to the cash in the business.

If you are going to hire a turnaround executive, let him/ her articulate, even if in broad terms, what the dynamics of previous turn-around processes were, what factors contributed to the success and what failures occurred in the process.

Phases of Change

2. The more you do, the faster and better the turnaround results will be

The other myth that many business owners have in handling a dysfunctional enterprise is that they need to do more than they are currently doing. Most of the time, a close analysis of the business will reveal that less needs to be done. Stop the franchising, stop adding the inventory, stop the price war, stop hiring new people. JUST STOP… at least for a moment of internal review.

If your shop is not selling enough to cover rent, the problem may not be the inventory, it could be that customers are no longer coming in the door. It could be that your target market went online and you didn’t. So coming to your store is an inconvenience.

The other understanding of this myth is that it is the big things that made your enterprise dysfunctional. The fact is, big problems start as small, and left unchecked, they fester and shortly, they are a mountain to deal with. Getting through to the root of that mountain is work that requires a step back, which many people don’t want to do because it reveals failures and miscalculations that are easier to forget than deal with.

Just remember this, the best golfers swing and the best archers shot depend on how far back they pull. Take some time to review how you got to your dysfunction – did:

  • meetings stop making sense?
  • your brand get diluted by cheaper products?
  • you silence your staff by ignoring their ideas?
  • customers sop being the core of your business?

Whatever it is, take the time to stop and you might just discover that there is too much unnecessary work going on in your business that is distracting you from the main focus.

3. You all share the same vision of the reborn enterprise

This is a myth that is prominent in partnerships and family businesses. The business may have a shared vision that is plastered all over the business walls, merchandise, website, and other branding areas. However, the pain brought by the dysfunction has different levels and modes of effect on the leadership of the business. If these wounds are left unattended, it is possible to have people with different visions and plans for when the business is enjoying success again. Some of the directors may be planning for higher dividends, some may be angling for better offices some may be angling for better equity, and some may be plotting to get rid of the others who are seen as hindering their visions.

The fact is, beyond financial, turnarounds call for serious emotional investment from the business owners/ directors. There are going to be difficult conversations, some personal things may come out that impact on the business and people will be required to shape up or ship out. Whatever the quagmire, it must be handled well because the turnaround is not a trial and error. A good turnaround will bring back the business from the brink and business owners do not have the luxury of saying, “We will talk about our expectations, once the business is up again”. The effect that cheese has on mice is minuscule compared to what an increase in revenue and profit does to personal ambitions.

There is always a personal reason that keeps people enduring the turnaround process and the easiest way to bring it forth is to ask, “what does this turnaround process mean to you as an individual?”

Time

4. You have it all figured out

No matter how hands-on you are in your business, you don’t know it all, and you don’t have it all figured out! That you have it all figured out is a lie that many a business leader/ business owner feeds on to keep from facing the truth that the enterprise is dysfunctional and needs professional help.

Many business owners seek to hire to reduce the workload on them rather than hire to equip their business with the best solution givers as the business demands grow. Just because one knew the process of inventory management between the supplier, the kitchen and the customer’s plate does not mean that with 5 franchise outlets they can still manage the process efficiently. Just because you can identify that the problem in the business is poor handling of patients at your clinic, it doesn’t mean you know the solution; and even if you do, it doesn’t mean you can implement it with radical and positively transforming results!

This myth is normally a perfect platform to justify why the business cannot afford to hire or have a professional turnaround executive on their payroll or expense as a consultant. Many years ago, the statement “physician heal thyself” was coined in jest but it rings true today. There are things that one cannot fix by themselves as a business owner precisely because they are the business owners.

Seeking professional help and solutions is not a sign of weakness. It is a sign of leadership and respect for the many people who depend on the business.

5. “Let’s do business first” everything else will follow

This myth best exemplifies a lack of leadership, vision, and care for the people who rely on the business doors being open. It carries the idea that “I know we are almost having a flat tire, but let’s keep going and hopefully it will hold until we get to our destination”. This reasoning is wrong at so many levels yet it is something that many generational businesses suffer from.

Consider a baby clothes business that was set up in the heart of the city in the 1980s and has lived through the years, to be handed over to a 3rd generation. The 3rd generation knows the power of setting up an online shop or have a Facebook or Instagram page, but the previous generation doesn’t understand how these will help their business. They don’t understand how a pregnant woman does not want to hustle through traffic to the shop to touch and feel the baby’s clothes and blankets. Their inability to see the potential gets them to say, “Let’s continue business the way we have been doing it. We will get there when we are ready!”

The ‘everything else’ that will follow is what makes up the business activity and it cannot be left to chance or guesswork. It has to be consciously built into the strategic plan of turning around the dysfunctional enterprise.

Conclusion

As has been evidenced by many a turn-around executive, a dysfunctional enterprise does not require rocket science to get it on the right track again.

It requires work, sacrifice, transparency and a firm determination towards a focused goal of getting it to be effective, profitable and worthwhile again.

Download an excerpt of the Strategic Business Turnaround Book or BUY NOW

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Strategic Business Turnaround Book

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Wangari Maina

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