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When Business Stalls, Follow These 5 Steps To Turn It Around


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I have taken part in many business turnarounds in my career, and time and again noticed the same problems, regardless of whether the reason for the turnaround was a relatively minor situation or a reorganization after bankruptcy. Here are the five steps that need to happen during any major business adjustment and some of the pitfalls to avoid along the way.

1. Assessing the Situation

Before a successful business turnaround can be implemented, it is crucial to understand what got the company where it is now.

When businesses fail, it is most often due to ineffective management. Since management is usually the problem, it is difficult to use current management insight to determine what change is needed. As outside consultants, we often hear from ineffective management teams that they need greater funding to correct the sagging business, but we know that throwing money at a problem does not work.

The people who created the problem in the first place will not know how to fix it. Providing them greater resources is a mistake: it wastes money and degrades employee morale. Also, failing businesses most often do not have good metrics in use to manage and guide the business. Metrics should not only tell company leaders where they have been but should also be used to gauge future performance. Management should be able to clearly describe how the metrics it uses will predict future results.

Providing that the company’s recruitment services are competitive, the issues affecting the performance of business developers can range from an ineffective sales process to low morale. In these situations, I have never seen a “bad” sales team, but I have seen plenty of lousy processes and plenty of low morale—both deal-killers that will destroy any company’s business development effort. Great insight can be gained by getting close to the company’s sales force, sales processes, and customers to determine why sales are not progressing to plan.

 2. Defining a Winning Culture

Companies in need of a turnaround usually have ill-defined culture. We can test this by asking recruiters to describe the company culture as they perceive it. In failing businesses, employees will not be forthcoming, and answers will vary from person to person; you’ll find that no two recruiters share the same description. Especially when a company is charting rough waters, it is imperative that the recruiting team embrace a unified culture, one that will define success.

At the heart of culture are the core values a company embraces. Core values are like the Ten Commandments. They are simple action statements that define the principles the company believes in, not fuzzy declarations that can be interpreted at the whim of management. They should be published and posted throughout the company. Employees should understand the corporate commitment to them, and that disciplinary action will follow their violation.

“Tell the bad news first, not last,” was a core value we used at one company. If we were not able to make a customer delivery on time or if we expected to miss our sales forecast, we were expected to give fair warning to the customer or the CEO. This core value became a cornerstone of the company’s customer service. Another core value was, “Do the right thing for shareholders, customers, and employees, and don’t take a position that favors one over another.” This core value ensures that the company will keep the playing field level for all and not sacrifice one group for another.

Many companies say they do the right thing—but do they? And do they do it all the time? Core values define corporate culture, and companies without them tend to wander and underperform.

 3. Managing People

People are the most important component of any organization –- and recruiting organizations ought to know this better than anyone. Unfortunately, what often happens here is that recruitment organizations suffer from “cobbler’s children syndrome.” When companies fail, it is almost always due to ineffective management. In a business turnaround, it is important to identify who stays in his or her current position and who must find a position elsewhere. However, most failing ventures have poor methods of measuring individual results, so care must be taken in this selection process. Making this determination is critical; powerful managers surround themselves with high performers.

However, when looking at the long term, it isn’t so much who you fire as who you hire. To fill out a failing company with high performers, look for a track record of success. All high performers will have one. To retain them, you must assure these valuable employees that they can trust management’s word, that management has their best interests at heart, and that management is committed to distinction in all that they do. High performers want to be on a winning team, and if they think management can’t accomplish this they will look for employment elsewhere.

 4. Creating a New Vision of the Future

When companies fail, employee morale and confidence is degraded. Most employees in these situations want their company to prosper, but they don’t know how to accomplish it. They believe they have done an admirable job, and will resent those who say otherwise, especially if employees from other departments lay blame on their department. This not only creates low morale but also degrades teamwork, a necessary ingredient in success. In these situations it is imperative that a new vision be formulated and effectively communicated to all employees.

Don’t expect this to be an easy task—it usually isn’t. Most employees believe they have been on the right course, and they see the company’s failure as due to the ineffectiveness of other departments, not theirs. When the new vision is communicated, expect employees to fall into three categories: 1) Those who embrace it with enthusiasm; 2) Those who sit on the fence waiting to see how things go, and; 3) Those who do not buy in. Who resist the change, and are open and verbal in their opposition.

The fence-sitters and the resisters must quickly reverse their positions and enthusiastically support the new vision or find employment elsewhere. The sooner management converts these groups, the better. Powerful firms have recruiters that embrace a vivid vision of the future and employ individuals who are confident in their management and in their employment with the company.

5. Developing a Strategic Plan

Once a turnaround management team has defined the core values, culture, and vision of the future, effective strategic planning can begin

The process should include the top management members who will be charged with implementing the plan. The meetings should not be secret, as employees will always find out, and become suspicious. No one likes secret meetings that may affect his or her future, and recruiters are especially sensitive to this. After the plan is finished, the team should be promptly informed as to the outcome and how the plan affects their future.

Turnarounds Take Understanding

Pulling off a business turnaround takes an intimate understanding of a business, including its customers, products, sales process, and employees. Powerful leaders and managers will begin by defining the culture and vision and will then communicate these to gain strong employee support.

Since the turnaround process should be completed in a short time period — stalling or extending it can lead to even more losses — management should apply all the tools available, including third-party consultation. With the proper tools and an understanding of these five steps, you’ll be on the road to a successful and permanent business turnaround.

John R. Treace has over 30 years experience as a sales executive in the medical products industry. He spent over 10 years specializing in the restructuring of sales departments of companies that were either bankrupt or failing. Investor groups and venture capital firms hired him to manage turnarounds of pre-IPO companies. In 2010 he founded JR Treace & Associates, a sales management consulting business. He is a member of the National Speakers Association and earned a BS in Psychology from the University of Memphis. Treace is the author of the new book, “Nuts & Bolts of  Sales Management: How to Build a High-Velocity Sales Organization.” For more information go to www.treaceconsulting.com.