Turning Around Manufacturers
With the ongoing downsizing of manufacturing one of the world’s most endangered species may well be the manufacturing CEO. Thankfully, many of these manufacturing CEOs continue to overcome adversity and ultimately develop and lead thriving companies.
Some of these manufacturing CEOs, however, have put themselves, or been put into, the position of trying to turn around a failing enterprise. While turning around manufacturers certainly can be difficult, the satisfaction of successfully turning around a manufacturing company often exceeds the immense mental and emotional strain that accompanies all of the tough decisions that “go with the territory.”
When I am involved in turning around manufacturers I like to ask the CEO if he would get a better return on capital invested if his (rapidly depleting) capital was invested in a savings account rather than in his company. Owners often find this question to be a bit shocking. Fact is, sometimes you are better to close than continue. It can be a bitter pill to swallow but sometimes turning around manufacturers is impossible.
If the owner feels that there is a realistic possibility of returning his company to profit and is willing to undertake the rigorous steps found in any turnaround he needs to follow three basic steps.
The first step is to perform a survivability assessment on your company. Prior to making this assessment you need to spend some time in serious thought and get input from unbiased, relevant, and experienced outsiders.
Some companies will likely to die regardless of the intervention. If this is the situation you find yourself in, it’s time to pack up the old kit bag and close your business. Harsh advice but true nonetheless. For every “miracle” turnaround there are many more that fail. Being positive and being delusional can be an easy line for a manufacturing CEO to cross. As the man from ING used to say, “Save your money.”
Some companies will likely survive if they receive dramatic and immediate action. If you find yourself in this situation you have a chance of surviving. The operative word is chance. It’s important to realize that the changes you will need to make to your marketing and selling practices to save your company will be both sweeping and very wrenching. I am often amazed at the number of CEOs who want their business to change but are unwilling to make changes. It’s imperative for these manufacturing CEOs to understand that things will feel a lot worse before they start to feel better.
Some manufacturing companies will likely survive if they receive a moderate level of action. If you think this is an accurate assessment of your situation then you have a good chance of surviving. Provided the core of your business is sound you will only need to endure a moderate amount of change to your marketing and selling methods. In my experience the CEO needs to be willing to be flexible enough to agree to moderate changes in the way his company goes to market.
The next step involves stabilizing the company. This is the function of stripping all emotion out of your decision-making and a willingness to use a scalpel or a bone saw to make the necessary cuts. While examining staffing levels and making the difficult hiring, firing, and reassignment decisions is what you tend to think of at this stage, you also need to remember to cast a cold eye on all of your marketing and selling practices.
The final step involves making the company healthy and subsequently creating systematic growth. One major danger is that the CEO will fall back into past bad habits and create the circumstances for another reversal. To avoid this you need to create marketing and selling practices that are a tightly structured process rather than a series of ad hoc events. Remember that random processes cannot be improved upon, so test, measure, optimize, and repeat the process.