Over the past twenty years, I have seen many leadership teams successfully guide their businesses through major change. There is a common denominator in our business turnaround efforts: ‘Seven Pillars of Successful Turnaround and Transformation.’ Consider for example, one situation. As the newly appointed CEO of what is now InterContinental Hotels Group, Richard North inherited a business with conflicting strategies, bloated overhead, a deteriorating financial position, byzantine management processes, a public spinoff, and a looming takeover battle. Applying the seven pillars, Richard did achieve the seemingly impossible. He redefined the strategy, realigned a new leadership team, cut nearly $200 million in overhead, redesigned a corporate center and three global regions, defeated a takeover attempt, and successfully spun off from the Bass Group on target, as planned.
Core Concepts of Organization Turnaround & Transformation
Although there are numerous books on change, financial turnaround, and latest consultant models, many companies still struggle to achieve the desired successes. In many cases, companies lack an integrated approach that includes strategy, organization design, and finance imperatives conducted in a “safe harbor” and non-politicized process. The key principles of such an approach are presented here as the ‘Seven Pillars of Successful Turnaround and Transformation.’ Each pillar individually is insufficient to transform a company, but collectively, they can lead to powerful—and fast—change.
Size the Prize
Size of the prize defines not only vision, but also the magnitude of change in market positions, target economic results and business valuations, the deadline for the broad changes, and what the impact of these key leaders and all employees.
As you think about your organization transformation, can you clearly define the prize for leaders and employees, and is it enough to compel change?
Appoint Bold Leadership
Because turnaround issues can be complex and paralyzing, the senior leadership team must be bold, decisive, and aggressive in moving the organization forward. Leadership must be able to provide strategic clarity, alignment, and a sense of urgency to drive results.
Are your leadership teams sufficiently capable, decisive, and driven for the same significant results?
Clarify the Organization Crown Jewels
When companies try to compete in too many areas, they lose their distinctiveness. Companies must clearly redefine the distinctive growth potential within the industry value chain, and most compelling customer value propositions. Senior leadership must align around industry advantage and customer distinctiveness.
In your company, is your senior team in agreement about the number of businesses and the crown jewels of each business? Are they aligned about how to leverage strategy with these crown jewels to realize a competitive and organization edge, sustainable over time?
Design More than Back of a Napkin
There is an age-old temptation to create top line structure, typically function based, on the back of a napkin. A more strategic approach must leverage the crown jewels of the business The structure should be a deliberate construction of targeted work and roles and relationships, relative to impact on competitive advantage.
Are your work processes and capabilities strategically tailored to strategy? Are they effectively integrated into an organization design that minimizes barriers and handoffs, particularly across the core advantage work?
Leverage Your Best and Your Brightest
Many companies view strategy as the sole domain of the CEO, who may rely significantly on external consultants for analysis and advice on key strategic decisions. This pillar suggests your biggest transformation asset is actually a cross section of key internal leaders and professionals in partnership with the CEO and senior team. These leaders are the uniquely knowledgeable about the business, front line difficulties, key customer issues, and the changes needed. They can be a valuable strategy and design team, and primary sponsors for implementation and emissaries for change.
Design processes need to be more than unilateral, isolated decisions by a few leaders at the top. Can your organization trust your best and brightest to do the work of strategy, design, and turnaround?
Cut the Gordian Knot*
Most organizations struggle with a few strategic dilemmas that can create significant gridlock. For example, a product company debates whether to sunset current products or technology and launch new ones or regional businesses pause over how to enter new geographies, etc. Indecisiveness in these areas causes a chain of delays that ripple throughout the organization. I have found that a best and brightest team, working in the context of the target prize and crown jewels, can objectively examine and solve very complex issues and slash these Gordian Knots.
Do you have the right team, in a ‘safe harbor’ environment, that can cut through complexity and quickly resolve strategic and organizational issues that are preventing us from moving forward?
*The Gordian Knot is a legend of Phrygian Gordium associated with Alexander the Great. It is often used as a metaphor for an intractable problem solved by a bold stroke ("cutting the Gordian knot") (Wikipedia, par 1)
Accelerate Change through Accountability and Speed
Commit the eight, convert the eighty. From the very beginning, it is important to integrate an overall change strategy. The senior team must first commit to key strategy and design elements – hence, commit the eight. The eighty refers to the next level of leadership and key professionals who should be involved in the strategy and design process. Every phase needs to be accountable to deliver “process tight and product strong” results. Speed presents a dilemma; move too quickly and risk incomplete solutions, but move too slowly and fail to achieve sufficient traction.
Are your teams following a plan that is disciplined and structured? Can you finish your turnaround strategy, show significant progress within three months, and realize compelling results within the first year?
Companies I have worked with who were successful at transformative change share common elements. Each company had a leader who faced a downturn and critical turning point, bet on internal leaders willing to tackle the turnaround challenges and redesign process, followed a disciplined and structured process, took dramatic short-term actions which aligned with clear strategy; identified speed as a major driver and accomplished the design and transition planning within a few months. In short, these companies adhered to and demonstrated the key pillars and principles of transformation.