Featured Article – 2007 July
When Turnaround Professionals Answer the Call
by Tom Beane
For turnaround managers, the best-case scenario is when the owner or CEO of a troubled company recognizes that it’s time for a change — and he makes the call before it’s too late. Usually this realization comes about after completing a process very similar to the five stages of grief — Denial, Anger, Bargaining, Depression and Acceptance. He’s gotten past blaming everybody else — his bank, his creditors, his employees — and now realizes that it’s up to him or her — and no one else — to find a way to fix the business NOW!
Of course it rarely happens this way. Usually, management — and its advisors and creditors — are all at different stages in the process with little or no agreement on the next course of action. There are significant differences of opinion among the parties as to the severity of the situation. In an attempt to resolve these differences, a creditor or advisor often presents management with a list of consultants and strongly suggests that a turnaround firm be retained. It’s understandable that the executive is reluctant to go down this path, but he knows he has to make the call. He wants to know how I can help. Here’s what I tell him.
We work for you. The lender or your attorney gave you a list of consultants to call. You want to know who I’m working for: am I working to help them or to help you? A reference by a lender or other trusted advisor usually indicates previous experience with the group and positive results. When your business is in a troubled situation, the ability to quickly regain credibility with your creditors (secured and unsecured) is one of the keys to success. Working with an experienced, known firm can sometimes facilitate a positive outcome. Regardless of who recommends us for an assignment — your attorney, CPA, banker or other professional — we work for you. You want to make your business profitable again. It’s our job to help make that happen.
You are right — we don’t know your business. Though we have experience in hundreds of industries and potentially have a good understanding of yours, our experience has shown that, in a distressed situation, specific industry knowledge or experience is not as important when choosing a turnaround professional as is the firm’s experience in dealing with crisis situations. Specific knowledge of creditor relations, out-of-court workouts, and bankruptcy proceedings are the skill sets required. We will never know your particular industry as well as you do, but we know how to put a troubled company back on the path to profitability.
We are not a Swiss-army-knife consulting firm. Our practice concentrates solely on financially and operationally challenged businesses, regardless of industry. Working with troubled companies is the only thing we do, allowing us to provide a level of expertise that other multi-practice or industry-specific firms cannot match.
We know when to go home. Our job is to perform to the best of our ability and in the most expeditious manner to return your company to financial and operational health. We understand the term “time is of the essence” and our analysis is focused, with clearly defined objectives allowing a quick resolution. We know when to leave!
If you need help later, we’ll show you how to get it. When your turnaround advisor completes an engagement, that doesn’t guarantee clear sailing for your company. It is often wise to assemble a new team of advisors to help guide your business in the right direction. We can help you set up an advisory board of experts who can assist you in the areas where your business needs the most support.
Marc Kramer, a faculty member at the Wharton School of Management, has written an interesting article on the value of turnaround consultants. Read it here.