Lessons from Taking on a Turnaround in Middle Earth

“The greater danger for most of us lies not in setting our aim too high and falling short; but in setting our aim too low, and achieving our mark” Michelangelo

There is no greater challenge in business than carrying out a corporate turnaround. But there is also no opportunity as exciting as working to restore one of the most iconic businesses in the southern hemisphere….in one of the most stunning places on earth…Middle Earth. It’s why I took the top job! In a year that seemed more like a decade amongst sweat, a few tears and a whole lot of fun, we had turned around a business from a losses history to Profit$!

My experience with turnarounds, start-ups and high growth businesses is that they happen from the inside out. This starts with people – from the way we manage the business to how we communicate to how we serve our customers. So here are the learnings from my unforgettable adventure in Middle Earth:

1. Generate Cash with Lightning Speed. My years of training as a CFO reinforced that the success of any turnaround and the survival of the company largely rests on how much cash can be generated in the shortest possible time. Focus every decision on this as nothing is more important than cash flow – not sales, not customers, not suppliers, not employees – without cash the company will have none of these. The primary and paramount objective in any turnaround, in any company, in any distressed situation is to increase free cash flow and become cash-positive.
2. Establish Priorities. I learnt that the 80/20 rule rules! 80% of sales come from 20% of the customers; 80% of profits come from 20% of the products; 80% of the waste comes from 20% of the work and so on. Don’t focus on everything, don’t try to solve all of the problems and don’t expect complete results. Look for that 20%….focus exclusively on that. Focus on that 20% of customers; improve that 20% of products; redesign that 20% of work. Look for the drivers – the levers – that critical and pivotal 20%; fix those areas and watch the company improve faster than anyone would have imagined. We stopped the lower margin sales and instead did a deal with the major supermarket player for a profitable volume deal that drove 80% of our sales and profits. Soon after we introduced two new brands that we sold locally and exported to Asia that led to a 30% increase in revenue. We also focused on production and introduced new processes and procedures that led to production efficiency increase of over 60%.
3. Establish Credibility with Shareholders, Board Members, Bankers and Creditors. I always live by the following principle: Do what you say, say what you do and never over promise! The fastest way to establish credibility with Bankers and Creditors is to properly manage expectations. Communicate with them regularly and work constructively with them; understand their situation, their needs and negotiate with their objectives in mind. Be straight with them and don’t try to hide the realities of your situation; they will discover all the facts eventually.
4. Manage Communications. This maintains credibility! Openly discuss the company’s situation with Board members, Shareholders, Customers, the media and most importantly, Employees. Manage the message that is communicated to your Bankers and Suppliers. All constituencies and stakeholders must be given accurate and regular updates on what’s going on, what’s broken within the company, how it will be fixed, when will things be ok and how the company is progressing.
5. Surround yourself with smart people. Attempting to lead a turnaround or a restructuring without the relevant experience is an invitation to disaster. It’s not much different than asking your neighbour for help when you require heart surgery. Your neighbour may be honest, trustworthy, intelligent and he may know you very well – would that be ok with you? Unlikely! You would want the best cardiac surgeon you can find. It’s the same for employees. Find the best experienced and skilled employees available. They will be more costly but are the most important and critical investment the company will ever make. They will make the right decisions, make them at the incredible speed in which they need to be made and will be easier for you to hold them accountable for their results.
6. Create an environment that allows people to be motivated to embrace change and want to make things better. Everyone needs to have the same set of business values and an alignment of goals and objectives. Bring employees into the process as early as possible, have them contribute to the new changes and get buy-in. I made it my job to give them a reason to come back and do it again tomorrow. I figured that employees really have a choice, they can work for me or they can go someplace else. I’ve worked for people who expected me to feel lucky I had a job. I’ve also worked for people who inspired me to give my best every day. I knew that if I wanted to build a successful company, I had to spend time creating places where the employees want to be….and I needed to be the kind of leader with whom they want to work. My new team were fantastic. Like the time our client in Asia insisted on a shipment in unrealistic timing, the team and I worked all weekend to ensure we made the delivery truck by the Monday morning. We all came in on Saturday and Sunday ran the lines and packed boxes and did what we needed to do to help the factory team deliver on time.
7. Listen more than you talk. Take the time to listen to your team….and step out of the way to allow them to deliver! Spending the time to sit down one-on-one with your employees and hearing about their day-to-day experience can uncover some powerful insights that would otherwise never come to light. This then allows you to help remove roadblocks for them where necessary.
8. Trust your judgement and your instincts. Your first impressions are often correct. As do most distressed businesses, we had less than perfect information, out-dated reporting systems and limited market intelligence. Whilst I would have liked to collect as much information as possible and validate every assumption I made, it often came down to making a decisions, sometimes a really BIG decision, with less factual support than I would like. Timing is of the essence and the luxury of delaying the decision or kicking it down to a “committee” was just not on the cards. Have the confidence to make a really tough decision from your gut and rely on your feelings and personal judgment.
9. Don’t take yourself too seriously. Remember to have fun along the way. We work in the best interests of the company, but sometimes, leaders can unintentionally create a barrier between themselves and their team members if they let the power go to their head. Whenever I felt this was happening or starting to happen I took a step back and consciously applied: patience, kindness, generosity of spirit, courtesy, humility, unselfishness, sincerity, integrity and of course a good humour.
10. It’s okay not to have all the answers. I quickly learnt that as a leader I didn’t need to have all the answers. Instead I learnt to ask the right questions to see what new and amazing ideas come out of the answers from the team….this is where the best ideas came from. Whenever we had a problem or I always gathered the team and started with questions like: What do you think is really happening here? Have you ever experienced anything like this before? What else would we need to know to really understand what to do here? Acknowledging and appreciating the awareness and insights, I then asked further questions…that arose organically from this process. I found that asking questions rather than dictating answers built camaraderie, teamwork and collaboration, showed respect and trust in the team, and energised the team to deliver more.
11. Seek out the opinions of others. Leading is a huge responsibility, but you’re not alone, and an outside perspective can help alleviate some of the pressure. Having a mentor or access to a mastermind group to help you think through tough decisions can make all the difference.
12. Avoid managing for the short-term to serve yourself and your compensation package. I always made decisions that were for the good of the business in the long term. In today’s business environment it’s not uncommon to see executives making decisions that positively affect business performance in the short-term in order to lock in their personal bonuses. This is problematic when trying to make decisions that are better for the business down the road.
13. Understand the impact your title can have on others. The more senior you become in an organisation, the more you must understand the impact of your words and behaviors on others. I found that there is really never a time when you can let your hair down. Your people are always watching what you say and do.
14. Take time to think about what you’re doing and refine as necessary. One of the hardest things a business leader needs to do is take 60 uninterrupted minutes three times a week to do nothing but think about the business. That was my job as the guy the at the top. The insight and inspiration I gained benefited the business more than you can imagine. It’s far too easy to get distracted by all the things we need or are asked to do everyday. Taking time every week to think about the business is the most important thing we can do every week. Employees need need constant reminding about how their role fits into the vision. Every decision we made every day was linked to the strategy and vision. If I found people were confused or distracted I would go away and think about how I could re-communicate the vision and mission. I did this almost every day.
15. Develop robust strategic plans. Once the turnaround process passes the crisis management stage, it is vitally important that strategy moves up to the front seat. A good strategic plan should be built from the customer and market perspective and clearly demonstrate, with detailed initiatives and accountability, how the company will change and work toward creating competitive advantage. Without a well-thought out and professionally developed strategic plan, the company will be sailing aimlessly, without any real long-term direction.

New Zealand Quality Waters Limited wasn’t a world famous startup. We weren’t the pioneers of the latest revolutionary product that will redefine our very way of life. Still, the team achieved an incredible turnaround under my watch.

No matter what industry you’re in or what you sell, we can all agree that leading a company through transformational change is never an easy task. But I hope learnings like these inspire you to push through even the darkest of storms, and to steer the ship to calmer waters and strong tailwinds.