A Turnaround Expert's 5-Step Process for Rejuvenating Struggling Companies
A Turnaround Expert’s 5-Step Process for Rejuvenating Struggling Companies
Guest: Odmar Almeida-Filho, a coach at CEO Coaching International. Odmar has extensive global turnaround experience in consumer packaged goods, telecom and internet media technology, and consulting at companies including Procter & Gamble, Dell, Telefonica, and Amway.
Quick Background: If a struggling company is in need of a turnaround, usually the CEO needs to execute a personal turnaround too. That doesn’t mean completely changing who you are as a leader. But it does mean that you’ll need to place a renewed emphasis on certain leadership traits in order to reorganize and reenergize your company before a bump in the road turns into a gaping pit.
On today’s show, Odmar Almeida-Filho explains the five-part roadmap he’s used both as a CEO and as an entrepreneur coach to execute successful turnarounds that set struggling companies back on track.
5 Keys to Executing a Turnaround from Odmar Almeida-Filho
1. Clarify your value proposition.
“Most people believe that the value proposition is simply advertising, a gimmicky statement of what you’re promising,” says Odmar. “But it actually goes beyond that. There’s three important elements to the value proposition, both for internal and external consumption. First is, declare in a compelling way what it is that you promise. Second is the first moment of truth, when customers go to your sales channels. You’ve got to do an extraordinary job with packaging, positioning, and merchandizing in whatever channel where you’re selling. Third is in-use experience of the product.”
Odmar’s experience as a CMO of Emerging Markets for Pampers is an excellent case study in clarifying a value prop. Every diaper company promotes that their product doesn’t leak. Pampers set itself apart by making what Odmar calls “promises of a higher order.” Instead of advertising that their diapers don’t leak, Pampers pitched that their diapers were the most absorbent, the most comfortable, and allowed for the most movement, which helped babies sleep better and improved their development. They further refined their proposition by specifically targeting new moms rather than trying to persuade consumers who were already committed to a particular brand.
“That is the most important thing for me: does the value proposition rank well with its target audience?” Odmar says. “If that’s not right, then it’s very hard to fix the situation.”
2. Evaluate your team.
In one stop on his career as a turnaround expert, Odmar was brought in by a global company that needed help with a strategic problem in a market where they’d underperformed for years. But, like many struggling companies, this firm didn’t realize that it had failed to make the proper investments in its most valuable resource: people.
“They made the right strategic choices,” Odmar says. “The problem really was the team. A combination of not having the right skills for their jobs. Not having the right level of engagement. People didn’t believe. There was not a whole lot of clarity on the purpose and the goals of the company. There were no KPIs that would measure the company’s performance, and even worse, no KPIs that would measure a person’s own performance. They hired a number of junior people. There were no bonus incentives for really beating the goals. So just foundational stuff.”
Odmar’s first move was to hire a “rock star HR manager” who helped him develop a five-point plan for improving the workforce:
- Give employees a compelling purpose. “Why are we here? What is it that we needed to do? And most importantly, focus on the societal impact of what we do.”
- Deliver a glide path to success. “A combination of direction, but also trajectory. Where do you want to be in a couple of years?”
- Establish KPIs. “When you give someone a KPI that they own and they’re accountable for, you’ve got to give them the responsibility for all of the elements that help them get to that KPI.”
- Hire ahead of the curve. “We designed an organization for a company that’s 10 times bigger than what it was. 10 times. Not two times, not 10%, 10 times bigger.”
- Align comp to the glide path. “We created a variable compensation plan that tied the team’s KPIs to us hitting the glide path. So you’ve got 700 employees scattered around the county all driving towards beating the glide path. And when everybody’s driving towards that end goal, people are no longer battling each other. They’re battling the bad guys outside. They want to hit that target. And everybody is handsomely rewarded.”
3. Develop a strategic plan.
Every company thinks they have a plan. At struggling companies, usually those plans are too vague, like, “I want to be the best in my space” or “I want to double my sales next year.” When the CEO’s vision is fuzzy, the details never come into focus either.
Odmar believes that successful companies have to make five specific choices:
- What is the ultimate goal?
- Where do we want to compete and win?
- How do we win?
- What do we need to be good at?
- What are the processes and systems you need in order to execute the strategy and plans?
When Odmar was working on Dell’s Consumer division’s launch in Latin America, the company had vague goals: grow bigger and be a player in several consumer product categories, while sticking to its established model of selling directly to consumers. Odmar helped Dell zero in on a more impactful choice, and find the right value proposition for the retail channel.
“If you want to expand and get bigger, you’ve got to choose to also compete in retail,” he says. “Now that’s a tough choice. And of course there’s a lot of risks. But you’ve got to make that choice. And once we made it clear that we want to get into that channel, a tough but clear choice, then we put all our resources into making that happen. As a result Dell was very successful in Latin America and still is by just choosing to be in the big box retail channel, aside from their direct selling channel.”
“The best indicator of execution is to look at a company’s scorecards,” Odmar says. “What are you tracking weekly or monthly?”
Struggling companies are usually tracking lagging indicators: sales, profit margins, renewal rates, delivery costs. All important numbers to keep track of. But even a daily sales report is yesterday’s news. Those sales are all a result of processes that you and your team executed days, weeks, months, or even years ago. What are you doing today that will drive up tomorrow’s numbers?
“Instead of tracking your sales, how about we track how many outbound calls we’re making this week?” suggests Odmar. “How many appointments we scheduled? Instead of tracking delivery costs, what kinds of contracts are we renegotiating? How are we observing the market to find opportunities to lower our delivery costs? Those activities are specific, they’re observable, they’re measurable, and all of them are within the control of the team.”
And what happens if your numbers are still falling short? That’s when mediocre CEOs start tossing around threats and ultimatums. Instead, consider how a high-EQ CEO might sit down with a struggling employee and ask these five questions:
- Where are we versus expectations? Better, worse, or the same?
- What are the drivers that lead to this position?
- What are the corrective actions?
- What help do you need from me and the leadership team to make those corrections?
- When do you think we’ll be back on track?
“You’re getting results and that’s of course important,” Odmar says. “But in the process of that, you’re actually building confidence in the team. They’re coming up with the answers and you’re doing it in a way that’s not intimidating. It’s not threatening. You’re really building that confidence. And you’re teaching business acumen. Because, at the end of the day, if you own a business, you’ve got to know those five answers. If you don’t know them, you’re not owning it.”
5. Monitor your cash flow.
“Cash is king,” Odmar says. “None of what we’ve just discussed means a thing if there’s no cash from the business.”
At the top level, CEOs have to be on top of the company’s cash situation, from checking cash in the bank daily to identifying ways to shorten the cash operating cycle. At lower levels of the organization, it’s critical that you fill key finance positions with top performers you can rely on to monitor budgets, connect KPIs to cash flow, and identify potential inefficiencies both in your processes and your overall tax planning.
“Cash is that important, you’ve got to put your best talent to your best resources on that,” says Odmar. “Because at the end of the day, we exist to generate cash, to give the appropriate return to the shareholders so that we can do the things that have an impact on society, customers, and employees.”
1. Strengthen your value prop. Get crystal clear on what you’re selling, why it’s the best solution for a specific problem, and who your target customer is.
2. Reevaluate your plan and organization. Surface-level problems like a dip in sales are almost always symptoms of more significant problems with your team, metrics, or processes.
3. Cash is king. If your turnaround plan doesn’t boost your bottom line, circle back to step one.
About CEO Coaching International
CEO Coaching International works with CEOs and their leadership teams to achieve extraordinary results quarter after quarter, year after year. Known globally for its success in coaching growth-focused entrepreneurs to meaningful exits, CEO Coaching International has coached more than 1,000 CEOs and entrepreneurs in more than 60 countries and 45 industries. The coaches at CEO Coaching International are former CEOs, presidents, or executives who have made BIG happen. The firm’s coaches have led double-digit sales and profit growth in businesses ranging in size from startups to over $10 billion, and many are founders that have led their companies through successful eight, nine, and ten-figure exits. Companies working with CEO Coaching International for two years or more have experienced an average EBITDA CAGR of 67.8% during their time as a client, nearly four times the U.S. average and a revenue CAGR of 25.5%, more than twice the U.S. average.