Corporate Turnaround Artistry

Chapter 2Crisis Leadership

The best turnarounds often start with a shock, something that breaks through the clutter and distraction of the languishing business and refocuses the team's attention. Not being able to fund payroll is a common financial crisis. Losing a major customer or a key employee can jolt a workforce as well, and a good leader knows how to manage and refocus the anxiety that accompanies these sorts of disruptions. Good leaders never let a crisis go to waste, while poor leaders are overwhelmed in a crisis, often losing control (and their jobs). How a leader responds at the moment of shock magnifies the results going forward.

If there is no natural crisis but the leader is authentically ready for a change, then sometimes a shock needs to be created. When you tell people they need to change, they hear you but usually don't really take it seriously. When you fire their boss or shut down a division and then tell people things need to change, they usually pay attention.

The critical first step in any crisis is to establish control. Control of your thoughts and your reactions first. Control of cash, customers, and employees next.

Day 1: Cash and Controls

Priority 1 is to establish full control over cash and collateral. Do it immediately, in the first five minutes. There are only three things that can shut a business down immediately:

1. Lack of cash (Chapter 3)
2. The bank (Chapter 4)
3. Regulators (Chapter 6)

If you respect and control the bank's cash and collateral, ...