Turnaround Management Journal Issue 2 2011

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urnaround Management Journal

2nd issue 2011

Dr. Christoph Lymbersky (editor)

urnaround Management Society


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Impressum / Editors / Authors

Exclusive rights by the Management Laboratory and the respective authors o the articles in this publication.Published by the MLP Management Laboratory Press UG, a business unit o the Management Laboratory,Dr. Christoph Lymbersky, Luetkensallee 41, 22041 Hamburg and the MS urnaround Management Society. 2010 by the Management Laboratory. All rights reserved. No part o this publication may be reproduced ordistributed in any orm or by any means or stored in a database or retrieval system , including but not limitedto, in any network or other electronic storage or transmission, or broadcast or distance learning without the

prior written consent o the Management Laboratory.Articles are prepared as the basis or discussion rather than to illustrate either effective or ineffective handlingo an administrative situation.Neither the Management Laboratory Press UG, the MS urnaround Management Society, the authors, nor theeditor are responsible or misleading inormation or any damages resulting rom the use o the articles or theinormation contained in them. Te articles are not meant as advice but as a basis or discussion.

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Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detail-lierte bibliografische Daten sind im Internet ber http://dnb.d-nb.de abruar.

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When ordering this title, use ISBN: 9781466450059 orISSN: 2191-6012

www.Management-Laboratory.com www.urnaround-Society.com

urnaround Management JournalIssue 2, 2011

Dr. Christoph Lymbersky, MBA, MAcc(editor & author)

Dr. Mike eng (author)

Dr. Stephanie A Parson (author)

John M. Collard, CP, CIM (author)

Mark Blayney (author)

Marcia Xenitelis (author)

Clive Simpkins (author)

Henrik von Scheel (author)

Marc Wagner (interview)

Short Notes by:

orben Rick, Alice. Lee Hiller, Jem Tomas,Ebi Akpeti, ony Ridley

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Welcome to the second issue o the 2011 urnaround Management Journal. Afer a success-ul first issue, we are proud to present this second issue. We planned to distribute about 1000

copies o the first issue to our members and interested parties, but because our members alsodistributed the journal to their contacts, we were able to send the journal out to about 12.000readers! Tis was an exciting and encouraging success or the first issue and or its authors.Some copies were distributed in digital version, but many were sold through bookstores,magazine stores, and online stores like Amazon.

I hope that you enjoy reading this second issue, which eatures many interesting articlesabout change management in turnaround situations, as well as articles on strategic issuesand mergers and acquisitions during times o crisis. Another article offers an introduction tothe International urnaround Management Standard, an ambitious research project o the

urnaround Management Society.

Our member interview is with Marc Wagner, Group Head at Detecon International, a con-sulting company that is rapidly expanding in corporate restructurings.

As always, I welcome your eedback on this journal and hope you will send us your com-ments about the articles.

Kindest regards,

Dr. Christoph Lymbersky

A word rom the editor

Dear valued readers, members, and riends,


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In this Issue

Introducing the International urnaround Management Standardby Dr. Christoph Lymbersky

Introductionby Christoph Lymbersky

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Te Importance o Post-Merger Integrationby Dr. Mike eng 13

Value Creation Model: Built o Sellby John M. Collard

Managing People And Te Process O Changeby Mark Blayney

Are Your Communication Strategies Really Engaging Employees?by Marcia Xenitelis

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Member Interviewwith Marc Wagner

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Strategies Behind Crisis Managementby Dr. Stephanie A Parson

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Crisis Management- or Managing a Crisis

by Clive Simpkins

Never Waste a Crisis -A Real Leadership Opportunity

by Henrik von Scheel

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12 Reasons Why People Resist Changeby orben Rick

Crisis Management - Expert Strategies Forurnarounds and Liquidations by Lee Hiller

Crisis Management and Business Continuityby Ebi Akpeti

BP Crisis Management: Being a Good CEODoesnt Make You a Good Spokespersonby Jem Tomas

oyota Recall Crisis by Alice

Increase Perormance Trough employeeEngagement by orben Rick

World Class Corporate Crisis and Commu-nications eams by ony Ridley

urnaround Management JournalShort Notes

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o be successul turnaround processes cannot only

be about cost cutting, they must also be accompaniedby strategic leaps, such as an acquisition, outsourcing,moving production acilities etc.. Without a holisticaproach to your turnaround project you will ail.

Dr. Lymbersky at the Institute of Directors in London.


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Te need or a standard

I big companies like Motorola, GoldmanSachs, Chrysler, and oyota can get in to acrisis and need a turnaround to battle thedownwards spiral, than any company can ail.I economic history has thought us anything,it is that even the biggest and best can all. Nocompany is immune against distress. No com-pany lives orever. One more thing is sure: i

they all, they all deep and with a big noise.When I started studying corporate turna-rounds, I ound that very little was knownabout turnarounds and their strategies. Inact, three years ago, I was not able to finda book that properly described how a tur-naround should be done or what influencesone. Most books were either extended casestudies or were ocused primarily on finan-cial turnarounds, operative turnarounds, or

the strategic side. Academic articles ocusedmainly on crisis actors, symptoms, and veryspecific aspects o turnaround situations. Inthe past three years, because o the economiccrisis and the increased awareness that dist-ressed investing and turnarounds can be a

very lucrative business or consulting compa-

nies, more books have been published in thisvery complex and difficult area; however, thecurrent literature is still ar away rom havingdeveloped a common body o knowledge anda common structured approach to a turna-round process.

A study by Proessor Richard Whittingtono the Said Business School shows that ne-arly hal o reorganizations ail to deliver

the improvements they set out to make. Alt-hough almost 90 percent o reorganizationsemphasize the use o project managementtechniques like careul attention to budgetsand planning, these projects still ail in manycases. Tereore, the adoption o project ma-nagement techniques alone does not seem toincrease the chances o success or a turna-round.

Te next problem that turnarounds ofenhave is the lack o stakeholder support. I theyare not well inormed and involved, bankswill send their own investigative accountantsinto the company, the court might assign awarden and suppliers, and customers couldresign their support or the companys turna-

Introducing the International urnaround

Management Standard

by Dr. Christoph LymberskyManagement Consultant , Researcher and Director o the urnaround Management Society

Most reasons or the advent o crisis situations are not simple; the more time passes, the moreareas o the business are affected, and a quick fix is seldom the solution to the problems that havedeveloped.


available online at www.turnaround-management.com

urnaround Management Journal (2) 2011

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round efforts.

Tere are many more reasons why turna-rounds ail. One o the reasons is that turna-rounds are ofen managed by business-areaexperts, such as financial experts, accoun-tants, or lawyers, who dont have a holistic

view o a business or knowledge rom allbusiness areas. A turnaround manager musthave knowledge in all business areas plusspecific turnaround knowledgea generalistwith a specialty in turnaround management.Te ailure rate o turnarounds ail varies ac-cording to which study you read, but one othe more optimistic studies points out that 35percent will reach profitability within threeyears (Peter McCann: urnarounds : Brains,Guts & Stamina). More pessimistic studiesshow that less than 1 percent o insolventcompanies will reach sustainable profitabili-ty. Te development o a model or rameworkor how to treat these difficult situations thatinvolves all aspects o the business would sig-nificantly improve the chances o a successul,sustainable turnaround.

urnarounds are not just about cutting costs,although this assumption is a major mistakemany people make when aced with crises.Cost-cutting is one essential part o the re-sponse, but the business must also be madeto grow organically. o be successul, a tur-naround process must also be accompaniedby strategic leaps, such as the developmento another business along the way, but tur-narounds can also mean outsourcing specific

parts o the business or moving productionacilities to other countries, especially in acompetitive environment. While these movesmay be unpopular and may have to be accom-panied by well-planned stakeholder commu-nication procedures and change manage-ment, they orms a core part o the IMS.

Te idea behind the IMS is to give turna-round managers a methodology that is deri-

ved rom a thorough study o successul tur-naround cases in order to avoid the pitallsthat have caused other turnarounds to ailand to suggest proven ways out o the crisisby taking into account all aspects o business,as well as stakeholder management, changemanagement, and other areas the neglect owhich could endanger the process.

Te Development Phase

Te standard was developed out o extensiveliterature research in the urnaround Ma-nagement Societys database o 152 successulturnaround cases, interviews with proessio-nals rom the industry, and ocus groups. Weare aware o no comparable research projectin corporate crisis management.

Te reasons or most crises situations are notsimple, and the more time passes beore thecrisis is addressed, the more areas o the busi-ness are affected, so a quick fix is seldom thesolution to the problems that have developed.

When turnarounds are handled by lawyers,accountants, and financial experts who re-structure the business rom their points o

view, they are rarely successul. A businessis highly complex: what is done in one areao the business affects the others, and it isthe rare action that has only a single effect. Ateam o area-specific experts is not sufficientto treat a corporate crisis that has many diffe-rent symptoms and causes. Problems will be

overlooked because o lack o knowledge andunderstanding about the complexities behindthe business. Tis is why most turnaround e-orts ail.Tereore, the question remains: How can theproblem o many turnarounds ailing be sol-

ved? Part o the solution has to do with what

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the ideal turnaround leader must bring withhim or her when taking on an assignment.

Te skills required or a turnaroundproessional

A turnaround leader must have a great manysof skills. He or she must be able to lead andmotivate people who are rustrated, scared,and ofen without hope, a dangerous mix orany company and a situation that can eitherexplode, as in the case o Enron, or implodewhen people leave the company. (Tese arethe companies that die quietly.) While there isno way to upload sof skills into a turnaround

leaders personality, a set o guidelines can beuseul. I ound many answers to people prob-

lems in change management, which is part othe IMS.A turnaround leader must also have a signifi-cant educational background in finance, stra-tegy, process optimization, marketing, sales,business valuation, debt restructuring, stake-holder management, and so on, along withspecific knowledge o turnaround manage-ment, including amiliarity with a wide rangeo turnaround cases and their lessons learned.Few people have all these skills, which is whymost turnarounds should be led by a teamo people with a variety o skills and areas oknowledge. Te team must also work well to-gether and have set responsibilities and work-flows that can help them combat changes andaccommodate urgent situations.

Figure 1


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Te IMS provides these workflows to tur-naround teams, sets clear responsibilities,and optimizes the management approach toacilitate the urgency required in most turna-

rounds.

Te structure o the IMS

Te next question concerns how to combineall these requirements so a turnaround situ-ation can be handled properly. I ound theanswer in project management, which gives-provides an overall ramework or turnaroundmanagement, serves as a structured guide tocontrol the turnaround process, and providesthe right inormation at the right time to the

turnaround management team (M) andthe stakeholders. Figure 1 shows the structureo the IMSs processes and stages.Figure 1 Te stages and processes o the IMSTe turnaround process starts with a corpo-rate analysis, which uses a structured checklistapproach adapted to address crises and their

causes without leaving out unknown problemareas. Te corporate analysis produces a de-tailed report about the companys situationthat provides the M with a set o possiblestrategies and ways out o the situation.

Te IMS addresses all business areas thatmust be considered when a company is re-structured:

Financial Strategies Operational Strategies HR Communication Management Project Management echniques and

Methods Change Management Controlling Risk Management Marketing Quality Control Process Improvement and more

Figure 2 (C) Dr. Christoph Lymbersky

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Te urnaround Process got devided intoabout 250 components and sub-components,all o which are interrelated. Since every sub-component represents an action, each actionhas an effect on other actions in the turna-

round process. Tese connections betweensub-components are outlined in each sub-component.

Te goal is a ramework that is divided intostages so a CEO or turnaround manager caneasily find the situation in which the troubledcompany finds itsel. For example, i a com-pany is producing products that dont sellwell, the companys competitive environment

has ew global players that practically own themarket, and the company is in financial di-ficulties, situation can be ound in the IMS,which will provide tested strategies and waysout o the situation (i there is a way out).Te IMS also serves as a guideline to whatthe M must do, at what time, how to do it,to whom to provide inormation, and so on.In so doing, the IMS provides Ms withknowledge and lessons learned rom proes-

sional experience that is not otherwise avail-able rom a single source.

Te IMS targets all the major reasons thatcompanies ail in turnarounds: insufficientsupport rom shareholders and lenders, badmanagement, wrong product-market mix,non-comprehensive turnarounds (in whichissues were overlooked or not regarded as im-portant), targeting o symptoms rather thanissues, unstructured approaches to turna-rounds, and so on.

Te IMS combines all aspects o the busi-ness that are important in turnaround situa-tions and links them in a unique way. Eachstep taken during a turnaround process has

an effect on other areas o the business, so theIMS links the effects, makes the user awareo them, and provides guidance on how tocontrol them.Figure 2 illustrates the links among the ac-

tions that can be taken during a turnaroundprocess and the implications they have orother actions. Te figure, as it is shown here,is unreadable; it is intended only to illustratethe complexity o the standard. While writingthe IMS, I had to keep every subcomponentin mind and think through its implicationson the more than three hundred other sub-components.In order to highlight the dependencies in text

orm, each sub-component o the IMS con-tains a heading, Context, which shows thedependencies and links to other sub-compo-nents.Even though the IMS is not exhaustive andthough it should be extended through addi-tional analysis, its usability and contributionto the body o knowledge is clear.

About the author:Dr. Christoph Lymberskyhas ounded three success-ul companies. He currentlyserves as the director o theurnaround ManagementSociety, where he is also en-gaged in research projects,such as the Internationalurnaround ManagementStandard (IMS).

Te International urnaround Management Stan-

dard is published as a book and can be bought overthe urnaround Management Societys website or onAmazon.

International urnaround Management Standard

Author: Dr. Christoph LymberskyISBN: 978-3981216226Publisher: Management Laboratory PressPublication Date: 2011

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Ben Chams


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Te importance o post-merger integration isderived rom the act that value creation can

only begin when the organizations begin towork towards the purpose o the acquisition.In other words, integration is the source o

value creation.

Also, mergers and acquisitions are said tohave a success rate o only about 25% to 50%at best and post-merger integration is ofenblamed as the major reason why mergers andacquisition deals are less successul than theyshould be.

In almost all commentaries or studies on thesubject matter, PMI has been pointed out asan important key to merger success. One au-thor states that it may be the one major causeo ailure in cross-border mergers.

Te same author states that studies show thatcultural fit has a major effect on post-mergerperormance and that companies that allow

multi-culturalism and prevent too much con-trol perorm better than less permissive firmsand that the origin o competitive advantageis the local environment. Tus, i a Singapo-re firm is interested in the computer sofwareindustry, it might want to acquire a firm inthe best local environment (i.e., Silicon Val-

ley) and try to help its expertise spread to theparent firm.

Integration Defined

So what is PMI?

Integration has been defined as the act o com-bining into an integral whole- a consolidationo two corporations. Post-merger integrationor PMI reers to the aspect o an organizati-onal merger that involves combining the ori-

ginal socio-technical systems o the mergingorganizations into one such newly-combinedsystem or the process o combining two ormore organizations into a single organizati-on which involves several organizational sys-tems, such as people, resources and tasks.Post-merger integration has also been defi-

ned as a gradual and interactive process, inwhich the individuals rom two or more or-ganisations learn to co-operate in the transero strategic capabilities.Post Merger Integration will reer to the pro-cess o harmonizing organizational elementsbetween merging corporations in order tomake the merger work so that it achieves theenvisioned goals and aims o the corporatecombination.


Te Importance o Post-Merger Integration

by Dr. Mike eng

Mergers and acquisitions are said to have a success rate o only about 25% to 50% at best and post-merger integration is ofen blamed as the major reason why mergers and acquisition deals are lesssuccessul than they should be.



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Te definition o PMI success, on the otherhand, is not based on share prices but on theextent to which targets like cost synergies,cross selling or know-how transer were metand includes criteria such as implementationefficiency and social compatibility as seen inthe companys management systems, its un-derlying ideology, and in its relationship withemployees (or example, employee participa-tion, working hours, pay, health and social se-curity benefits etc).

Levels or Dimensions o Integration

Analysts state that integration takes place onseveral levels or dimensions with one authorclassiying them as procedural, physical andsocio-cultural integration.

Procedural integration reers to the processo combining systems and procedures o themerged companies at the operating, manage-ment control, and strategic planning levels.Te objective o such integration is to ho-mogenize and standardize work procedures.Physical integration o resources and assets

usually accompanies procedural integrati-on. Managerial and socio-cultural integrati-on involves a complex combination o issuesrelated to the selection or transer o leaders,changes in organizational structure, develop-ment o a consistent culture and the increasesin the commitment and motivation o per-sonnel.

Other analysts state that merger success is a

unction dealing with task integration andhuman integration. ask integration is de-fined as the identification and realization ooperational synergies measured in terms otranserred capabilities and resource sharing.Human integration is concerned primarilywith generating satisaction and ultimately a

shared identity among the employees romthe combining organizations.

One author cites the our degrees o integra-tion:

otal autonomy, Restructuring ollowed by financial con-

trols, Integration o main systems and Full integration.

In relation to the our degrees o integration,one author asserts that Integration need notbe total and cites five different PMI approa-ches:

Preservation or stand-alone: Both com-panies are kept separate with almost noor only minimal changes. Te completeopposite o integration, is, in the authorsopinion, a very good choice in order notto destroy the value o a transaction.

Conederation: Companies enjoy a rela-tively high level o autonomy, but a varie-ty o interdependencies and some control.

Absorption: One company is ully integ-rated into the other company or adopts itsstandards, processes, etc.

Best o both worlds or best o class: Bothcompanies create a combined entity ta-king over superior parts rom both, or in-troducing best-o-class standards.

ransormation: whereby the integratedcompanies try to create something entire-ly new ranging rom a giant leap in terms

o geographic or product coverage to evena undamental change in the businessmodel, or example.

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Works Cited:

Aralanta M (2005) Evaluating Success in Post-mergerIS Integration: A Case Study, Te Electronic JournalInormation Systems Evaluation Volume 8 Issue 3, pp143-150, available online at www.ejise.com

Christopher Kummer, Overcoming the Challenges

and Issues o Post-Merger Integration, Mergers & Ac-quisitions: Issues and Perspectives rom the Asia Pa-cific Region, Asian Productivity Organization, 2009,ISBN: 92-833-7031-3.http://www.apo-tokyo.org/00e-books/IS-38_M&A.htm

H. Donald Hopkins, Cross-Border Mergers and Ac-

quisitions: Do Strategy or Post-Merger IntegrationMatter? International Management Review, Vol. 4 No.1 2008, http://www.usimr.org/IMR-1-2008/v4n108-art1.pd

See Kummer, Note xxxiv, citing Chatterjee, Lubatkin,Schweiger & Weber, 1992.

See Kummer, Note xxxiv, citing Michael Porter, 1991.Wordnet, a lexical database or English, wordnetweb.princeton.edu/perl/webwn; Wikipedia, citing AnthonyF., Buono; Bowditch, James L. (1989). Te human sideo mergers and acquisitions: Managing collisions bet-ween people, cultures, and organizations. San Francis-co: Jossey-Bass Publishers. ISBN 1555421350.

Yinmei Wan, Managing Post-Merger Integration: ACase Study o a Merger in Chinese Higher Education,

Doctoral Dissertation or University o Michigan, 2008citing Birkinshaw, Bresman, & Hakanson,( 2000); Shri-vastava, (1986); Waldman (2004), http://deepblue.lib.umich.edu/handle/2027.42/58541

Johannes Gerds and Freddy Strottmann with Paksha-lika Jayaprakash, Post Merger Integration: Hard Data,Hard ruths, DeLoitte Review, Issue 6 (2010)

See note xxxix, Yinmei Wan, citing Birkinshaw, Bres-man, & Hakanson,( 2000); Shrivastava, (1986); Wald-man (2004).

See note xxxix, Yinmei Wan citing Shrivastava (1986).

See note xxxixYinmei Wan summarizing Shrivastava(1986)

See note xxxix, Yinmei Wan summarizing Birkinshaw,Bresman & Hakanson (2000).

H. Donald Hopkins, Cross-Border Mergers and Ac-quisitions: Do Strategy or Post-Merger IntegrationMatter? International Management Review, Vol. 4 No.

1 2008, http://www.usimr.org/IMR-1-2008/v4n108-art1.pd

See note xxxiv, Christopher Kummer.

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About the Author:

Mike eng (DBA,MBA, BEng, FIMe-chE, FIEE, CEng,PEng, FCMI, FCIM,

SMCS) is the author othe books Corporateurnaround: Nursinga Sick Company Backto Health (2002) andCorporate Wellness:

101 Principles in urnaround and ransormati-on (2006). Dr. eng is widely recognized by theAsian news media as a turnaround CEO. He has27 years o experience in the Asia Pacific region,including 17 years as the Chie Executive Officer

o multi-national, local and publicly listed com-panies. He has led the successul turnaround oseveral troubled companies and is currently theManaging Director o a business advisory firm,Corporate urnaround Centre Pte, Ltd., whichassists companies on a ast track to financial per-ormance. Dr. eng is the ormer President o theMarketing Institute o Singapore (2000-2004), anational body representing 5000 individual andcorporate marketing proessionals in Singapore.Dr. eng is currently the President o the National

University o Singapore MBA Alumni. NUS MBAprogram is rated the best in Asia.


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Determining

value is moreart orm thanscience.

John M. Collard


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Valuing a company is the easy part; creatingthat value in the first place so you can meas-ure it is a more ormidable task. Create a ValueEquation to build Worth into your company.

Determining value is more art orm than sci-ence. rue value can only be established atthe time o a transaction, where willing buyertenders payment and willing seller accepts itin exchange.

Buyers and sellers look at the componentmake-up o a company differently, and there-ore, place different values on these ingredi-ents and on the whole. o enhance the realcompany value, analyze company compo-nents as they relate to worth in the mind opotential buyers. Value to one buyer ofendoes not necessarily hold the same value oranother. Establish multiple buyer profiles de-pending upon the circumstances and prepare

to build value each would be willing to payor.

Tere are essentially two kinds o buyers Strategic and Annuity Buyers, both with di-erent motives. Yet, both demand returns ortheir shareholders.

Te Strategic Buyer purchases or reasonsthat fit into their strategic plan. Tey benefitthrough synergies like acquiring customerbase in expanded territories, new products,added capacity, and reduced costs, et cetera.Tis type o buyer may place some value inthe first line management team, but will seeadded value in the ability to place their ownmanagers into key positions.

Te Annuity or Financial Buyer, on the otherhand, sees value in the stand-alone entitysability to generate cash flow rom profits yearafer year. Te institutional buyer places thehighest value on how motivated and incentiv-ized the existing management team is, andtheir receptiveness to remain to generate cashand profits. Te owner/operator converselywill look at buying a job.

ypically, strategic buyers o closely held

companies purchase at six to 10 times earn-ings and/or cash flow, while annuity buyerspay two to six times cash flow. Te ultimateworth o the company depends upon whothe buyer will be. Tese multiples are usuallyconsiderably higher in public companies, butthe concepts o building value are the same.


Value Creation Model: Built o Sell

by John M. CollardCertified International urnaround Manager - Level D (CP), and Past Chairman o urnaround Management

Association (MA)

Heres a primer on how to build a value creation model aimed at achieving the kind osteady growth that attracts investors and uture buyers o the business itsel. Te key busi-ness attributes and how to create the most value in them are spelled out. While ocused onprivate companies, the lessons offered here can apply to any business.




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Te essential, is to look at what is valuable andunderstand how to exploit and preserve this

value. From the start, plan to sell the businessand put value creation into perspective.

Free cash flow and the continued ability toproduce it with reliable probability creates thegreatest value. Tis is not as easy as it sounds.In act, it can be complicated, is ofen misun-derstood, and requently is bungled. Look atthe elements in the Value Creation Equationto see how each brings orth value and howtogether they compound the effect.

Value Creation = Net Asset Value + FutureRevenue Stream + Going Concern Value +In-centive to Purchase

Net Asset Value (NAV)

Sometimes reerred to as Orderly LiquidationValue, it is the cash net worth o assets lessencumbrances i you were to liquidate theseassets at a air market price under orderly dis-position conditions when liquidation is notnecessary. Tis NAV can equal Net Worth onthe Balance Sheet, but is ofen adjusted or the

value o intangibles.

Simply stated: angible Unencumbered BookValue + Intangible Assets + Adjustments toMarket Value (Over-amortized/depreciated/expensed assets, or usable Inventory writtendown lower than market value) - ObsoleteInventory and Bad Debts - Outstanding Ob-

ligations on open contracts = market value.Build a strong, healthy balance sheet with ad-equate reserves and proper statement o asset

value, because this is a undamental on whichto expand a company and increase its worth.

angible assets can be appraised to establish

their worth. On the other hand, intangible as-sets are harder to value because they are sub-

ject to interpretation. I you sell a machineyou realize cash or the transaction; but i youlose a customer, no one pays you or it, theyre

just gone. Intellectual property is also hardto value, but filing more patents will generatevalue, particularly to those who can afford toprotect them rom inringement.

Te real opportunity lies not in building as-set base, but in building maximum returnon those assets and deployed capital. Assetsdont generate worth by themselves, they canonly be used to generate worth. I the assetsits idle, it is actually losing value, but i vol-ume causes the asset to work to produce out-put production, value is being created.

Te closer the relationship o assets to realize$1 or each $1 dollar on the balance sheet thebetter. Cash and Securities fit this descrip-tion. Accounts Receivable will be discountedas they age; ocus on keeping the days out-standing as low as possible. Utilize percent-age completion contracts when possible to

keep receivables low and cash flowing.

Utilize just-in-time and consignment agree-ments to keep raw materials at the lowest lev-els possible to minimize obsolescence. Pro-duce in-process work expediently to covershort-term needs. Build finished goods orfirm orders or reasonable short-term expec-tations o sale, dont overproduce. I in a sea-sonable business cover production levels over

the off-season with contracts or sale o goodsjust beore the season, cover the risk with or-ders or goods. It may be better to have lessthan market demand i projections were off,compared to interest and carrying costs tohold artificial Christmas trees until next year.


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Customer Lists, contacts, name recognition,trademarks, reputation, Web distributionchannels and Internet presence are ofen notconsidered in asset valuation because theyare not carried on the balance sheet. Tese

assets, however, are ofen worth considerablevalue in the market place. Te reasoning orthis theory is that these assets can be turnedinto cash; thereore, should equal the related

value they could generate in return or theirsale. Tese intangible assets can produce u-ture sales, profits, and cash.

Future Revenue Stream

A real value in any company starts with itsrevenue stream; the more you can count onit occurring, the more value it has. Te valuebecomes the net present value o the afer taxree cash flow stream o revenue under con-tract, plus repeat customer base. Contractbacklog is worth much more than revenuethat you must locate every year. Te cost tore-create the sale each year is high in termso time and human energy. Locate custom-

ers where multiple year contract environ-ments can be set up. Te government ofenawards contracts or multiple year periods.Many larger companies avor contract rela-tionships with vendors to reduce the overallcost o screening vendors again and again.

While not as quantifiable as backlog, thereis value in a customer base thats been main-tained or a long period o time. Te longercustomers remain with a company, the morelikely they will be loyal in the uture. Whencustomers stay with an organization, this isan indication o the value, which they re-ceive rom that organization. Conversely,customer turnover indicates their dissatis-action in the company's ability to provideservices. For example, sofware companies

retain customers and repeat sales with prod-uct upgrades and gain new customers withimport utilities or easy conversion.

Clearly growth in revenue volume is an in-

dicator o valuation in a company that inves-tors are willing to pay or. I customers flockat above industry levels to a company or theservices that they provide, this is a good in-dication o the company's ability to perormat above expected levels. A motivated salesorce with the ability to generate new rev-enues year afer year has more value than acompany who has a poor selling reputation.A lack o growth indicates that the company

does not have an ability to increase its valueover time.

When a company has a great, and believ-able, prospectus or the uture, the buyer willofen plan additional capital investment touel growth. I this case, the buyer could bemotivated to pay a higher valuation or thecompany and then invest on top o it.

Going Concern Value (GCV)

Here is where the un begins in all transac-tions. Te going concern value and good-will, or sof assets, will always draw the mostcontroversy and discussion in terms o their

valuation. Tese elements are most prone todiffering interpretation by buyer and seller.

Here to is where you can build the most val-ue into a company. ransaction value is onlyat a point in time. Buyers and investors lookmore to the companys ability to create addi-tional value to enhance returns on investedcapital as they hold their investment. Impartthe elements that Future Buyers look or:

Businesses that create value. Consistency


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is the key. You must demonstrate growthin revenue, profit, and cash flow. Do every-thing in your power to eliminate and man-age hick-ups along the way. Audited state-ments go a long way toward veriying results,

in spite o some recent press.

High probability o uture cash flows. A his-tory o positive cash flow at increasing levelsis very important. rue annuity buyers pur-chase cash flow not the business. Strategicbuyers will value cash flow plus what couldhappen i additional capital is provided. A-ter all, ree cash flow determines the periodicreturn on investment and increases the po-tential or a much higher purchase price inthe uture.

Management team and human capital. At-tract and motivate a marketing orientedmanagement team with the ability to pro-duce recurring profits, return on capital, andree cash flow as an annuity or the owners.Develop an in-place; stable, well-trainedworkorce to implement operating processeson an ongoing basis. Tis is the most valua-

ble off-balance sheet asset. When the ownero a privately held business has transitionedout and is collecting the net profit and cashwithout participating in an active manage-ment role, the value increases dramatically.

Te ability to sell, compete, distribute, pro-duce, develop products and thrive.Tis stand-alone entity track record demon-strates the viability o the market relation-

ship between the products/services offeredto meet customer demand and need, abilityo the company to compete, and companyreputation in the marketplace. Te moreunique a product is the more value it con-tributes to the deal. Te company must beable to differentiate its products and services

rom the competition, even i this is basedmainly on perception. Remember, productsdo have a lie cycle and require improve-ments to remain in demand.

Te directors and managements role mustbe to build Going Concern Value! Te GCVcan be best maximized with stable leader-ship, setting and ollowing sound strategiesto consistently bring products and servicesto market, all the while nurturing resourcesand implementing processes to manage thecompany. Here is where the greatest valueresides.

Incentive to PurchaseCreate reasons or a buyer to want to con-sider your company as an acquisition can-didate. Buyers want a Fair Entry Valuationso that they can expect a realistic return po-tential. Tere must be Exit Options so thatthe buyer who buys your business can realizehigh ROI at the time they resell.

Te better the company is at creating stake-holder value and shareholder return, themore interest there will be in buying someor all o the stock. While investors ofen buyon hope and promise, the dot com marketsector collapse clearly indicates a need to ul-timately produce returns to substantiate in-

vestment. Tink or a moment, had many othe dot com managers built GCV to supporttheir promising technologies, they mightstill be around today. Tose that have built

GCV have strong balance sheets, can weath-er the storm, and will undoubtedly find op-portunities to gobble up assets rom thosewho didnt.

Build on any one element in the Equationand you increase its individual value. Build



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up all elements in the Equation and you re-alize an exponential creation o value to theright buyer. Te buyer looking or a stan-dalone entity to produce an annuity streamwill place the highest value on the companywhen all components are strong and it op-erates with little owner intervention. Buy-ers looking only or parts o a business toaugment their own, will want to invest lessand only place value on some components,regardless o how strong they are. For exam-ple, i you build a strong senior managementteam, but the buyer wants to run the busi-ness, they will place no value in your seniormanager(s) that will be replaced.

Remember, as in the movie Field o Dreams:I you build it, they will come.

21


About the Author:

John M. Collard, Chairman,Strategic Management Part-ners, Inc., an Annapolis,Maryland, USA-based turna-

round management firm spe-cializing in interim executiveCEO leadership, asset andinvestment recovery, corpo-

rate renewal governance, private equity advisory,recovery und management, and investing in dist-ressed troubled companies. He is a Certified ur-naround Proessional (CP), and Past Chairmano urnaround Management Association (MA).John is an inductee into the urnaround Manage-ment, Restructuring and Distressed Investing In-

dustry Hall o Fame.

www.StrategicMgtPartners.comeleon: 410-263-9100

Strategic Management Partners, Inc. Wins urnaround Atlas Award: urnaround Consulting Firm o the Year(Boutique)


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When managing staff it is important to recognise that your staffwill have a variety o personality types and will be motivated by,and ear, different things.


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One o the key issues acing business ownersand anyone involved in turnaround manage-ment consulting is managing change. Onceyou have set your business objectives, youhave decided what changes are needed. Is thisenough? Will the changes simply happen?Or not? Tis article looks at the barriers tochange and how turnaround firms go aboutchange management.

Te answer is that unless you make them hap-pen, there will be no changes. And there canbe many barriers to overcome with your staffthat mean making changes happen will bedifficult.

Te barriers to change can be categorised intoa number o problems dependent on the un-derlying cause as below. Each identified cause

however then allows you to identiy the ac-tion needed to address it.

I staff:

dont know they have to change then theissue is one o inormation and the solu-

tion will involve ocusing on the commu-nication o the plan, goals and actions.

cant change it may be because they lack: knowledge o what they need to do,

then this is an inormation issue as abo-ve;

knowledge o how to do it, then theyneed training and support;

resources (time, money, people, equip-ment) to allow them to do it, then youneed to look at a range o project ma-nagement issues in order to make thechange possible

wont change because they dont want tomake the changes, then you need to un-derstand what the underlying motivationor this is, beore you can start to think

about changes you will need to make inthe business culture.

In many cases o course a situation may in-volve a combination o problems which willin turn mean that a combination o solutionswill be needed.


Managing People and the Process o Change

by Mark Blayneyaccredited business rescue expert and author specialising in owner managed businesses

CEO o urnaroundhelp Ltd., UK

Managing change in your business, or in turnaround management consulting, is not justan abstract process, it is one which affects real people. Tis article looks at some o thetechniques turnaround firms use in managing people while implementing change ma-nagement.



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Successul change management projects tendto require commitment to a strong program-me o communication directed at dealingwith each underlying problem; detailed pro-

ject management to see the project through

to conclusion; and a ocus on staff motivation.

Much o what we do at work rom day to day,and how we do it, becomes a habit and exis-ting habits are hard to break. Achieving reallong term changes in how a business operateswill require significant effort to overcome o-ten deep-seated resistance to change. You willhave to lead people into breaking out o exis-ting ways o doing things in order to create

new healthier habits.

I you want to promote change, then the mosteffective way to do so is to use the pressure oexternal events as a lever to unreeze existingbehaviour. Tis then gives you an opportuni-ty to introduce the new behaviours that youwill want to rereeze as the new habits o wor-king that you want to have in place.

Staff can however be extremely reluctant tochange or a wide variety o reasons whichcan include:

Psychological - uncertainty, ear, disori-entation (so change needs to be as swif aspossible to avoid nagging doubt, but slowenough to bring everyone with it)

Personal attitudes and belies - we cannotdeliberately under quote in the initial sta-ges o an assignment (like everyone elsein the industry does) to get the work as it

just isnt right

Group loyalty - the sales team may fightlike cats and dogs amongst themselves,but just watch them stick together i you

try and put production in charge

Habit - but weve always done it this way

Politics - not i Joe is going to be in char-

ge

Physiological - the new roster o 20 con-secutive night shifs is unacceptable

o unreeze existing behaviour you thereo-re ofen need the heat o external pressure (aburning platorm) beore people will realisethe need to move to a new position. So as oneo President Obamas advisors amously said,

Never waste a good crisis.

But you cannot simply rely on external orcesto provide sufficient pressures as ew o yourstaff will have a real immediate appreciationo your position.

You will thereore also need to signal majorchange by making your staff aware o the situ-ation and the need or action and by making

change real; and this usually involves doingsomething that really makes people sit up andtake notice.

Barnstorming ideas and shock tactics can beuseul to signal that real changes are going tobe made to happen. Some o these, and themessages they convey, include:

Slaughtering sacred cows - everything inyour business is potentially up or radicalchange

Killing something big - is there a largevisible project that can be axed (withoutthreatening uture development)?

Clearing out non-perormers - you can-24



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not afford passengers

Breaking a blocker - I someone is activelyblocking change, they cannot be allowedto win - either you are with the changesand where we are going or you are againstus

Obviously, i you can get your staff to wantto change (buy in) they are obviously a loteasier to manage and motivate than i youneed to orce them to change. Unortunately,as discussed in the next article, the manage-ment style required tends to be dictated bythe degree o crisis and speed o responseneeded.

So what changes do you want to drive inyour business, and what external pressuresare there on your business that you can useto help make these changes happen?

Managing the Process

I you are looking to really change your busi-ness or are undertaking turnaround ma-

nagement consulting, to be successul, youwill need to make long term change stick.Tis article looks at some o the techniquesand processes turnaround firms use in im-plementing change management.

Obviously, i you can get your staff to wantto change (to buy in in the jargon) they areobviously a lot easier to manage and motiva-te than i you need to orce them to change.

Unortunately the management style requi-red in a situation tends to be dictated by thedegree o crisis and speed o response nee-ded.

Most turnaround situations start out in a sta-te o conusion, chaos and a lack o control.

As a result, in the initial phases o a real cashcrisis or a turnaround situation, speed ochange tends to be o the essence, periods ouncertainty have to be minimised, and con-trol has to be established. Tis tends to re-quire a highly centralised and directive ma-nagement style (ell) to deal with the crisisphase as you get a tight grip on the businessand there is a ruthless ocus on the core issu-es o cash and what can be major changes torestore viability.

Even during this stage however, respect orstaff, even those resistant to change is im-portant, and the critical distinction betweena directive and assertive, and a rude and ag-gressive approach, always needs to be main-tained.

As the degree o crisis reduces, the approachcan be relaxed into more one o explainingthe benefits o the proposed changes so as toobtain commitment (Sell) while in the reg-rowth phase this needs to evolve again intoa more empowering one (Ask) which gives

scope or staff to innovate and experimentand relaxes what may have become an overrigid management style.

One approach that can be very effective inempowering a team to direct a swif paceo change is the crisis weekend, where youget your line managers together as a groupor a real crisis summit. Tere the team canreally work through, in a concentrated and

intense atmosphere, what the situation is,what needs to happen, and who is going todo what. When done right, this team thenbecomes a powerul committed orce andnever orgets Our twelve-hour days whenwe sorted out how we were going to reallyfix the mess.

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You will need to give the team time to gelhowever, as to become a team, the grouphas to go through a team building processo storming where they argue about howto work, beore norming when they agreehow to work together beore actually acting

as team and perorming.

As you move through a change process, par-ticularly in a turnaround situation, the wayso effecting and fixing change will start witha very directing style o fixing new habits.One approach is to issue instructions and

then check up every day or 21 days that theinstruction is being ollowed that day. Tetheory is that by the end o three weeks, thenew way o doing something will have be-come the new habit and your staff will knowthat once something has been decided, theyneed to do it because there is no hiding place

and you will not be going away.

You can then relax your vigilance and checkson this item significantly.

Tis approach is however highly time consu-ming and your efforts will thereore need to


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be clearly prioritised.

Over time you can move to a more empo-wering mechanism or changing the cultureusing a range o other approaches to manage

the culture:

Walk the talk - lead by example

Shared values - include attitude as a ba-sis or recruiting like-minded staff to re-inorce the culture and define antisocialbehaviour (or example rudeness to cus-tomers, or laziness) or our culture. Ieveryone in the business is living the cul-

ture, the antisocial can be dumped wit-hout remorse or protest

raining - the values o the organisationshould be specified and incorporated intotraining and staff development

Rewards - ensure these go to employeeswho act the values

Value staff - treat them like winners andcare

Celebrate success - identiy wins (espe-cially early quick ones), make success

very visible (or example, give a bottle ochampagne to people who exceed targets)

Celebrate creative ailures - its better totry and not succeed than not to try at all,so long as the risk and downside o ailure

is limited

Cultivate identity - promote the values aspart o your brand and make it real by wayo uniorms, corporate colours, emblemsand slogans

Put customers first - which makes the jobworthwhile

Develop a tight culture, but loose ma-nagement - so you can give staff discreti-

on but within the bounds o a firm set ocorporate values

When managing staff it is important to recog-nise that your staff will have a variety o per-sonality types and will be motivated by, andear, different things and so the third articlein this series looks at the techniques used ormanaging people through change on a perso-nal level.

So, to decide whats the best approach to useto start to achieve the changes you want, de-cide what degree o pressure the business isunder and whether there is a good crisis youcan use.

Managing Te People

Managing change in your business, or in tur-

naround management consulting, is not justan abstract process, it is one which affects realpeople. Tis article looks at some o the tech-niques turnaround firms use in managingpeople while implementing change manage-ment.

When managing staff it is important to recog-nise that your staff will have a variety o per-sonality types and will be both motivated by,and ear, different things.

o illustrate what I mean, or a moment ple-ase imagine there are only two types o peop-le in the world. We will call these square andround pegs respectively.

You as an entrepreneur may be driven by suc-


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Mark Blayney is an ac-credited business rescueexpert and author spe-cialising in owner mana-ged businesses. For moreinormation about Mark

Blayney and his compa-ny urnaroundhelp Ltd.see: www.turnaroundhelp.co.uk

cess (and ear ailure). Some o your staff maybe motivated by receiving praise and recogni-tion, and conversely may ear rejection. Bothyou and these types o employees may ofenbe quick to take decisions, and are restless,

active, and open or change (lets call you thesquare pegs).

Most o your staff are unlikely to be like thishowever. Many will simply value securityand structured policies within which to work(so they know where they stand) and earchange, uncertainty or conflict (lets call themthe round pegs).

In normal times it thereore makes sense tomanage your staff in a way that is appropriateto them.So or example, your production staff arelikely to be round pegs, who work best in theround holes o structured work when theyare managed in a round peg way, or examplewith detailed instructions on how to do theirparticular job.

Your sales staff may well tend to be squarepegs, in square holes, who need to be mana-ged in a square peg way with clear targets osales to achieve and lots o praise when theysucceed.

So, to be effective at making change happen,you need to manage the way you go aboutchanging things to match the needs o yourstaff.

I your pace o change is ast, while square pegstaff may well be comortable with this, yourrush to change things can righten your roundpeg staff. You and your other square peg staffmay thereore need to slow the pace o changeand provide more support to the round pegsi these staff are to eel secure in their ability


About the Author:

28

to handle change.

I however your speed o change is slow, thenwhile you will be moving at a pace that yourround peg staff may be more comortable,

your square peg staff may well be rustratedby the rate o change and you may need toquicken the tempo to keep them with you.

Particularly with round peg staff, managingchange can ofen be about building their con-fidence in their ability to change and this ishelped by:

providing support through training and

inormation

building trust through two-way commu-nication, avoidance o criticisms o thepast, allowing ailures and demonstratingthat you appreciate that success may taketime.

So, to decide the best approach to helpingyour staff make the changes happen that youwant, think about who your staff are, whatwill motivate them, and what speed they willmost comortable moving at.


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Marcia Xenitelis

What we needto strive or are creativecommunication methods to engage em-ployees in the process o change.


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Te requency at which the word engage-

ment appears in any discussion about em-ployee communication has begun to makeme wonder whether we clearly understandwhat the term means. More importantly, dowe understand what it means to our clients,particularly CEOs, when they talk about en-gagement? We have engagement tools, butcan we really say that these tools actually en-gage employees in the process o change? Orare employees merely engaged with the tool

itsel?

Tere is only one question that you need askyoursel to find out whether your employeecommunication strategies are going to engageemployees, rather than simply inorm. Tatquestion is: Can you establish whether thetools and methods you are using to commu-nicate with employees are changing attitudesand behavior or providing inormation?

Employee engagement is a shared understan-ding o the issues that affect the business, andthat understanding leads to changes in em-ployees attitudes and behaviors. Unless em-ployees truly understand the issues and makea meaningul connection between their jobsand those issues, their attitudes and behavi-

ors will not change. o achieve engagement,

three things have to happen: Te business is-sue has to mean something to the employeepersonally, the employee has to understandthe issue (and I mean truly understand it, not

just read about why it is an issue), and mostimportant, each employee must be made toeel a part o the change process.

As communicators we have the opportunityto become creative in how we communicate

and engage employees. Te ultimate aim inemployee communication has to be to createthe Aha! moment. Tis is the moment whenemployees have the necessary inormationand can say, Now it makes sense, Now I un-derstand, Now I can do something aboutit.

ools are important in this process but ge-nerally they just communicate inormation.

What we need to strive or are creative com-munication methods to engage employees inthe process o change.

Tere are five steps or identiying what theAha moment is and they include the ol-lowing:


Are Your Communication Strategies ReallyEngaging Employees?

by Marcia Xenitelis

Change Management Expert, Proessional Speaker, Author and Consultant



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1. Focus group research. Ask employeesabout their thoughts on the organizationand its competitors.

2. Identiy the largest gap between what cus-tomers think and what employees think

customers think.3. What would create a paradigm shif in

employees thinking?4. Can you measure the impact o the change

in thinking?5. How significant is it to achieving the busi-

ness objectives?

So lets look at an example that would be a-miliar to communicators: the annual report

announcement. ypically an online annualreport would be made available to employeesvia the intranet. Some employees read it, butmost tend to scroll down to the last pages tocheck the annual salaries o the senior execu-tive staff and then close the document.

Lets imagine that the results in this annualreport are very poor and the CEO is deter-mined that employees understand the issuessurrounding the poor results and become ul-ly engaged to help turn the company around.Heres how one organization accomplishedthis.

Te company held our brown bag lunchmeetings over our weeks where employeescould attend or ree or one hour and hearrom an outside proessional about how toinvest in the share market. Importantly, the-re was no obvious link between the meeting

topic and the organization the employeesworked or. At week three, they were analy-zing annual reports and generally decidingwhether they would invest in a particularcompany based on the inormation contai-ned in the report. By the ourth week theywere given another annual report and asked

the same question, would you invest in thiscompany? Te answer was overwhelminglyno. And o course this last company was theone they all worked or, which brought themto the Aha! moment. Now the organizations

employees understood and were engaged andready to become involved in turning the com-pany around through teamwork and new in-itiatives.

Here are some steps you can ollow to ensu-re that you can come up with creative waysto communicate with employees and engagethem in the process o change.

o challenge belies that your employees haveabout your organization, you need to haveacts. Te marketing department is an excel-lent source o acts about the business, withresearch on brand image, customer satisac-tion, customer and non- customer views oncompetitors and inormation about marketsegments. Each o these areas provide valua-ble inormation on opportunities to link em-ployees with business issues that can be mea-sured. For example, the organization shouldhave acts about how customers eel aboutthe service provided by the organizations callcentre. Employees will also have an opinionabout how the believe customers perceivetheir service. By taking the results o the cus-tomer eedback and presenting it to staff thisofen creates an Aha moment because cus-tomer eedback is typically better than whatemployees anticipate. Once you have sharedthis inormation, the objective is to then ex-

plore ways that employees can become en-gaged in urther improving that customereedback. Focus groups are another excellentway to find out what employees think aboutdifferent aspects o these areas and how theirbelies can be challenged as you need to helpthem better understand the issues that affect


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About the Author:

Marcia Xenitelis is a recognized authority on the subject o change communicationand helping organizations get traction with strategy. She has consulted widely to busi-ness, spoken at conerences around the world and has developed products ocused onchange management. For access to case studies and more inormation on the types ostrategies you can implement to engage employees visitwww.marciaxenitelis.com or a wealth o ree inormative articles and resources.

33

the business.

Key sources o business data are customerexperience data, business results by productor service stream, competitor customer eed-

back, and measures o the attributes o yourbrand. Tese are sources o data that you canuse as a measure o improvement as a result oyour employee engagement strategy.When selecting business outcomes as a mea-sure or your employee communication stra-tegy, you need to be quite certain that the

strategy you implement can actually affect thebusiness outcomes you have decided to ocuson.

Finally, when it comes to any employee enga-

gement strategy, whether it be total transor-mation o a business or improvement in oneaspect, you can rarely go it alone. Partneringwith other areas o your organization inclu-ding marketing and human resources willensure that the optimum outcome is achievedor your organization.


Advertisement:

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urnaround Management JournalShort Notes

12 reasons why people resist change by orben Rick

Crisis Management - Expert Strategies For urnarounds and Liquidations by Lee Hiller

Crisis Management and Business Continuity by Ebi Akpeti

BP Crisis Management: Being a good CEO doesnt make you a good spokespersonby Jem Tomas

oyota Recall Crisis by Alice

Increase perormance through employee engagement by orben Rick

World Class Corporate Crisis and Communications eams by ony Ridley


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12 Reasons Why People Resist Rhange

by orben Rick

orben Rick is an experienced senior executive, both at a strategic and operational level, with strong track

record in developing, driving and managing business improvement and development, change management andturnaround.

Expecting resistance to change and planning or it rom the start o your change managementprogamme will allow you to effectively manage objections. Understanding the most commonreasons people object to change gives you the opportunity to plan your change strategy to ad-dress these actors.

Its not possible to be aware o all sources o resistance to change. Expecting that there will beresistance to change and being prepared to manage it is a proactive step. Recognizing behav-

iors that indicate possible resistance will raise awareness o the need to address the concerns.

At the end o the day all sources o resistance to change need to be acknowledged and peoplesemotions validated. Its ar better to anticipate objections than to spend your time putting outfires, and knowing how to overcome resistance to change is a vital part o any change manage-ment plan.

12 typical reasons or resistance to change:

1. Misunderstanding about the need or change/when the reason or the change is unclear

I staff do not understand the need or change you can expect resistance. Especially romthose who strongly believe the current way o doing things works welland has done ortwenty years!

2. Fear o the unknown One o the most common reasons or resistance is ear o the un-known. People will only take active steps toward the unknown i they genuinely believe and perhaps more importantly, eel that the risks o standing still are greater than thoseo moving orward in a new direction

3. Lack o competence Tis is a ear people will seldom admit. But sometimes, change inorganizations necessitates changes in skills, and some people will eel that they wont beable to make the transition very well

4. Connected to the old way I you ask people in an organization to do things in a new way,as rational as that new way may seem to you, you will be setting yoursel up against all thathard wiring, all those emotional connections to those who taught your audience the oldway and thats not trivial

5. Low trust When people dont believe that they, or the company, can competently man-age the change there is likely to be resistance

6. emporary ad When people belie that the change initiative is a temporary ad



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7. Not being consulted I people are allowed to be part o the change there is less resist-ance. People like to know whats going on, especially i their jobs may be affected. Inormedemployees tend to have higher levels o job satisaction than uninormed employees

8. Poor communication Its sel evident isnt it? When it comes to change managementtheres no such thing as too much communication

9. Changes to routines When we talk about comort zones were really reerring to rou-tines. We love them. Tey make us secure. So theres bound to be resistance wheneverchange requires us to do things differently

10. Exhaustion/Saturation Dont mistake compliance or acceptance. People who are over-whelmed by continuous change resign themselves to it and go along with the flow. Youhave them in body, but you do not have their hearts. Motivation is low

11. Change in the status quo Resistance can also stem rom perceptions o the change thatpeople hold. For example, people who eel theyll be worse off at the end o the change areunlikely to give it their ull support. Similarly, i people believe the change avours anothergroup/department/person there may be (unspoken) anger and resentment

12. Benefits and rewards When the benefits and rewards or making the change are not seenas adequate or the trouble involved

o win peoples commitment or change, you must engage them on both a rational level andan emotional level.

Crisis Management - Expert Strategies Forurnarounds and Liquidations

by Lee Hillerowner o the SEO and branding firm Pen And Ink Inc.

In a weak economy it is not surprising to discover one o the astest growing fields o businessmanagement is crisis management. Ofen a crisis situation occurs beore it is ully realizedby a business and an expert must be brought in to intervene. Te goal o crisis manager is toidentiy the nature o the crisis and plan a turnaround or liquidation strategy. Te crisis man-

ager is ofen struggling with multiple actors including the company's public image during theanalysis o company's current profitability and recovery viability.

Many businesses try to restructure their way out o the crisis deploying many o the same strat-egies which lead to the current ailures. A crisis manager will see the company's structure witha resh pair o eyes and can implement a plan rom an impartial point o view. urnaround orliquidation may well be related to how soon a crisis experienced outside manager is brought


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in.

Recently US Automaker Chrysler was deemed "not salvageable" by both the media and theFederal Government. Detroit area turnaround specialist Jim Mcevia o Mcevia & Associateso Bingham Farms stated, "Ultimately you're talking about a set o circumstances that means a

liquidation o Chrysler's assets, that's what everybody's been talking about but nobody's say-ing it." As o this writing, to our knowledge, Chrysler has not brought in a crisis manager totake over. It is said to be losing more money than it ever has.

Circuit City tried to restructure by firing its best sales people beginning in 2007. Te inter-nal decision made by Phil Schoonover ormer Circuit City chairman, CEO and president totransorm Circuit City in to Best Buy was a critical actor in the companys ailure. Had a cri-sis manager been brought in prior to the 2007 decision perhaps they could have developed aturnaround strategy, rather than succumbing to the eventual liquidation.

Tere is even help or crisis management in the nonprofit sector. Dr. George Head, PhD anddirector emeritus o the Insurance Institute o America in Malvern, PA and special advisor tothe Nonprofit Risk Management Center and co-authored the Centers book, Enlightened Riskaking: A Guide o Strategic Risk Management For Nonprofits.

Head says, Economic downturns bring both threats and opportunities to which a resource-ul nonprofit can and should respond constructively - both or its own protection and or thegreater well-being o its clients and o the general community o which that nonprofit is a con-tributing part. In hard times, it is easy to find and bemoan the threats. It is more rewarding oreveryone, however, to seek out and seize the opportunities. In all o these circumstances, the

discipline o risk management can provide resources and tools or sustaining a nonprofit andthe clients and communities it serves.

Te slowing economy has created a need or crisis managers within retail apparel sector. A vet-eran retailing expert, Milton Waldoff o Te Waldoff group says, Te world o retail is fierce,competitive and unorgiving, more so today than at any time since the Great Depression othe 1930s, surviving is not a given, nor is a successul closing. He continues, A crisis man-agement expert knows every situation cannot be turned around, some situations simply callor liquidation and management must have the experience, knowledge and expertise to knowwhat works and what does not, and which situations might be turned around very success-ully! Both take proessional unemotional analysis and planning. Waldoff has been involvedin numerous successul retail crisis management situations.

As the economy becomes less orgiving and consumers have less to spend, the marketplace willcontinue to contract to accommodate the loss o incoming revenue. Businesses large, small ornon-profit can benefit rom the services o a proessional business crisis manager. Knowingwhen to hire a crisis manager to assess the health o your business could mean the differencebetween a turnaround or liquidation o your business.


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Crisis Management and Business Continuity

by Ebi AkpetiMaster in Media and Communications, Master in Finance

In the last couple o months the world has been mesmerized by the BP oil spill in the Gul oMexico. Te accident occurred in the deepwater horizon platorm owned by BP, which led tooil leaking into the Gul or 3 months unchecked. Te damage caused to the environment, thelocal economy and to BP will take years i not decades to recover rom.

What happened? Where did BP go wrong?

Tis kind o tragedy is not unique to BP but it revealed a major flaw in BPs operational pro-cesses; BP ailed to show that they had effective systems in place to deal with a crisis. I BP had

taken a stock o what happened to Exxon on March 24, 1989 when Exxon Valdez ran agroundin Alaska Prince William Sound, they would have been better equipped to deal with the issues.History is a solid prophet o the uture!

From the BP experience ,we can see that successul companies are not the ones without arecord o disasters but those that can prove they are adequately prepared to deal with anyemergency. Preparing or crisis should become top o the mind concern or organizations.Companies must stop adopting it cannot happen to us approach because crisis is inevitableand no one can say when it would occur. Tey should instead put in place a strategic plan thatcould adequately deal with possible/envisaged disasters. Te strategy to deal with such events

should be subjected to review periodically. Sounds like a luxury doesnt it ? but it is not !!!A well structured crisis management plan showing the arrangement management has put inplace and measures taken to solve problems when crisis hits an organization is essential orthe continuity o that usiness.

he most challenging part o crisis management today is the social media. When somethingdoes go viral on the web, it is overwhelming and scary to see how ast it spreads. Because thecrowd controls the conversation, You tube, Facebook, Myspace and witter and not the con-

ventional media have become the biggest threat to organizations. While they are excellentmarketing tool and are being used by organizations to promote their goods and services, they

have been discovered to be effective tool in the hands o competitors when crisis eventuallyerupts. Companies that are looking to exist in the long term need to pay attention to socialmedia mentions o their brands, services and even their top management. Tis should be doneregularly; in order to respond to any negative circumstances should it arise. It is an organiza-tions responsibility to turn negative comments (i any) around and deend them as soon aspossible. It is the silence and non action that in most cases, result to embarrassment and pos-sible litigation or organizations (remember the United Airlines case?). I there is no response


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on witter or Facebook one hour afer a story breaks, it shows clearly that an organisation isnot adequately prepared to deal with social media crises. Unortunately very ew companiesare yet to identiy their communications on the social media.In preparing a crisis management plan,the guidelines must be taken.

ake a look at the crisis whether large or small that has affected the organization in thelast ten years.

ake into consideration what can happen to a company at any point in time. Tings suchas workplace violence, terrorism, kidnapping, fire, HR issues, I ailure, internal raud,death o staff etc.

Play the what i game and constitute problems that could happen. Assign responsibilities to staff so every body knows who is responsible or dealing with

such issues. est and re test the crisis management plan. Finally dont orget to recruit an online crisis manager!


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BP Crisis Management: Being a Good CEODoesnt Make You a Good Spokesperson

by Jem TomasDirector o CB3 Communications, a UK based crisis management and strategic communication consultancy

Tere is no doubt that the sheer severity o the Gul catastrophe has had a monumental effecton the reputation o BP, justly or not, and the financial cost will be staggering. But with percep-tion being reality, how much has the perception o BPs response contributed to the financialaccounts?

BPs engineers, along with countless others rom several agencies, have worked tirelessly tostem the oil flow, yet still they are seen as the culprits, while the US government and its looselegislative approach to oil drilling in the area, Haliburton, responsible or the mechanical up-

keep o systems that ailed, and ransocean, the drilling company hired by BP, largely avoid theire o the public. BPs response has been massive, practically and financially, yet their effortsare all painted against the blame which is thrown at them.

Te act that public anger is concentrated on BP, and not others, may have something to dowith the media response they put orward. It terms o crisis communications they have act-ed quickly and succinctly, as can be seen rom their online work. But their words, coming


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rom their spokesperson o choice, CEO ony Hayward, have acted as a magnet or anger anddistrust, not sympathy and understanding. And the question, albeit unquantifiable, must beraised: how much has the perormance o Hayward in the media contributed to the financialhammer blow? 1%, 5%, 10% (even at 1% were taking lots o zeros).

It is ironic that ony Hayward, a very capable CEO, has always been known or his aggressiveapproach to maintaining and raising saety standards. His experience in the field o oil explo-ration and the industry as a whole is (or should be) beyond reproach. But all that counts orlittle when dealing with a vengeul media, encouraged by a public baying or blood, eeding acrisis maelstrom.Hayward - Good CEO, bad spokesperson?

Te cleverest, most capable, experienced, sensible, respected, even honest, CEO is never nec-essarily capable o dealing with a media storm. Such circumstances tend to be way outside

their comort zone, in an environment normally way out o their control. Te angel o theboardroom may be adept at managing people, resources, time, finances and the market, butwithout considerable orethought, experience, and training in dealing with the media thesemanagement attributes will count or little, and may cost a lot.

Hayward has been castigated or his perormance in the media - rom wanting his lie back,when 11 were killed in the initial tragedy, to claiming that the ocean is very big, when to localsthats not quite the point. Tere are many other examples, in which Hayward has added (ex-cuse the pun) uel to the fire.

Having looked into Haywards background and career, there is little doubt over the honourableintentions o BPs Chie, but i CEOs, senior managers, subject matter experts and spokespeo-ple are ever going to ace the media under such an onslaught, preparation, practice, mentoringand extensive training are utterly vital. Working your message (assuming you know what itis), reconnecting during interview, handing tangential issues, subtle bridging, persuasive tech-niques, linguistic dexterity - these are all cerebral actions which must be almost second-natureduring the sparring o a harsh media interview, maniesting itsel in a rapid mental obstaclecourse. Speaking confidently at the annual AGM, providing lively and humourous dinner par-ty chat amongst other titans o industry, eloquently arguing your case in the boardroom - allgood and well, but such attributes, whilst handy, will not enable the dynamics, strategy and

tactics required o a crisis media interview (or any media interview, come to that). It is a di-erent ball game, in a different ball park, in a different country.

In deending ones reputation during a crisis, being seen to do the right thing is crucial but asHayward has shown, words spoken in the media during a crisis can be very, very expensive,immediately and or a long time aferwards.


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oyota Recall Crisis

the author chose to publish this article under the synonym Alicethe other writes regular research papers or the UK company ukresearchpers.com

oyota is a motor vehicle manuacturing company with its headquarters in Japan. It is gener-ally abbreviated as MC and is a multinational corporation which has employed more than71,116 employees in the whole world. Tis is the largest automobile manuacturer as it has thelargest number o sales in the whole world. MC was established in 1937 by Kiichiro oyoda.It was ounded as a spinoff rom his athers company. Importantly, oyota Company is thelatest automobile company to ace financial crisis. In the year 2009, this company reported anannual net loss o approximately US$4.2 billion. In the same year, the oyota Company was re-ported to have recalled more than eight million cars and trucks in the whole world (Aidoo 76).

Te oyota Company recall crisis started with a single, horrendous car hurtles in Caliornia.Afer this, other two separate recalls were reported that covered 7.5 million cars. Tese in-stances made this company to be orced to announce its suspension o the sale o eight o thecompanys best selling vehicle. Tis move cost the oyota Company and its dealers a mini-mum o approximately $54 million loss o sales income on daily basis. Importantly, the recallcrisis o the oyota Company was a very big threat to the worlds car industry. As it has beenrevealed, the first recall covered about 4.2 million oyota and Lexus models. Reports haveindicated that, the oyota cars were reported to loose control afer having malunctioningbrakes. Tis instance in South Caliornia led to the unolding o these crises where a car lost

control and killed our people instantly. Te oyota production management was to blame asthe car owners had to replace their floor mats o their Lexus cars which were thought to inter-ere with the gas peddles. On September 29, 2009 the oyota Company announced that it wasrecalling the floor mats on the already produced 4.2 million oyota and Lexus vehicles. Tiswas received by the vehicle owners as a production management ailure o this company andhence its sales reduced drastically. Afer this, oyota Company would have managed this crisisthrough the public relations in order to prevent their bad reputation rom being spread allover the world. In doing this a lot o methods needed to be used those were aimed in restruc-turing the companys reputation. Vividly, it was the ailure o the production management tooresee that the floor mats would interere with the gas pedals and hence resulting to accidents

(Regester & Larkin 132).

Crisis Management through Public Relations

Public relation has become very popular or its assistance in managing crisis. Managing crisisthrough public relation involves identiying the crisis and the extent to which it affects the

victims. Te analysis o the impacts should be ollowed by implementations o action plan


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o communicating the views o the organization and hence influence customers perceptionstowards the company. As indicated by the experts, the oyota Company ailed in its publicrelations in trying to manage the crisis o recall. In this case, a lot o advices were given to thiscompany rom many other competitors and those companies that produced other products.Additionally, the case o oyota Company was used by many companies to learn not to all in

the same trap. Public relation is a very essential management issue that should be addressed inmany companies. Tis is because the way a company represents itsel to the general public inorder to win the trust o the people. For the case o the oyota Company, customer trusted itsproducts quality because o the way the company had been producing quality vehicles romthe time it was ounded (Aidoo 76).

Where oyota Failed

Te way oyota Company used the aspect o public relations to deal with the recall crisis waswanting. As could be observed on televisions, the tone and message used to address dealers

and customers was not up to the standards o what is required in the media. In this case, theoyota Company was blamed or not being aggressive in the usage o public relation strategyin winning peoples trust. From the tone it was possible to indicate that this company wastrying to restore the customers confidence on their vehicles but the strategy used was not theappropriate one. Despite the act that, the company admitted that it made a mistake in qualitycontrol, the strategy used in passing this message across was not convincing. From the historyo customers views on trusting malunctioning companies, oyota Company customers werestill willing to orgive the production managers or the mistake committed and give it a secondchance but were not wholly convinced (Liker 68).When the recall crisis unolded, the reports about how this company produced ake products

were very much spread all over the world through the use o internet. oyota Company wouldhave rankly announced what was the cause o the problem and the efforts made by the com-pany to fix it. Importantly, one o the major qualities o public relations is to take the ullresponsibility and being empathetic to the amilies and customers who were affected by theproblem. Te oyota Company lacked this as the people were expecting even the presidentand the CEO o oyota company to explain the problem and how they were intending solveand control it in uture. As could be seen rom the media, the apologies given by Akio oyodawere not enough to convince the public to remain loyal to the companys products. Accordingthe media, there were no tears that were shed by Akio to indicate that he was empathic to thosepeople who died. Tis is one o the things that made the oyota Company to be unable to uti-

lize the aspect o public relations to win the customers trust (Regester & Larkin 132).

Te actions taken by the oyota Company to solve the crisis were very late as it was afer thecompany was advised to actively and competently utilize public relations. Te crisis o oy-ota Company was declared as the worst handled in the history o management crisis. Tis isbecause the strategy used in addressing the public was not convincing. It would be advisablei the management o the oyota Company to consult rom the experts beore addressing the


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Turnaround Management Journal Issue 2 2011

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