Advice:How to manage your way through [out of] a crisis

By , published on 24th October 2011

This recession has seen plenty of casualties; there’s no doubt about that. In hindsight there should have been no surprises when we saw estate agents and conveyancing lawyers taking the hits. But they have not been alone in their pain.

Here is another true story – one that could have ended up in the insolvency and bankruptcy courts… but didn’t!

A recent client, a distributor of a particular health product, felt the tide turning. Along with the general angst that accompanied the recession the specific problem was that their key distributor cancelled their major income stream. The business was about to die. Or so it seemed.

The business used the Scan/Evaluate/Recommend/Results process model (developed with similar organisational issues over the last few years) to scrutinise, appraise, propose and check outcomes. Clear that a fast response was crucial to the ensuing crisis, the business made the tough decisions, and took massive action to turn the situation around. Over a period of some six months the key directors went through the four-step process as follows.

Scan…

Forty years of success. Four years of squeezed margins. Two years of losses. Then the distribution contract that represented almost 70% of turnover was cancelled. Nearly 100 people stood to lose their jobs – in a recession.

Evaluate…

The management and staff had dug themselves into deep ruts. It was a business defined by its past, so could it really be changed? And fast? And radically? And could it win new business? Who to keep and who to lose? What were the legal implications? The heart had no place here. It was survival of the fittest – or no survival at all.

Some quick-and-dirty qualitative research among staff, customers, competitors, the media and trade associations produced one clear view of the company: lots of goodwill, little belief in its ability to change.

Success would depend on leveraging that goodwill, and demonstrating that real change was happening – and fast.

Recommendations…

First and foremost: stop being Mr Nice Guy, and think survival. Brief heavyweight commercial lawyers to pursue compensation for the distribution contract cancellation. Immediately instigate redundancy proceedings for 80% of the staff. Appoint a new management team – with a new MD in his 30s.

But cutting costs is never enough. We had to discover a new future. We redefined what their expertise was – not distribution and marketing, but product expertise. Their product knowledge reputation was second to none – and everyone trusted them. We proposed a complete restructure of their operations, refocusing on two core areas of expertise – and appointed new, and respected, heavy-hitter directors for each.

Now it was possible to pursue new distribution deals with a real story to tell – and the response was gratifyingly positive. The company had proved it could change, while not losing all the ‘old positives’.

Results…

A multi-million pound settlement of the legal dispute brought the company six months to re-establish itself. Several new distribution contracts were won – and one with a really prestigious brand leader. Over 50% of staff still had jobs, and all those who left had full recompense. The company was revitalised. It had new sense of purpose – and a self-belief that had withered over the previous years. Suddenly, ‘lazy’ sales people were delivering impressive results, and the new management team were really driving the business forward. The company was formally ‘re-launched’ just six months after disaster struck, and the ‘new’ company is a much better business than the old one ever was. It’s got a secure, profitable future.

Crisis? What crisis?

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Robert Craven

About Robert Craven

Robert Craven shows MDs and owners how to grow their sales and profits and focuses on how to do this in recessionary times. His latest book is the runaway success “Beating the Credit Crunch – survive and thrive in the current recession” www.directorscentre.com He is a keynote speaker and the author of business best-seller ‘Kick-Start Your Business’ (foreword by Sir Richard Branson) and runs The Directors’ Centre, helping growing businesses to grow. For further information, contact Robert Craven on 01225 851044 [email protected]

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