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Coaching leaders of failing businesses

Graham talks about helping business leaders who are coping with a business that is failing - whether financially, or by being unable to reinject growth. Both have a different sense of urgency and priority, but only by understanding what has happened can a leader plan for the future and hopefully recover.



Today, I'm going to talk about helping business leaders, or business owners who are trying to turn around a business that's failing. Before I begin talking this through, I just want to give some sense of what I mean by failing.

Failing is on the spectrum, it could be that the business is going to go bust, it could be that they’re going to run out of money in the next six weeks, and another is that they've lost their way, are stagnating; just simply can't reinject growth. They are completely different business situations that have a totally different sense of urgency and a totally different sense of priority that needs to be brought to bear at each end of that spectrum.

If you're dealing with the first one, where the business is looking like it's going to collapse, and it really is on its knees, then there are several things that as a coach you want to make sure the business leaders have dealt with, which is, first of all, their legal position, secondly by behaving responsibly, or they cease to trade as quickly as they should.

Obviously, you can't continue to counter English company law, if you know full well that the business can't pay its bills, but equally, if there is a future for the business, somehow, someway, you have an obligation to continue to trade. So, the first thing is, are they doing all the things they should be doing from a legal point of view? For example, getting good insolvency advice.

The second thing is do they know why they're failing? Do they understand what's happened to their business? Has there been a significant market shift? Has there been a problem with supply? What what's happened to put them in this very difficult place? Only by understanding what's happened can you start to then plan potential solutions.

So, if, for example, it was a bad debt - a customer has gone under and left them with a big hole in their sales and a big hole in the bank balance - the question is, can you recover over time? If you could recover over time, can you speak to creditors? Can you speak to bankers? Can you try and get an agreement to give you the time to recover?

On the other hand, if it's something much more complicated; for example, say there is a lack of supply of your key raw material and it isn’t coming back into stock anytime soon - Unless you can downsize to a level that meets that supply and still be viable, you probably are looking at a preordained outcome. By understanding what's causing the problem, you can start to weigh out whether or not it's worth all of the trouble and time and fret to get the business back up and running successfully. This is important because as I said, there are legal obligations that sit around this, and around directors and business leaders in this kind of situation.

It may lead to other kinds of off-the-wall solutions; it might be that you could sell the business because whilst you can't make it viable in a short space of time, someone with synergies who can absorb the business can get savings and bring financial strength that will buy you the time. The reverse might also be true, it might be that you could make an acquisition, that would give you the reverse benefits I've just described. You may even be able to persuade investors to help you do that. In that context, it could be that one of your competitors is in exactly the same boat that you're in, and by merging together you can shed enough overhead and operating costs to gain enough market share to make it viable for both the new, combined organisation to survive. That's one set of questions. And as I say at that point, it's all about; do we know why we're here while we're in this mess? And do we think there is a way forward to getting out of the mess?

Coming to the other end of the scale where a business is failing in the sense of stagnating; This happens regularly to online businesses, and we all know the business growth curve - it comes to a point where business plateaus for one reason or another. Often that brings in new leadership who inject new ideas and re-energise the organisation and let it kick on yet again.

If this is this kind of situation; either the new management or the old management are recognising that the business has started to slow, and is really in danger of becoming mortally wounded, what are the sorts of things as a coach that you're going to encourage them to think about? I'd start with, well, what are your core competencies? What is it that this business is really, really good at? What are the things it knows how to do? And is it world-class in each of those core competencies? Because if it's not, the stagnation could simply be that the business is not competitive any longer; it's become complacent, over-bloated, and too expensive. Call it what you will. And it's not moved with the market conditions and the competitive position.

Another question would be ‘If I understand my core competencies, can I use them in parallel markets? Can I create new opportunities that look different take me into new dimensions, but fundamentally built around things we understand very, very well?’

Another aspect is all of the stakeholders; Do the people in the business feel energised enough to rise to the challenge? Do you have the right key trading partners, whether it's customers or suppliers, are you chasing the wrong kind of customers that are inevitably low growth? Customers are inevitably price sensitive, when you should be looking for higher grow more premium customers offering you more profitability opportunities? Or are your suppliers not really acting as partners, are they not really coming to the party and making you competitive and effective in the marketplace? Are they starving you of innovation?

If you start to create an image in your mind and in the leadership's mind, of what could be the future, what could be a new way ahead? Then the challenge becomes how are you going to share that with all of the people that you need to share it with? Because that change can be very significant, it might not be a small thing, it could be a massive transformation programme. Which in itself can be exciting and fun, and really brilliant to lead, but not easy and not without risk usually. Usually, that risk is both from the business’ point of view - of doing things that don't work - and from a personal career point of view, or personal financial point of view. You take the business towards a risk zone where you could fail.

Moving on from that, one of the key aspects from the coach's point of view with the business leaders, does the leadership group, not just as individuals, but as a group share that common view. Do they have a real desire around the main core tenets of that particular new plan? And that may have to start with Do they share a common understanding of the current circumstance? Does the production director understand the issue in the same way that the sales director does? Does the finance director have the same view of the world as the chief executive? And this may sound really silly, but actually, it's fundamental. If a production director doesn't really believe that he or she needs to reinvent their processes, the energy behind that will slow it down.

You can see the point. I'm making up examples so that when coaching the CEO - if that's what you're doing - you also need to be sure that there's a team. Believe in what they’re saying, and not only that, but I understand the reasons why they understand what's going to happen if they don't change, and they understand the status quo and the future that they're trying to create together. Which then leads to... Do they have the same level of ambition? Do they have the same appetite for risk that he or she does? This is important because this is a journey, they're going to go on together.

Whilst it's never going to be easy, and you're not looking for ‘Yes men’, it is really important that the commitment is genuine and deep. That will see you through the challenging times ahead. That could then lead to some other more fundamental questions. Other stakeholders may have views, shareholders, bankers, and funders, may all have views that you need to bring on board. If you need to raise more funds, you need to explain to them, that you're moving into the risk zone to correct stagnation. You may need their endorsement and indeed you may need more money, so how do you present that to them? How do you deal with that relationship that you need to create to make it a success?

As the coach you don't know any of these answers, you don't have any of these solutions in your kit bag. What you do have is the kinds of questions that are going to help these business leaders and their teams work it out. Because the one thing about stagnation is that it rarely solves itself. Unless they fortuitously bump into some great opportunity, the chances are they really do have to reinvent the business.


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