You don’t find many examples of major companies who find themselves in a negative spiral and then a new leader is able to turn the situation around and put it on a winning track. This is an interesting topic, because we can learn valuable lessons from the small number of successes that there are. Here are three that are the most significant:
1.) Chrysler – In the late 1970’s Lee Iacocca became CEO of Chrysler, which was in a death spiral. He quickly simplified the organization and introduced a wildly popular new model, the minivan. By 1983 Chrysler paid off a $350 million government loan that was critical to the turnaround.
2.) IBM – In 1993 IBM was heading toward bankruptcy and its board hired Louis Gerstner and he went to work streamlining the company and focusing of services and by the mid 1990’s the company was highly profitable again.
3.) Ford – In late 2006, Ford was a mess; its cars were boring and the organization was fat and bureaucratic. The board hired Boeing exec Alan Mulally as CEO and he stuck to the basics, leveraging their assets to acquire cash, putting some excitement into the products and cleaning up the organization. This quickly put Ford back on track and profitable.
Stepping back from these examples and others, there are five characteristics that clearly emerge as the way to turn around a sick organization, or to further strengthen successful ones:
1.) Fresh Talent – You need to reach for an experienced, objective, aggressive new leader who is not vested in the practices of the past. This person can come from either the inside or the outside, as long as they have the skills just mentioned.
2.) Develop the Plan for Success – This starts with extensive interviews inside and outside the organization, as well as detailed reviews of the marketplace, competition, technologies, and trends.
3.) Simplify the Organization – Managers hire too many people, and with time, you end up with a bloated bureaucracy that complicates and slows down decision making. This has to be cleaned up quickly.
4.) Key Measures – A score card needs to be designed that enables the organization to see progress toward the achievement of the plan and makes the ultimate goal clear. This also helps in signaling when course corrections in the plan need to be made.
5.) Sense of Urgency – The new leader needs to create a clear sense of urgency that is felt by the entire organization. Without it, the organization will be lulled into a sense that all of this will wither away and we will soon be back to the status quo.
Mulally, Gerstner and Iacocca are the epitome of these characteristics; learn from them!