HR’s Role in Business Turnarounds

Many business leaders today are challenged to turn around their businesses due to massive changes in the marketplace. Turnarounds seldom are accomplished by a brilliant individual acting alone; they require the teaming of different resources and efficient, supportive organizational processes and systems. HR professionals should have the skills necessary to take the lead in getting people and systems better synced to produce a business turnaround.

Here are six examples of leaders who navigated successful business turnarounds and a brief description in each case of what their HR managers did to add value to the effort.

 

1. Communicate a clear vision and strategy: The president of a large European organization aimed to better align how country organizations collaborated in new market dynamics in Europe. The president kept getting feedback that associates in the different countries didn’t know what the strategic priorities were. This lack of clarity led to very diverse (and often counterproductive) actions that reinforced the status quo.

Although the president had announced the strategic priorities in speeches, executive meetings, and memos over several months, everyone still operated by the old code of conduct. Finally, his HR coach said to him, “People don’t pull out a memo to refresh their memory about what’s important. What they need is a short statement that they can hold in their mind’s eye as they work.” At the president’s request, the coach went through the various documents and produced a short three-paragraph strategy statement in the president’s own words.

As this new document was distributed and discussed, the confusion about strategic priorities went away. For example, one general manager complained that the European R&D organization wanted to introduce a new product under a brand name that this manager’s market research indicated was a very weak position vs. competition. “What can I do?” he asked.

His HR coach asked, “Is there anything in the strategy that justifies your position?”

The general manager replied, “Well there is that priority about stopping any profit hemorrhages. That’s it! What R&D is asking us to do is off strategy for our market.”

The new product enjoyed a successful launch –under a different brand name– and is still a profit contributor many years later.

 

2. Lead by example: Members of an executive team, in response to an economic recession, voluntarily suspended their own salaries at the same time they had to reduce employee wages to weather the storm. Associates in this company were impressed that their leaders were sacrificing along with them in this tough period.

Building on this goodwill and the clear message of the seriousness of their situation, the HR function organized workshops in all corners of the company to identify tangible ways to cut costs so that everyone’s normal wages could be reinstated as soon as possible. The brainstorming moved quickly to implementation and the company got back to normal faster than its competitors.

 

3. Align processes and systems to fully support vision and strategy: Leaders at a premier agricultural products company have a simple, straightforward mission: “to produce (our) products and services which consistently achieve the quality and service expectations of our customers in a cost effective, environmentally responsible manner.” Two governing principles support this mission:
   • Don’t use force
   • Keep your commitments

HR has taken the lead to shape an organizational infrastructure to align with the mission and governing principles:

• One production line is shared as needed by two product groups (bulk product and finished product).
• Individual goals and teamwork are focused on the key factors to fulfill the mission.
• Every associate is personally responsible for getting the training they need, scheduling their time commitments, upholding performance standards, and contributing to fulfilling the mission and governing principles.
• Differences in values and work approaches are acceptable, providing those differences do not detract from fulfilling the mission.
• Associates exchange information freely with all stakeholders and help as needed to ensure everyone succeeds.
• All associates live, speak, and endeavor to find the truth.

This company’s “turnaround” has been to convert a successful start-up into a high performing, rapidly-expanding operation that has become the world’s leading food processor in its product category. Its innovative and productive work culture has transformed traditional “hired hands” in the farming industry into loyal, skilled, and committed contributors to its success. More than 97 percent of the 4,000 seasonal associates return each year despite the fact they are employed only four months out of the year.

 

4. Connect emotionally with associates: The associates and leaders of a South African financial services company collaborated to assist a recently-hired associate who was experiencing several crises simultaneously. This associate’s husband died suddenly; she was facing the likelihood of defaulting on her home mortgage; and she had just begun treatment for newly-discovered cancer.

HR learned of this woman’s desperate situation and organized contributions from the company and voluntary contributions from associates. HR also managed a flexible work schedule tailored to her unique needs. This woman has emerged successfully from this emotional pit and the bond between her and the company couldn’t be stronger.

 

5. Overcome obstacles: A European producer of machine tools, laser technology, and electronics was facing a 40 percent drop in sales during the 2008 recession. Company leaders were firm that no associates should be laid off. But how else could this company make it through this economic hardship? The HR function managed a plan to reduce work hours for all associates. Associates responded very positively to the company preserving their jobs when so many others in their region were being laid off. “Tightening our belts is a much better alternative than losing our jobs,” one associate said.

The silver lining in this dark cloud was revealed when the recession ended and the company could immediately go back to full production. Other companies, who had laid off experienced workers, now had to hire new employees and wait for them to get up to speed. This company’s sales increased 50 percent in the first year of its recovery.

 

6. Celebrate success and inspire continuous improvement:

A leading pharmaceutical company, led jointly by its president and HR leaders, invested heavily in changing the mindset of its top leadership echelons from being “good managers” to being “effective leaders.” Twelve months later under the new leadership focus, a record sales year was celebrated.  The next year, the company went even further, implementing a process in which each of its top 250 managers aligned their key priorities with specific points in the company mission and with priorities of their functional colleagues and their cross-functional team colleagues, and with their boss. This tight alignment with the mission delivered yet another record sales year and a growth rate four times as fast as the global market.

 

Essential HR Competencies That Drive Turnarounds

Drawn from the case examples above, here are four essential competencies for HR professionals who coach and consult with business leaders who seek a turnaround:

• The Competency to Diagnose: the ability to see what others may miss in how the organization is really operating and to identify the multiple cause and effect streams that affect the bottom line.
• The Competency to Apply Organization Theory: an understanding of the theories, research findings, and practical experience that can predict how people will work together in a variety of situations and the ability to apply this understanding in a practical way that delivers improved results.
• The Competency to Design High Performance Organizations: knowing the results of past experiments with organizational form in motivating and regulating work interactions so that reshaping strategy, processes, systems, and structures produces better results.
• The Competency to Coach Business Leaders in the Dynamics of a Turnaround: knowing the organizational dynamics around change, the emotions that change brings out in people, and business leaders’ personalities so that your advice, coaching, and feedback will help make the turnaround a success.

 

Review the following table to glean a few more ideas of how you might add value to your leaders’ turnaround attempts.

 

Summary Table: What HR Professionals Do That Adds Value

What Business Leaders Do	What HR Professionals Do
1.     Communicate a clear vision and strategy to pursue	Monitor industry, customers, and competitors to be able to discuss intelligently what future opportunities could be explored Work with the leaders to articulate the vision and strategy Coach leaders on ways to build understanding and commitment
2.     Lead by example	Build leaders’ awareness of how stakeholders view the leaders’ behaviors Point out situations where leading by example is critical Provide feedback on how well the leaders “walk the talk”
3.     Align organizational systems to fulfill the vision and strategy	Be up to date on organization design principles and available tools that may be used to fit everything together Diagnose the whole system’s dynamics and root causes to understand precisely what helps or hinders the goals Facilitate work sessions to align processes, structures, people development systems, and rewards with vision and strategy
4.     Connect emotionally with others	Gather feedback on how things are going via opinion surveys and discussion groups and share results with leaders Organize discussion forums with customers, suppliers, employees, etc. so the leaders get first-hand feedback on how things are going Point out critical incidents and coach leaders how to connect emotionally with others for positive outcomes
5.     Overcome obstacles	Coach leaders to understand first the realities and their root causes of the situation Facilitate the creation of an implementation plan Monitor the implementation until the turnaround is successful
6.     Celebrate success and inspire continuous improvement	Coach the leaders not to rest on their laurels, but to renew the entire process (1-6) as the evolving market dictates As a facilitator, constantly ask groups, “What have we learned?” and “How can we improve?” Stay in touch with what really motivates individuals and groups and help the leader connect these factors with continuous improvement initiatives