Owners Versus Turnaround Professionals

By Kevin Burke, of Burke Advisory Services

Today companies engage the services of turnaround professionals in order to take their business to the next level, resolve cash flow problems, operations issues or to work out problems with lenders due to a lack of liquidity or, in the worst case, severe insolvency requiring restructuring.

It is important to understand why a CEO/Owner may reach out for help or accept the advice of trusted advisors to engage a consultant or turnaround professional. Remember, a founding CEO likely endured negativity and doubt from others as they fought to start their business. They may indeed be justified in believing they had to battle their way to the successful growth of their company. This required tremendous confidence in their own judgment. Isn’t a healthy amount of doubt concerning outside advice on their business a reasonable result of this experience? Along the way they had to teach themselves the basics of business. But likely, only the basics that applied to their small business.  It is also likely that they learned bad habits and less than optimal practices as they grew their company.

The business likely went along well until the day to day management requirements outgrew the founder’s abilities and training. Rarely are owners formally trained in the administration of a larger small businesses. Business outcomes Are generally more negative without the supplemental input of a trusted advisor or turn around professional. Owners seldom have the formal training or abilities of an experienced turnaround professional. In fact, owners can often have beliefs that actually run counter to the current realities of business situations today.

So, either the owner had a brief insight of reality or a trusted adviser convinced them that professional consultant could help improve their situation. It is not unusual that the decision to seek outside assistance is made somewhat begrudgingly. After all, who knows the business better than the founder CEO or owner?

The Problems

Generally, the turnaround professional will in short order determine that the company has one or several of the following issues:

Unfortunately, it is often difficult to convince an owner of the real nature and root cause of the problem. Remember, while building their business, they developed denial and defensiveness to a near art form.   Getting the owner to accept that they are essentially responsible for all or most of the problems is the first hurdle. The second hurdle might logically seem to be implementing solutions to the company’s problems. It is not. In reality, the next, even higher, hurdle is convincing this owner to step back and stay out of the turnaround professional’s way as they go about turning the business into a well-oiled machine. It is common for owners not to understand the differences between their role as founder and that of a turnaround professional or interim manager.

The Excuses

An entrenched and recalcitrant owner will have a load of excuses why they should retain control and/or not trust the their “baby” in the hands of an outside turnaround professional:

At this point one must ask: “then why are you and your business in this situation?” Of course, the answer is that they do need the professional help of a turnaround or management expert.

The Real Problem

As one might imagine, getting an owner to step back and follow the lead of an outsider is no easy feat and in reality, not always possible.

I recently had an engagement where the owner frequently disagreed with my appraisals of the situation, didn’t believe or have faith in my solutions and regularly countermanded my decisions and direction to the employees, essentially usurping my authority and the significant goodwill I had initially established with the workforce. Even though I was simply implementing industry best practices, he confused his personal feelings and judgement with good business sense.  The owner was not a bad person or malignant in any way; in fact, he was just the opposite. He had a big heart and was loved by his employees and vendors alike. I had worked with him in a minor capacity for over 7 years, solving problems and advising him on various business matters and had actually become friends with him. Because I cared about the engagement, the owner and his employees, this engagement became one of the most stressful of my career.

No matter how I explained the situation to him he could not emotionally let go or accept that someone could manage the business better than him. Needless to say, the engagement didn’t go as well as either one of us had hoped for. Sure, some changes and improvements were made but I won’t be surprised to see some backsliding. Especially with the changes he didn’t really believe in.

Bear in mind that this owner is the exception.  For every obstinate owner who doesn’t “get it”, there are many, many more who want to learn, improve and make positive changes in the way they operate their business.

The Solution

In order for a client company to make real permanent progress, the owner must accept the limitations of their skill set and acknowledge and have faith in the skill set of their turnaround professional or consultant.  It is critical that the turnaround professional has significant experience and training as well as the skills and ability to complete the engagement. They must have a clear understanding of the issues and the vision to correct the situation. Striving for mediocrity is unacceptable.  Most importantly, they must have the full support of the owner and the management team. Without this essential support, the engagement can become an expensive exercise in futility.

Going forward

if you are currently going through a turnaround, develop your relationship with a turnaround professional to one of trust and faith. If on the other hand you do not find yourself currently enmeshed in crisis then consider keeping a trusted advisor, turnaround professional or qualified consultant on retainer. Meet with them regularly to discuss and strategize the process of growing your company. Remember, as it concerns your business “if you’re not growing, you’re dying.”  Set up systems for dealing with critical issues. Have weekly leadership meetings with top managers. Consider an Advisory Board or a functioning board of directors with regular meetings.

Kevin Burke is a member of the Turnaround Management Association and a Certified Turnaround Professional.  A graduate of the Villanova School of Business, he has over 35 years of experience in banking and executive management.  His management consulting practice is located in Troy, Michigan.