Recent weeks have featured a number of highly publicized train wrecks, haven't they? The Academy Awards, Secretary Sessions's "forgotten" conversations, that awkward dashcam video of UBER's Travis Kalanick having a meltdown--some big names and brands are currently in pretty uncomfortable situations.
Alex Kowalski, CEO of Performance Complete Metal Solutions and a YPO member, has real life experience climbing his way out of a bad situation. In 2012, he purchased a failing business. While he was aware he didn't know the industry, the selling price for the company was alluringly low so he took the plunge. After all, he had plenty of entrepreneurial experience and thought it would be simple to turn around. He explains, "The company had a nice customer list, two locations, and the equipment was in decent condition." Or so he thought. In truth, he couldn't have been more wrong.
"We soon found that customers were angry because their products weren't being delivered on time and many suppliers had placed the business on 'credit hold' due to the financial condition. They were struggling to get raw materials delivered to produce parts. Employees were depressed and most hadn't received a raise in the previous four years." Kowalski saw the depth of failure in the business's process, and that as much as the company lacked capital, it lacked leadership even more. He did indeed turn it around but only through careful and diligent leadership.
Here are the 9 steps Kowalski used to pull top performance out of a bad situation that might have become catastrophic.
1. Start with a Change Statement.
The previous owners had kept employees in the dark about the company's situation, which had created confusion and animosity. Kowalski gave them "100% transparency with the financials so they could see how bad the situation was." They then introduced everyone to the concept of the Toyota Production system and the 7 types of manufacturing waste. "We created a mascot, TIM P WOOD, an acronym for the wastes. He was a tool to help them memorize and commit to changing things. The call to action was 'We need to beat TIM P WOOD.' " Kowalski rallied the team to envision what needed to change and how to do it.
2. Ban the word ASAP.
"The term ASAP is really a meaningless distress call," Kowalski explains. "Everyone uses it and nobody really pays attention to it. Instead, our employees were required to define what they needed, from whom, and by when. Commitments to get projects done were firm. Deadlines were not allowed to slip. Meetings started on time. Product shipped on time (even if it meant working the weekend)." By insisting that deadlines and expectations become clearly defined, things get done when they should be, not as soon as someone feels like its possible to get moving.
3. Ask "WTF (Where's The Focus)?"
Kowalski saw that meetings lacked organization, so theyremoved conference room chairs. Everyone stood around a tall table for meetings. "This kept everyone on task and greatly shortened meetings. Only the main focus items were discussed and issues were resolved much faster. No one wants to talk about meaningless things for an hour while standing up." If you can identify what's causing distractions and remove that from the environment, people's focus will start to increase.
4. Prepare for turnover.
"One my business heroes, Dan Ariens, has a saying, 'change the people or change the people," Kowalski says. "Turnover is natural, it's OK, because no one person is bigger than the company, no matter what you think." It takes time and effort to build a team of people who are "all in" and want to be part of the turnaround and future success. Change happens through people who prioritize the company over their individual interests. When the "bad eggs" or the ambivalent exit, the team performs much better.
5. Show your people what's in it for them.
There's going to be hard work ahead; employees need to know they will see personal as well as corporate benefit. "We call it WIFM. In our company, we put a profit sharing program in place right away, rolled out a kaizen rewards program, put an organizational structure in place and gave people an org chart so they could see where there next opportunity might be."Your team needs to see that if they buy in and you get through the rough patch there is something in it for them.
6. 80/20 your customer list.
Kowalski makes a surprising claim: "Over the 4 year period we went from 230 customers to 8. In that process we have doubled the revenue of the company." They chose to focus on the best customers they had and overserved them. That enhanced performance resulted in a significant amount of new business from those customers. The process also eliminated the "noise" of smaller, less lucrative customers. If 80% of your business comes from 20% of customers, then be sure those clients get your absolute best. They'll keep coming back, and they may bring their friends.
7. Put your money where your mouth is.
"All the rah rah and inspirational leadership in the world doesn't mean anything if you don't show your team that you're willing to invest in the business and in them," insists Kowalski. After assuming ownership, Kowalski took significant steps to return the company to profitability. They closed one of the locations, brought all operations under one roof, and sold off equipment that wasn't part of the core competencies. This quick, decisive action returned the company to profitability within the second month of ownership. By the end of the first year, it was clear they had turned the corner. At that point, Kowalski knew the employees would be watching to see what he did next. Would he take the money and run, or stick around and help them grow? "Our employees needed to see us creating new opportunities for them; it was an important part of transforming the company culture." In the subsequent three years, he invested an additional $2MM to purchase new equipment and expand.
8. Draft and develop.
He explains, "It's an old football adage, and it works for us. It means choosing young players over the high priced free agents, and then cultivating their abilities." With only two exceptions, the current leadership team has been grown from staff and interns who were with the company in Kowalski's first year of ownership. This is as much a cultural as a financial choice; as they have grown and trained together, his key players have formed a cohesive group. Because the company demonstrates a willingness to help them succeed, they, in turn, remain committed to the company's success.
9. Work through failure quickly.
There's no value in endlessly discussing who is right, why an idea could/should/might work or debating its merits. Instead, Kowalski pushes his people to try new things, and to move quickly from idea to action. And "if you are going to fail, fail quickly, learn, and then do better next time." Many of the best process improvements in the business come from harvesting the lessons from a failure, sifting out the most worthwhile ideas, and improving on them until something truly valuable is attained.
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