Anatomy of a Turnaround

Most companies at some point will need to turn things around. Here’s why some succeed…and many fail.

- HAMZA MUDASSIR

At any point in time, one in three companies requires a turnaround. That’s what research by Boston Consulting Group has found. And while you may not be able to predict whether you’ll be one of those companies, you’ll surely recognize the signs of distress: If your long-running business model collapses, your leaders lose focus of the company’s mission, and your key talent starts to leave, then you’ll be facing an existential crisis. It’s turnaround time!

Given how common this is, you might assume that most experienced entrepreneurs and CEOs are adept at managing it. That is, unfortunately, not the case. The same research highlights that 75 percent of turnaround attempts fail to improve performance over the long term.

Part of the problem is a lack of foresight. By the time a company’s leaders realize something has gone wrong, it is usually too late. That holds especially true for tech companies, which regularly deal with a winner-takes-all dynamic, where a competitor ends up dominating a whole industry versus just a part of it. But it can be true anywhere else, too. When you lose ground, it can be hard to regain it.

But there are solutions available, even when a situation looks dire. It starts with leadership. When attempting a turnaround, most leaders focus on their finances—viewing a troubled organization as a profit-and-loss sheet that needs to “lose fat,” for example. When these leaders spend, they often do it in the form of bonuses to incentivize their team’s better performance. That makes sense; when a leader focuses on finances, they’re hoping to find certainty in an otherwise uncertain situation. But they miss something in the process: culture.

When a leader plays the numbers game, they lose track of the culture of their business— and that blind spot can result in failure.

1/ Learn from religion.