What are the Necessary Traits of a Successful "Turnaround CEO" ?

I took this question from a TMA forum at Linked In posted by Frank Feather, and my response is also posted there.

1) A good listener. My assumption is the CEO is coming from the outside, and perhaps even outside of the specific industry. It is not fair to assume that a) all members of existing management contributed to the failures, and certainly b) none of them know anything about the business otherwise why would they have failed.

The incoming CEO must learn many things quickly about the new company. Who are the key customers, what are the critical factors for success, what are some of the internal views about how the company fell from grace. Most importantly, the incoming CEO must learn the people. Who has his head on straight, who can get his head on straight with a little guidance, and who is hopeless?

These decisions cannot be made if the incoming CEO acts like he already knows it all before walking in. With the wrong attitude, he will get no cooperation.

2) Understand the numbers. I have found companies typically did not get into trouble because of manufacturing failures, engineering problems, and a bad contract here or there. Yes, these contribute, but every company has its share of these. Good companies have the cushion to overcome a setback on occasion.

Companies get into trouble because they don't focus on cash flow. They don't focus on the balance sheet. They don't understand how decisions made each day by the many managers with authority will affect the bottom line.

I do not suggest that the incoming CEO must be a finance guy, but he must understand how business decisions will affect the firm financially. He must understand which levers he should push to quickly start building a financial cushion for the company.

3) Focus. The ability to identify the high leverage items quickly. The incoming CEO cannot fix everything at once. Neither he nor management will have the bandwidth. What must be fixed early that provides the most relief to cash flow with the shortest time to implement? What must be fixed early to stop decisions that will only add new problems to the old?

4) Be aggressive on expectations. Once the high leverage items are identified be aggressive about implementing solutions. Ensure teams are focused on fixing and solving the causes of the failures. Get some quick wins. This builds the team up - remember they have been getting torn down for quite some time during the downfall.

5) Patience. This seems counter to 4) above. But both must work together. Remember the staff already had a full-time job before you walked in the door. You are requiring them to work on things that they weren't working on before. As they see that you are driving them to some key wins, and as they see results, 4) and 5) will be highly complementary.

6) Empathy. Demonstrate that you understand the importance of the success of the company to them. The turnaround CEO will be seen as here today, gone tomorrow. Failure, while perhaps a setback for the CEO's reputation, is not as damaging to the CEO as it will be for the employees whose livelihood is dependant on the success of the company long-term. Many employees have a lifetime invested (or hope to invest) in the company. Show them you understand this.

What do Controllers "Control"?

A consistent downfall I have seen is the idea, defended by many in the organization, that the controller is actually controlling something. Finance defends this idea because it makes them feel powerful. Other management defends this idea because it relieves them of great responsibility.

Certainly, if properly executing his duties, the controller will implement systems that help accomplish much of what his title proclaims. Absent such systems, he is basically left having to sign a check for some agreement made some time ago by some other member of management. I do not intend to go into the appropriate procedural systems, these can be explained by most controllers, even the ones not doing their job.

But to really be in control requires having a management team at all levels that are complete businessman. Every day, employees are making decisions that are binding the company to future payments. These happen whether or not anyone else is looking.

How to create such a management team? Create complete entrepreneurs. Do they understand cash? Do they understand the customer? Do they understand quality? Do they understand how the decisions they are responsible for making every day affect the outcomes for the company?

I go back to some earlier posts:

http://anthem-llc.blogspot.com/2010/04/communicate.html

http://anthem-llc.blogspot.com/2010/03/four-oclock-meeting.html

Communicate, train, teach. This takes the investment of time by the entire team. However look at the payoff. Every manager acts like a complete businessman. They think about the impact of their decisions on cash, quality, and the customer. By the time a document gets to the controller’s desk for approval or payment, most if not all questions have been answered, and the project has already been scrubbed and re-scrubbed to ensure good assumptions driving a good outcome.

With this, the controller’s job becomes much easier. And, he can truly say he is in control.