Thought Piece
Small growing companies, runs the standard advice, should think, behave and work like a big company. Then as the business does grow the big company culture is already embedded. This appears to be good advice: as noted in my thought piece on transition points, companies too often falter, or fail, or drop back to being smaller entities at a critical moment in their development. If a company has too many short-term fixes rather than brand-new ways of working to meet the changing and growing requirements, then the inconsistency of those fixes will cause the business to falter, lose profitability and work their motivated entrepreneurs to a point of deep stress.
A finance director of a well-known high-street brand remarked that his company had the procedures of a corner shop. Those situations can simply make people walk because they are put under so much pressure right across the organisation, not just in the finance function.
As a result business advisers who work with growing companies that have the procedures of a small organisation will often walk into the business and say: "This isn't right; this company should have big company procedures." The adviser will then try to retro-fit large company procedures to those enterprises which intend to be big. Their viewpoint is that if the company intends to be a large business, then it should be like one now.
The problem is that companies which take that advice end up with procedures which are simply too big for their current position. The advice invariably comes from executives and advisers who have worked in much larger organisations. The result is companies have a level of control and overheads which slows the business down and introduces an unnecessary and unsustainable cost.
Banks are not charities. But they do calculate the lifetime value of the customer and they understand the reputational risk to themselves of the slash and burn exercises they are sometimes accused of.
That brings us to the role of the banks, so often the largest creditor and certainly the one with the most intimate knowledge of how a company is faring. We all love a stereotype and the heartless, faceless bank pulling the plug on sound businesses over a minor blip sits deep in the business consciousness. But not all banks fit this caricature. "We want to work with management of a business facing difficulties to help identify the issues and provide solutions to get them back on track," says a senior manager with a leading retail bank. "We can make the most impact when the problems are identified early. We are keen for management to be open with us."
Banks are not charities. But they do calculate the lifetime value of the customer and they understand the reputational risk to themselves of the slash and burn exercises they are sometimes accused of. Most solutions to business difficulties involve access to more funds and/or different products (hedging, leasing, factoring) and that all adds up to continued and profitable involvement for the bank.
A Repositioning Turnaround may mean divestment of a troublesome subsidiary. It may mean embarking on (yet another) cost-cutting exercise, including turning away revenue opportunities if they are not of a sufficiently high margin. It most certainly involves a first step of getting an impartial and pragmatic overview of what the problem actually is, from Turnaround Professionals who also know the kind of language with which to talk to banks. The moment you take this kind of decisive action, you're likely to discover that there's no crisis, no drama, only urgent action that must start now.
Peter Charles 2010
Peter Charles
"The advice invariably comes from executives and advisers who have worked in much larger organisations."
"Too often the end result is the equivalent of a small boy wearing an oversized jacket that actually belongs to his big brother"
"The secret is then to make changes to procedures one at a time rather than rushing through a whole raft of changes.""Add an interesting quote here."
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