The human elements of a Corporate Turnaround
Originally published in the December 2023 issue of AUSTRALIAN RESTRUCTURING INSOLVENCY & TURNAROUND ASSOCIATION JOURNAL
A successful turnaround depends on more than just getting the numbers right.
Corporate turnarounds often evoke images of spreadsheets, graphs and board meetings where the
conversation revolves around numbers. While these quantitative elements are critical for course correction, the human elements are equally vital but frequently overlooked. From culture and stress to emotional behaviour and psychological safety, the human facets play a substantial role in determining the success or failure of a turnaround strategy. This article takes a comprehensive look at these essential components.
IT ALL STARTS WITH CULTURE
Culture can be aptly described as the DNA of an organisation. It’s a complex amalgamation of values, beliefs and practices that define how employees interact and work. A toxic culture can be a significant impediment to effective change management, derailing even the most meticulously planned turnaround strategies.
Enhanced productivity is the linchpin of any sustained turnaround. A demoralised workforce, stemming from a poor culture, can lead to reduced productivity. Stakeholder management, particularly among staff, becomes crucial at this juncture. A well-aligned, supportive culture fosters innovation and makes the job of managing change easier.
Leaders play a pivotal role in shaping the culture. Their actions, more than their words, set the tone for the organisation. Authentic leadership that is consistent and transparent can act as a catalyst for culture transformation, which in turn can expedite the turnaround process.
STRESS IS YOUR ENEMY
Stress is not merely a state of mind but a physiological condition that can have serious repercussions on both the individual and the organisation. When people are stressed, they are less focused, less creative and less productive. Time and stress are the two most formidable enemies that can slow down or even derail a turnaround initiative.
A stressed leader often makes reactive instead of proactive decisions. The ability to think clearly and rationally is compromised, leading to flawed judgment. Leaders become insular, less trusting and stop communicating effectively, which can have a snowball effect on the entire organisation.
Mitigating stress is not just an individual responsibility but an organisational one. Techniques like mindfulness, cold plunges, saunas, breathwork, relaxation exercises, and even professional counselling can help manage stress effectively.
Leaders need high emotional intelligence to navigate the complexities of human behaviour, especially during a crisis. They must recognise their own emotional responses and understand how their actions and reactions impact the team.
High stress levels can cause leaders to become emotionally volatile, making the work environment tense. This emotional instability can then cascade throughout the organisation, causing a further decline in morale and productivity.
A stressed and emotionally erratic leader is also less likely to maintain open communication lines with stakeholders, including financiers, employees, suppliers and customers. This can result in a further erosion of trust and confidence, making the turnaround even more challenging.
Psychological safety refers to a work environment where employees feel secure enough to express themselves without fear of reprimand or ridicule. It is the cornerstone of a healthy work environment and is especially crucial during turbulent times.
Leaders have the responsibility to create and maintain this environment. Their role is not to shield teams from discomfort but to protect them from harm, thereby creating a space where people can take calculated risks without fear.
There’s a nuanced difference between emotional safety and physical safety.While the latter is non-negotiable, emotional safety gives employees the freedom to voice their concerns, disagree openly, and offer new ideas, which can be critical to the turnaround process.
TURNAROUND PRACTITIONER VERSUS EXECUTIVE COACH
A turnaround practitioner focuses on the quantitative aspects — financial restructuring, operational improvements and efficiency gains. In contrast, an executive coach concentrates on the human elements — stress management, emotional well-being and team dynamics. Most successful turnarounds require a harmonious blend of both these roles.
The executive coach can address the human issues that frequently act as roadblocks in a turnaround process. When combined with the strategic planning of a turnaround practitioner, this creates a holistic approach that considers all elements that are critical for success.
“Time and stress are the two most formidable enemies that can slow down or even derail a turnaround initiative.”
“The executive coach can address the human issues that frequently act as roadblocks in a turnaround process.”
CULTURE TRANSFORMATION IS CRITICAL TO SUCCESS
The guiding principles for a successful culture transformation include leadership commitment, clear vision and strategy, effective communication and continuous employee engagement.
Effective culture transformation is a structured process that requires careful planning and execution. It begins with identifying the need for change, whether due to performance issues, employee dissatisfaction, or a changing market landscape.
Once the need is acknowledged, defining the desired culture sets the vision for what the organisation aspires to become. Obtaining commitment from leadership ensures there is organisational will and resources to effect the changes.
The next step involves developing a clear strategy and plan, which lays out the ‘how’ of achieving the desired culture. Communicating this plan across the organisation keeps everyone on the same page and fosters a sense of shared responsibility.
Employee engagement is crucial; hence training and support should be provided to help employees adapt to the new culture.
Alignment of policies and procedures ensures that the culture is integrated into the day-to-day operations. Continuous monitoring helps to adjust the plan as needed and fine-tune the approach.
Finally, celebrating milestones and successes acts as positive reinforcement, encouraging the team to stay committed to the culture transformation journey.
A successful corporate turnaround is about more than just financial restructuring and operational improvements; it’s also about managing the human elements effectively. Leaders must lead with empathy, build trust, focus on reducing stress, and create a culture conducive to change and growth. By aligning both the human and business aspects, organisations can not only navigate the challenging period of turnaround but also set the stage for long-term, sustainable success.
In conclusion, when it comes to corporate turnarounds, numbers tell only half the story. The human elements — culture, stress, emotional behaviour, psychological safety and the need for both turnaround practitioners and executive coaches — are equally significant. Addressing these aspects will result in not just a successful turnaround but also a stronger, more resilient organisation.
The owner’s behavioural response to a threat can quickly deteriorate if not dealt with early
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