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                                The Psychology of a Corporate Turnaround

          This is a case history of a distribution company turned around from a net operating loss of approximately $7.0 million to a net operating profit in excess of $23.0 million. Following are thoughts on the psychology and management  of the  human resource asset in a turnaround:

1.      Know your people 

     Within the first two months, it is very important to objectively assess the individuals in your workforce – especially the managers. In my turnaround experience you can place workers into three groupings :

A.      Those who are not aware of any problems or are part of the problem in the organization. Hopefully these people represent a small group.  The psychology of these individuals must be addressed. If  individuals in this group do not positively change their mindset regarding the organization’s goals then it is wise that they be replaced. Recessionary times are good to “ cherry pick “ the labor pool with the goal of your company upgrading certain key positions.

B.      The largest group is usually those who realize there is a problem but are not sure how to solve the problem. Also, some might be too timid to offer a solution. These individuals  are in search of strong leadership and are  concerned with staying employed. This is a group you need to spend some time developing and training. This is a large swing group who can help you either win or lose the turnaround game.

C.      The last group is your most important asset. These are the people, hopefully some are in management, who buy into and help with  your turnaround strategy. You should cultivate these individuals.

2.      Positive Attitude is Important  

     It is important to infuse a positive attitude within the organization. This becomes very important since usually a negative overall attitude permeates  a company with losses. One must concentrate on staying positive and upbeat with the workforce.

3.      Training for profitability is critical  

       Training the workforce in the proper way to work and to work towards profitability is critical. To successfully accomplish a turnaround the leader must put training in place to have everyone properly striving for  financial stability in the organization. One also wants the people to feel successful since  success does breed success just as failure breeds failure.  You want the positive momentum toward profitability to continue.

4.        Have everyone focus on the turnaround  

         Keeping everyone focused on the ultimate goal is difficult. The management team should develop, monitor and constantly adapt a three year plan to achieve increasing profitability.  Break the three year plan into quarterly segments. Win each quarter ! Having everyone in the organization accountable for their actions or inactions is critical.

       Do not overlook the importance of your people’s talents and their desire to be on a winning team in a turnaround situation. Sometimes it is easier to turn an organization around financially than turn the people’s mental outlook around positively. Remember turnarounds are as much psychological as financial.