In businesses in deep trouble, facing a hard turnaround, the necessity for making bold decisions and taking meaningful actions will be too obvious to ignore. The obvious risk of pending failure overwhelms the decision-risks. However in businesses with soft turnaround situations, although it may not be so obvious, making bold decisions and taking meaningful actions is also the correct course of action. Without doing so, a soft turnaround will one day become a life-or-death crisis.
I have found that in troubled companies, there has been as much or more damage from decisions-not-made (No Decisions) than from Bad Decisions. A backlog grows, inaction prevails, the troops are confused by a lack of direction, and management uses their time going in circles.
Perhaps revenues aren’t shrinking that quickly, or the company has “ridden out the rough patches” before, or the decisions are too difficult; subsequently the crisis never affects management’s attitudes. Decisions go unmade or are watered-down versions of what’s really needed. By definition this sinking organization isn’t used to making or even enabling good decision-making. They’ve practiced sloppy decision making, top-down decision-making that doesn’t require them to think or analyze, or zero decision-making. You’ll need input, observation and analyses generated from your mid-managers, but you’ll rightly be reluctant to rely upon them. Although the decline or demise of an industry can create unsolvable problems, an organization’s wounds are often self-inflicted, resulting from management neglecting to:
• Determine what decisions are critical and organize a bold attack on each in order of importance.
• Know how to make those decisions in a way that is both wise and effective.
• Enlighten the organization as to why those decisions were made, thus creating a performance-oriented culture that can achieve the desired outcome.
The result is a cacophony of bad decisions, a backlog of unmade critical decisions, and perhaps even some good decisions poorly implemented.
Many executives are ill-equipped for this task, and such a situation does present a challenge for even the most capable CEO. When you’re new on the scene at a company that has been mismanaged, you’ll inherit a backlog of pending decisions and will need to finalize many in short order. You’ll obviously want a good many of them to be directionally reasonable or even correct. There is only one prescription for this situation: make a list of those decisions that are important, set a timetable, use the most effective decision-making methods you can (see last week’s chapter on Industry Inexperience and next week’s chapter on Going Deep), and get on with it. Don’t worry over each decision, you’ll get some wrong; but going Northwest with vigor and clarity (see prior Chapter “Decisive Action Trumps Perfection”) is, regardless, the winning approach. Following is a story about the approach used for a company tangled in its underwear.
I was faced with this problem at the Phosphorous Chemicals (PC) subsidiary of FMC Corporation. We operated a very profitable but capital intensive and environmentally unfriendly group of phosphorous furnaces. Its principle customer, Procter and Gamble, used the phosphorous in several top-selling detergent products.
After several years of operating at 100% capacity, PC was under extreme pressure to expand. The supply constraint was limiting P&G’s sales growth. Both the Chairman and the CEO of FMC had previously headed PC and already “knew it all”. I was the new President with no chemical industry experience and, as far as the management team was concerned, no relevant capability portfolio.
Nevertheless, I faced a decision that was way overdue: whether to add capacity by building a fifth furnace. That meant spending $50+M in capital, creating greater environmental difficulties, and waiting two and a half years for results. Worrying over this decision had already gone on for almost two years, while P&G was stewing and seriously exploring options--about to make drastic product reformulations that would crash PC’s business. As I went into this assignment, I was told, “We can’t afford to proceed with the furnace project,” and, “We can’t afford not to.”
Well, I could employ a consultant team (and use up more time), just pick one of the two alternatives (remember both had giant problems), or continue to delay (while P&G took our business elsewhere). I consulted the middle managers but none had any new insights. I needed to make a fundamentally sound decision within two months but also needed a fresh perspective. I’ll conclude next week how this problem was solved (hint: Industry in-experience, an attitude that says “Teach me from the bottom up,” combined with “Going Deep” provided a solution)
Comments