Business improvement - Five steps out of failure

A qualified accountant, Richard Close is currently chief executive of Briggs Equipment. His presentation to the faculty drew on 25 years of experience in the automotive, manufacturing and distribution sectors where Close has worked in finance and chief executive roles.

“At Briggs Equipment, we arrived at the business in 2006,” says Close. “It was a distressed sale, and at that point it had a £120m turnover, but was losing £10m a year, with 1,000 demoralised employees. It now has a turnover of a little more than £80m, having made £5m, with 600 fully engaged employees. And trust me, the two are linked: one was a cost from demoralised employees and two, it’s the employees that turned the business around, all we did was provide the resources to do it.” So, where to start?

What’s the first thing you do when you’ve got a seriously underperforming business? In my view you’ve got to sort the top team out. The team that reports to the management board, that’s where it all stems from. You have to ask yourself, does the top team have the right attitude? Are they glass half full or glass half empty people? You need to work out who to keep and who should go.

Once you’ve decided that, it’s a question of asking who the influencers are in the business. It may be the car park attendant, it may be the canteen lady, but whoever the person that everyone turns to is, it’s probably not the management or the union rep. Make sure you can identify who the influencers are, because they’re the ones the staff will turn to when they want to understand something that’s going on in the business.

The next point that has to be tackled is the ‘middle management concrete’, typified by a guy I call ‘Brian’. At the car dealership I used to run, the typical Brian was about 48, sitting in the corner office hanging on to be paid off. His inability to make a decision becomes a blockage, and he represents a single level of power in the business that’s not needed. So we took Brian out and we gave reception staff at the front desk more authority to make customer service decisions.

How do you get rid of Brian? Well, partly by making him accountable for the top line results – you give Brian some objectives and every month you call him in and you measure him against them. In addition to that, you empower the staff below him. On many occasions I’ll have an open session with the staff who work with Brian. I will say to them, “Look, if management does not give you the right answer, challenge them hard and you have my permission to challenge them until they give you the right answer”.

The benefits of smashing the middle management concrete are twofold: it takes cost out of the business, but it also makes the staff feel more empowered. It gives them responsibility. Those staff on reception are now more motivated and they feel the company is behind them.

During a turnaround every idea is precious, so encourage your people’s creativity. Ask, “Are there any ideas? What’s the one thing you want me to do to make your job easier?” Every time, they will come up with something: it could be the way in which invoices are handled is wrong, or the phones are in the wrong place. I did it in my current office, where we’ve got 300-400 people. There was a tension around the place, and I asked, “What’s the one thing you’d want me to do?”

The answer? Move the waste paper bin. Someone had moved the recycling bin during an office reorganisation and it had really left people annoyed. It sounds patronising, but it’s not. So you listen and it makes their life easier and you ensure they feel valued. And if they do ask you a question or challenge you on the way the company is run, then you go back to them and respond. They may not always agree with what you say, but just going back is part of the process

This is absolutely critical, because time is short. Let me give you an example of credibility with staff that gets them onboard when you’ve got to turn a business around. We bought our current business in 2006. It had a turnover of £120m, but was losing £10m a year. Once the deal was done, the sales force was brought in for a meeting to find out what was going on.

The managing director of the company we’d bought stood up in front of them and introduced himself to them. He said, “I’m your managing director and we’ve just sold you, so cheerio”. When I took the microphone I was immediately in favour, because he never engaged with the staff. We were seen as heroes at that point. So, when you have previous bad management you get a window of opportunity and the trick is to try to capitalise on that as much as you can. Don’t waste your window.

In the four turnarounds I’ve completed, ‘the blind spot’ is usually glaringly obvious, and it is either an acquisition gone wrong, a strategy that isn’t working, or the wrong person in a top job.

When I took NACCO over it was a manufacturer with 1,000 plants. In the late 1990s it had decided to go into distribution and retail. It was a huge error. I came into a business that was losing £30m a year, all from the retail operation. It was obvious that was the problem if you looked at the accounts, but no one was talking about it because the board had been told to get into retail by the chairman. You’ve got to use your window of opportunity and tackle the chairman on what needs fixing.

If you have a board that is split and doesn’t want to tackle something, you’ve got to get the CEO or the chairman on side. I told NACCO’s chairman to get out of retail. He agreed. But none of the previous management had ever dared suggest it because he’d been the one that wanted to go into retail. It just shows that by using your opportunity, you can turn even the flattest business around.

Download pdf article:

• Five steps out of failure
  Finance & Management Magazine, Issue 221, May 2014

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