The Transformational Turnaround


Not long ago, over one hundred professionals gathered at an Advanced Education Seminar to hear a panel presentation of a business case. It was a distinguished audience in that everyone in the room was a Certified Turnaround Professional (“CTP”). To become a CTP, one must first have had at least ten years of experience dealing specifically with turnaround situations, submit real case studies for confirmation and review, pass both personal and professional reference checks, and finally, endure a grueling CTP exam that tests one’s knowledge in three areas: (1) management, organization and strategy, (2) finance and accounting, and (3) legal procedures. To come to the point, on that particular day this was a room filled with highly-trained experts looking to share and learn new concepts and ideas about dealing with turnaround situations, i.e. those organizations under financial stress.


The panel presented the case of a troubled hospitality business owned by two brothers. We were told that while these two brothers often had disagreed over many issues, they had managed to coexist, and, in fact, the business had enjoyed a substantial period of positive growth. This delicate balance had been maintained until recently, as the combination of (a) one brother’s intensifying personal problems and, (b) the events of 9/11 had put significant new pressures on the business. Consequently, the brothers’ business, like its peers in the hospitality industry, was now struggling financially while simultaneously the fragile interpersonal balance between the brothers had shattered into what a psychologist had termed “irreconcilable” differences.


Perhaps what transpired next should not have been surprising, since almost everyone in the room was predisposed by his/her specialty to zero-in on the typical problems of and remedies for financially-strained businesses. Thus, it was quite instructive to realize that all the alternative “solutions” presented by panelists and audience participants alike (most raised and defended vigorously) were variations on the same theme--how to wind the business down, recover as much as possible for the assets, how to be creative and/or aggressive in the application of a bankruptcy (or threat of bankruptcy) strategy, or which alternative wind-down strategy might be better than an actual filing. After forty-five minutes no one had even raised the possibility that the business as described might, deep-down, still fundamentally be a good business, with a reasonable chance to resolve the specific issues which had led to its admittedly serious current troubles. In short, it appeared that for the vast majority of the people in the room this was a simple, classic "turnaround". But was it?


Turnaround – an act or instance of reversing the course or direction of

It was time for me to speak up. As someone experienced with both healthy and troubled businesses, to ignore (or to not appreciate) the fact that this business up to recently had been a good business, and instead writing it off as doomed to fail, seemed remiss. Experience had often taught me that there can be a fine line between a successful business and one that is on the path to failure, and to me the brothers’ business seemed to be resting on just such a thread. While I agreed with "the pack" that the business without change had little hope of succeeding, I sensed there was a way to transform this company into a once-again-healthy business, not only capable of making a successful comeback, but also of launching a new, prosperous future. In my mind, what the business needed was not so much a turnaround as a transformation.


Transformation – a complete change, usually into something with an improved appearance or usefulness

To appreciate the difference, let us return to the three competencies covered in the CTP exam—(1) legal, (2) accounting and finance, and (3) management and strategy. The remedies being advanced as solutions to the case in question were, in fact, applying almost exclusively the legal and financial components of the CTP body of knowledge. If followed, the outcome might well have been a successful turnaround, i.e. “a reversal in direction”. The money-losing, value-dissipating performance certainly would have been stopped with positive cash recovered for some stakeholders. But, the brothers would not likely have been included in that group, and it was a foregone conclusion there would be no business left standing.

Alternatively, the transformation approach would focus much more on the “management and strategy” elements—organization enhancement, marketing and sales, perhaps innovation and new products. All with the goal of a revitalized ongoing business, one with an “improved usefulness” and with the life-threatening interpersonal issue removed, eventually capable of renewed growth.


To pursue such a path one first must be predisposed to even recognize the opportunity when it presents itself. Such didn’t happen in the presentations at hand. Was it because, in part the many accomplished experts in the room were so conditioned by their experiences as to not see a possibility that lay outside their traditional comfort zones?

The “transformational turnaround” involves a more holistic perspective, can present a different risk/reward trade-off than the narrower financial workout, and sometimes is more difficult to execute. Having an experience base which includes financially (even operationally) stable but strategically unstable situations greatly enhances one’s ability to see the transformation moment when it’s there with the confidence to seize upon it.

Edison once remarked that the reason many people miss opportunity is that “it is dressed in overalls and looks like work." Only a minority of turnarounds may be viable candidates for transformation. But when one does show up, and you can recognize it beneath the grubby clothes, then the hard work involved can be fun, rewarding, and value-generating for those with the most at stake.

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