“The first point to make is that the situation a mid size business (MSB) is in can be very different to that of an SME or large enterprise. They therefore need different advice and help.”
I enjoy working with diverse companies, and it’s rewarding to work with failing businesses to help turn them round – either for investors or for the employees. As a non-executive, you have to work out what the owner or CEO wants. Often, they are not honest with you because they don’t want to admit what state the company is in.
Not all owners are capable at directing and/or motivating the management teams to do what is necessary in order to make the business successful.
What mistakes do MSBs make to get themselves into a bad situation?
There are so many reasons why an MSB gets into a bad situation – one very common one is that the company grows too big and too fast for the management team that it has. The owner has a highly geared business and wishes to retrieve their investment, but they haven’t developed a successful strategy or motivated the executive team. This then leads to the sensitive matter of the owner needing to change the team around them.
What’s the most important skill as a chairman of an MSB?
In my view, studying Law was the best training I ever had because it taught me objectivity. To be a non-executive, one of the greatest qualities to have is to be absolutely unemotional and impartial – about the people, about the company, about the future.
It’s hard to retain that objectivity as the company grows. Usually this happens when the company has performed better than you expected – you get drawn in by the bright people who are looking forward to the future. If they perform worse than expected, it helps you retain your objectivity.
As a non-executive, it’s a serious risk to go along with the flow. You must always believe you are adding value. If you’re not, get out.
Do certain sectors have particular challenges?
Not really. If you look at my CV, you’ll see I’ve been in many sectors. I find this fascinating, but I come back to the salient question: is the risk ratio of cost to reward too high? Very often, it is – and sometimes you have to be upfront and tell people that.
For example, a company I’m working with now sells the same product that it did when it was struggling but in a completely new way. The problem with the business initially was that the management could not face the change.
The bright future only emerged when the company went into administration. We had got all the money back for the investors and they couldn’t resist calling the debt in, taking their money out and leaving the business broke. The result was a management team in situ that knew the old model didn’t work. So we started a new business model with the same product and it’s proven very successful.
Management teams very often have an emotional attachment. You need a ruthless objectivity.
What tools and techniques are used to turn a business around and retain objectivity?
Honesty and bravery. You have to be honest with the people you work with because they have to trust you. You have to be brave enough to think the unthinkable and tell the executive your thoughts. The minute you lose the trust of the management team, it’s over.
I’ve just started with a new company and I can see already that it’s going to be very hard to change the culture. I asked them several questions: “What’s your ambition? Are you up for the changes that need to be made?” The reality is that, with an ageing population and new diseases, the need for and use of their services is changing. What I need to find out is whether the management team recognise that, and if anything can be done to resolve the matter.
I also need to work out what the other people’s views are and what their vision for the company is. There will be people that don’t agree, and some people we have to leave by the wayside.
It’s not about being a dictator; you have to be open to your mind being changed. You have to ask, “what is it we want to achieve and how are we going to achieve it?” If there is a consensus that this is the best way to do it, then you need to get on with it. Get the governance arrangement and controls in place, and these will determine whether or not it will succeed.
You have to get the business on board and make them see what’s in it for them if the business turns around. The CEO has to lead well and use targets, honesty and a sense of reality. They need to ensure everyone is aware that the business is not playing games, and that it will only reward people when it is meeting its objectives. This ensures everyone knows the situation and that the reward is there if they make progress. You have to have respect and trust in place to do this.
We have to remember as non-executives that we don’t do the work – the management team and the business does, and we need very clear lines of responsibility.
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