CASE STUDY - TURNAROUND
New sales for a small graphics software firm had slowed to a trickle despite universal raves for its innovative technology. The company that had bought the firm had itself been taken into receivership by a European bank, which installed a new Chairman of the Board, our client. The bank's exit strategy mandated a successful turnaround and profitable sale, and the Chairman was trying to entice several suitors.
But big trouble was brewing. The firm had been built on youth and creativity, its management team all promoted from within. The prevailing management style could be characterized as "one-of-the-crew," the corporate culture as "we-they": the entrepreneurs vs. "the suits" from the bank.
One potential investor had gained access to the employees and promised complete support for the existing corporate set-up and strategic direction. The employees threatened to walk out on their jobs if the company were sold to anyone other than this particular investor. Productivity and morale dipped to the same low level as new sales.
The Chairman of the Board found himself in dire straits. He was facing an employee revolution, a sales chart with lines heading south, a bank wanting to cut its losses but with reasonable terms, and only one potential buyer whom the employees found acceptable. But without real competition, that buyer's offer came in far below expectations, and kept going lower.
The predicament weighed heavily on the Chairman. How could this company ever be brought together and/or sold profitably?------------------------------------------------------------------------
We were brought in by the Chairman of the Board to do a confidential search for a new CEO in the event he couldn't sell the company. But we pushed back tactfully against this initial charge.
We recommended firing the current CEO despite ongoing negotiations, which could be explained to potential buyers as minding their possible investment. Recommendation accepted.
We proposed the concept of an interim CEO, one experienced both in the industry and with similar "counterculture" organizations, to work with a designated transition team on increasing productivity and employee morale. We found the right consultant, and then worked as part of the transition team along with the interim CEO.
The team architected a transition strategy and presented it to the employees at a corporate meeting. As anticipated, the employees did not react positively. Our team then broke out separately and spent hours discussing the situation individually with the employees after the meeting. We listened to them and demonstrated the Board's concern. We suggested that without competitive bidding and new sales opportunities, corporate valuation would continue to plummet. This would preclude closing a deal fair to the company they had built with their sweat and tears, and fair to the bank's investment. We were able to reach the desirable employees, a large majority, and give them a broader perspective that convinced them to remain committed to the company.
We found a permanent CEO shortly thereafter. He was highly disciplined and accomplishment-driven, with a strong entrepreneurial track record, extensive sales and marketing experience and a demonstrated streak of ingenuity. He impressed us as a compassionate parent figure, with an "open door" management style. He ran both the company and the sales team, cutting key strategic alliances and growing revenues dramatically. He also brought in additional capital from alternate sources to match the bank's earlier investment.
Over a year later, the profitable graphics software company was sold to a corporate buyer intact, with key employees, including the new CEO, preserved and productive. Our search solution may have made the difference between viability and bankruptcy.