Requirements for a restructure


With the promulgation of the new companies act, 71 of 2008 a new era of risk management was entered into by South Africa companies. The effect of Chapter 6 (subsection 128 – 155) has been highly published and provides protection for companies who find themselves in financial distress.

But what has been the effect of business restructuring and what are the main requirements for this to be effective, irrespective the size of a business.

CEO John Chen of the embattled Blackberry Ltd stated six principles that must be embedded in any turnaround.

  1. Creating a problem-solving culture – when businesses are in trouble the morale goes, and instead of focusing on the solution, the problems drag people down. This also requires that difficult questions need to be asked. The search for the truth will be uncomfortable. It also requires that a positive culture towards challenges, obstacles and crises needs to be maintained.

  2. Maintaining a sense of urgency – targets and KPIs are important, and the urgency is to move beyond them even though targets might be achieved. Adriaan Groenwald from Leadership Platform calls this the ‘opposite pole’, where a people can be drawn to an alternative worth fighting for. This might require a complete revision of the business vision. Another way of looking at this is that there needs to be perpetual motion, meaning that your technical prowess is important, but change leadership becomes a requirement. Speedy reaction should also be integral in your decision-making. Gavin Levinsohn, CEO of Ogilvy remarked on their turnaround and strategic intent as “We’ve run the business almost neurotically but it has steeped us in the digital world. We tried to put operational intensity into the building, using healthy panic.”

  3. Take care of the company like it’s your home or family – sweat the small things, and take care of things like it was your own home, where you would prioritize, budget and leverage to get the best value. At this point we should continue to read the environment, scan it for relevant information, and not lose sight because we are wrapped up in immeasurable things. Entrepreneurs that are in it for the long run really care for their companies.

  4. Know thyself – because the business is a complex system, there is no perfect solution. Try and improvise and know that every action will have a benefit or a cost. Knowing yourself leads to better, if not always right, solutions. Just as you cannot tolerate selfish people at this stage, you should set the example to others, especially leadership in the business. It is during this time that the business values need to be reinforced, not thrown out the window.

  5. Empower employees to take risks – there is a time to reach consensus, and a time to let employees take certain risks. The culture needs to be set and agreed upon. Adriaan Groenwald calls this ‘being vulnerable’, the ability to engage your team openly and honestly, and letting people closest to where the issues are deal with them.

  6. Everyone has a role – everyone should get an opportunity to make a difference, e.g. motivating the customer, cutting costs, streamlining operations. For this the business needs to ‘un-bundle’, your job is to set the goal, theirs is to pitch in and get it done. As with speedy decision-making, the creation of additional systems should be controlled, as Adriaan Groenwald says, ‘fight hard against bureaucracy’.

The Burning Platform principle – quite often the problem teaches the people, that is, because there is no turning back, a solution or turnaround has to be driven, and the people need to buy into this. This applies whether the business continues in its present guise, or is sold off.

Sources:

https://www.sabusinessindex.co.za/11-principles-of-turnaround-leadership/

https://www.weforum.org/agenda/2014/10/john-chen-blackberry-turnaround-company/

http://www.leader.co.za/article.aspx?s=6&f=1&a=4217

https://www.linkedin.com/pulse/7-elements-successful-business-turnaround-strategy-how-chad-rapsey

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