Corporate turnarounds have attracted an increasing amount of UK media attention in recent months. Recurring themes include the extent to which an individual can take the credit and the difficulties associated with keeping momentum post-turnaround.
But can corporate turnarounds be characterized with a broad brush? Or, must they be judged individually?
Corporate Turnarounds: Examples
In The Telegraph, James Ashton looks into recent UK corporate turnarounds, in a piece titled “Turnarounds need to be treated with suspicion.” Ashotn argues that material change needs to be a sustained over a period of time and cannot be attributed to a specific moment or the exit of a CEO. As Ashton writes: “A cynical appraisal of the genre finds plenty of turnaround bosses who hope no one notices they have had to burn the furniture in order for their lucrative incentive scheme to pay out.”
The analysis uses BT and Debenhams as examples of businesses that weren’t ready for the transformation they claimed had happened; meanwhile, CEO Dave Lewis’ leadership at Tesco is praised for being bold enough to tackle issues across the entire business; its financial performance, strategy and supplier relationships.
But such praise doesn’t always ward off new facts. The Guardian reports that “Tesco has reported a sharp slowdown in underlying sales growth, as political uncertainty and volatile weather held back consumer spending.”
“Like-for-like sales at Britain’s biggest supermarket chain rose 0.4% year-on-year in its first quarter ended 25 May, down from 1.7% in the previous three months. Total sales fell 0.4%, hit by the firm’s decision to close its non-food arm Tesco Direct last July.”
The post continues: “Tesco’s chief executive, Dave Lewis, insisted that Tesco’s turnaround was on track and said it had outperformed rivals in a “subdued market”. Like-for-like sales have grown for 14 quarters in a row.”
Of course, this hiccup comes just two months after The Sunday Times characterized Lewis as “Tesco’s drastic saviour.”
Indeed, judging a corporate turnaround’s success at any single moment is a challenge. CNBC notes the case of Jaguar and Land Rover:
“The classically British automotive brands Jaguar and Land Rover had seen their fortunes soar under the stewardship of the Indian auto company Tata Motors. But now that legacy is under threat.”
“Land Rover’s market in China has been shrinking, Jaguar has a portfolio heavy on less-popular cars, and the fallout from Brexit threatens to raise prices on supplies Jaguar Land Rover uses to make vehicles.”
Further complicating UK turnarounds: Economic uncertainty. In a write-up that highlights Deutsche Bank’s turnaround path, Bloomberg notes one area outside leadership’s control that might get in the way: “the state of the European economy.”
Leadership’s View of Corporate Turnarounds
So what might be some “turnaround keys” that sit within a leader’s control? Ken Allen “is the CEO of DHL eCommerce Solutions, a division of Deutsche Post DHL Group. He served as the CEO of DHL Express from 2008 to 2018.” He recently authored a piece in Harvard Business Review on “Leading the Company Through an Existential Crisis.”
Among his tactics:
“For executives, the question of ‘what to do’ is often better thought of as ‘what not to do.’ Every day half a dozen opportunities land on my desk that promise to be the next big thing, but successful managers know how to turn down opportunities that could distract from the sector where they can deliver the most value.”
Employees “would need training for their new roles, and we started planning for how to provide it.”
“In addition — and this was the most difficult decision by far — we had to part ways with 10,000 of our own people. With our complete withdrawal from U.S. domestic shipping in 2008, a number of roles became redundant.”
But these tactics come with a single, overarching piece of turnaround strategy advice from Allen: “Our turnaround strategy was based on one central tenet: focus. DHL Express would have the single focus of being the world’s premier international express shipping company.”
Links
- The Telegraph: https://www.telegraph.co.uk/business/2019/04/14/turnarounds-need-treated-suspicion/
- The Sunday Times: https://www.thetimes.co.uk/article/dave-lewis-tescos-drastic-saviour-blm6w36jn
- CNBC: https://www.thetimes.co.uk/article/dave-lewis-tescos-drastic-saviour-blm6w36jn
- Bloomberg (via YahooFinance): https://finance.yahoo.com/news/deutsche-bank-options-limited-turnaround-062214361.html
- Harvard Business Review: https://hbr.org/2019/03/the-former-ceo-of-dhl-express-on-leading-the-company-through-an-existential-crisis