Oct 292014
 

Dr. Earl R. Smith II
DrSmith@Dr-Smith.com
Dr-Smith.com

Crisis intervention is one of the most challenging services I offer. It is almost impossible not to be seen as some sort of grim reaper. Necessity drives the engagement at least until the company is out of the woods. And there a lot of gravestones along the path to recovery.

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I am sometimes asked to engage with a company that is facing a survival crisis. Whether it is the investors or the CEO who issues the initial invitation, the environment that I find myself entering is generally fraught with tension. Most time the two camps have separated and are pursuing what they see as their best interests. The investors, long disabused of the golden visions of rapid growth and profitable exit strategies, are focusing on protecting their capital and are forcing the CEO and senior team to take steps towards that goal. The CEO and team are facing the possibility that the compensation scheme that they have benefited from is about to end. They tend to be interested in persuading the investors to put in more capital.

No matter how the parties found themselves to this situation, it is difficult to resolve constructively. Most of the time I end up acting as a ‘marriage counselor’ – positioned between two parties who are not feeling the warm affection for each other that prevailed in the past. Attitudes of cooperation and trust have given way to agendas that focus on individual interests and self-protection. Once this happens, the interests of the company – and its employees – are shuttled to a back burner. I am brought in to help sort it out – to help the parties decide between divorce and reconciliation.

The later resolution – reconciliation – does not have the same meaning as it might be suspected to have in marriage counseling. I long ago discovered that efforts to rekindle the ‘romance’, which the parties once experienced, are a waste of time. Most often, the parties have found themselves into this condition of estrangement because of the ‘looseness’ which prevailed during the courtship and early stages of the relationship. Much like coupling, the hard questions were finessed. Only after some time has passed have the warts and scars become an issue. So my job becomes to force the hard questions and facilitate the hard discussions.

My interventions often begin with work with the CEO and senior team. Sometimes we start with a focus on the effectiveness of the sales efforts or the potency of the marketing program. At other times, the initial focus might be on the overhead structure. However, the bottom-line focus is always on the length and lengthening the runway – the number of months that that company has to engineer a turn around using only currently available resources. The reality that drives this process is that the investors are disinclined to provide further capital and – even in the face of the CEO’s assumption that they will not ‘walk away’ from their investment – the investors are actively considering doing just that.

It becomes important that the CEO and senior team realize that the investors have – and are seriously considering – the alternative of putting the company out of business. Some CEOs that I have worked with remained in adamant denial of this possibility right up until the papers were filed with the bankruptcy court. The better ones have responded quickly to the suggestion that they needed to reevaluate their assessment of the situation. Once the CEO and senior team have begun their journey to the ‘new reality’, I turn to the investor group and help them begin the same process.

One of the overlooked facts in a company’s journey to the situation that I have been describing is the complicity of the investor group. In a very important way, they have almost always enabled the CEO and management team – helped/allowed them drive the company towards the precipice that it presently is occupying. However, it has been my experience that the investors are generally a harder nut to crack when it comes to accepting responsibility for the results of their actions. These people are facing the possibility that their judgment of the CEO and the company’s value proposition have been wrong. They resist the proposition that their actions – or in many cases, inactions – have exacerbated the problems. It usually the case that they have done just that.

After working separately with the senior team and investor groups – preparing them for a serious attempt at reconciliation – I facilitate a series of joint meetings. During these sessions, I bring up the hard questions that were finessed during the earlier stages of the relationship. Many of these meeting – particularly the early ones – are heated and recriminations tend to fly about in profusion. Sometimes the attitudes and agendas of the parties force things to head and dissolution becomes the only way out. However, in a significant percentage of cases, the parties begin to realize that faults are to be found on both sides. During subsequent meetings they begin the long road towards common interest and corporate success.

In the best of outcomes, my interventions sufficiently soften the attitudes and agenda of the two camps and allow a mutually acceptable compromise to evolve under which the investors play a more forceful role in corporate governance and the CEO and senior team operate under far more specific metrics, goals and strategic and tactical plans.

© Dr. Earl R. Smith II

 

 

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