Corporate restructuring: "An opportunity arises from every crisis"

80 percent of all restructuring attempts fail. On the surface, this is often due to companies running out of money. But the actual cause is usually something else: Turnarounds go wrong if there is no sustainable change in behavior. Our interim manager explains exactly how this can be achieved and why the success of a turnaround depends largely on it.

Why do industrial companies get into a crisis?

Interim manager: There are many reasons for corporate crises. In most cases, it is not a single cause, but rather a combination of various negative factors over a longer period of time. In particular, companies that have been successful for years or even decades often see no need for change or innovation. It is precisely this (mis)assessment that often marks the beginning of a crisis. And even after the onset of a crisis, many do not tackle things until they are urgent. As a result, companies then find themselves in a permanent firefighting mode. However, the focus is lost on what is really important - precisely because the flames are only extinguished when they are at their highest. You react instead of acting.

What can companies do to prevent this from happening in the first place?

IM: The "good" ones are already thinking about change before they have reached the pinnacle of success. The "bad" ones only do so when they are at the trough. The most important lever with which a crisis can be proactively avoided is the striving for change. The paradox is that the more successful a company is, the more difficult it is to turn away from the tried and tested and break new ground.

Hand on heart: what successful company touches its "cash cow"?

IM: Exactly! Many entrepreneurs downright shy away from critically scrutinizing successful products and business models in terms of their future viability. As a result, there are usually two drivers that bring about change: Greed and fear. Of course, these are bad advisors. And yet many entrepreneurs and managers only take action when they fear losing customers or encountering legal problems due to regulatory requirements. Also, only very few rebuild their entire organization without external pressure. And then there are the greedy ones who milk their "cash cow" until nothing (else) works. No thinking about tomorrow. When these or other factors come together, the crisis is usually not far away.

"There are always opportunities for change. Companies just need to address the issue in good time."

Under what conditions does a restructuring make sense?"

IM: The most important thing is the will to go through with the company restructuring - with everything that entails. If you're not prepared to do this, you can leave it alone.

What else must be in place for the restructuring to succeed?

IM: In addition to the unconditional will to change and the willingness to tackle tricky issues, the company must also be liquid. And it needs experienced and qualified staff who are also willing to go along with it. I also recommend a systemic approach that begins with a holistic analysis of the situation and the factors that led to the crisis. Because everything is connected to everything else.

As a certified restructuring consultant, what role do you play in all of this?

IM: In this phase, I support companies in the 360-degree analysis and in working through the identified issues. It is important to anchor external impulses internally in the further course of the process in order to benefit from the change brought about in the long term. And it takes people who do exactly that.

They speak to the employees. In a functioning business environment, they are considered an important success factor. They are often not involved in restructuring processes. It's all about costs, processes, KPIs, etc. Why is that?

IM: A restructuring is an emergency. The image of a hospital fits very well here. The seriously injured patient comes to the emergency room, where his bleeding is stopped. It is a matter of mere survival. Private sensitivities play a subordinate role here. Once the patient's life is out of danger, he is transferred to the ward. There the healing process can begin. This is the actual rehabilitation. Part of this "recovery process" is recognizing that what has worked before no longer works - or has never worked before. This can be a very painful realization. But continuing to do the same thing and expecting a different result - well, I can only describe that as foolish.

How should companies proceed instead?

IM: Industrial companies in particular are very process-driven. However, restructuring is usually not about adapting machines, but about taking people with you. The success of a long-term reorganization stands and falls with the personnel. Because the positive results only become apparent in the medium or even long term, employees must fully support the restructuring measures - and trust that they are the right ones. And the management must also understand that people cannot simply be reprogrammed like machines. They want to be convinced of something.

This is where we can make use of findings from neurobiology: A change in behavior is successful if it is linked to a positive experience. This means that employees need to experience that a change feels good, that it changes something for the better. Of course, getting staff excited about a new vision is exhausting, laborious and time-consuming. But we humans are always influenced by our immediate environment. If I, as a consultant, manage to convince employees of our restructuring plan together with the management, completely new ideas can emerge. In fact, a real creative cycle can emerge - with valuable input from the workforce. After all, they know the day-to-day business and the associated requirements best.

Speaking of day-to-day business: which adjustments should companies make first in the event of a crisis?

IM: Of course, finances come first. An insolvent company can no longer be restructured. From my experience, I know that organizational aspects are a close second. Often the "wrong" people with the wrong priorities are in the wrong places. This is where the greatest impact can be achieved.

The wrong people in the wrong positions - does that mean you are aiming to dismiss these people in order to replace them with more suitable ones?

IM: No, it's not that simple. For the most part, there is no black and white, but shades of gray in many nuances. That's why it's important to choose the right methodological approach and maintain results-oriented, appreciative communication. I like to compare this to craftsmanship: a hammer is used to hammer a nail into the wall. However, if you have a screw to hand, you don't need a hammer, you need a screwdriver.

As a renovation consultant who wants to bring about sustainable changes in behavior, I therefore need tools that suit the situation at hand. And I always have to bear in mind that people react instinctively in crises. In most cases, it is precisely ill-considered, instinctive action that has led to the emergency or made it worse. It is important to have many conversations here. And yes, sometimes you realize that there is no way around replacing individual people. Experience shows that alternative solutions with the same personnel often don't work - especially because people in management positions are multipliers. It is important that all stakeholders are behind this decision.

What criteria do you use to make such personnel decisions?

IM: Employees are not good or bad per se. The important thing is that the staff are suitable for the challenges ahead. However, there are always times when individuals are unable or unwilling to contribute to achieving the desired goal. Then it takes courage to make a decision that is right for the future of the company. The type of communication is crucial here. Clear communication is essential so that the employee in question can keep their face and leave the company with their head held high: It is not a decision against the person, but in favor of the skills and, if applicable, the attitude,

which this employee unfortunately does not bring to the table. The aim is always to part ways fairly. Fairness, transparency and respectful communication are also a basic prerequisite for employees to trust an external restructuring consultant and support their concept.

Let's talk about your systemic approach. What exactly is it all about?

IM: I learned early on that you have to take people with you in order to be successful. When I looked into this in more detail, I came across the performance culture approach by Prof. Dr. Wolfgang Saaman. I am convinced that we need to change the way we strive for success and efficiency. In many companies today, the misconception still prevails that "doers" are needed first and foremost. But it is the "thinkers" who should set the tone. Because they are not only concerned with the "what", but also with the upstream "why" and "how". They first critically examine an issue or situation and can therefore develop tailor-made solutions.

Only then should the so-called "doers" take over. Otherwise, companies would work haphazardly - without knowing what they want to achieve and what tools they need to do so. However, it is not primarily about what you do, but what you achieve. That's why it would be wise for a general rethink to take place in management and when filling management positions: Instead of highly valued "doers", there would need to be more effective "effectors".

And your tool is the P.C.F. model?

IM: Yes, "P.C.F. - Performance. Culture. Focus" serves as a methodical basis for restructuring projects and helps me to maintain an overview even in complex situations. Performance" is a basic prerequisite. Companies simply have to be well organized, the processes have to function efficiently and smoothly. In today's dynamic and fast-paced world, there is no other way. The "culture" aspect is where things get exciting, as it is the basis for service provision in companies. It's about how we treat each other. Despite maximum pressure to perform, we need people who can act as level-headed "leaders" and set the direction - also in terms of the way we work together. One crucial aspect is taking responsibility for your own area of work. Only if this is the case can employees trust and rely on each other.

The P.C.F. model according to Saaman
Model according to Saaman
▸Performance: Performance as the basis of every company
▸Culture: Interaction as a breeding ground for performance
▸Focus: The ability to focus on what is important and join forces

Why are trust and reliability so important?

IM: A chain is only as strong as its weakest link. In a production process, for example, one sequence follows another. I keep hearing that employees can't perform optimally because the person or department that previously worked on a task didn't deliver the required result. And then many people hide behind processes that "just don't work". No, every individual has to do their bit to ensure that everything runs smoothly. This includes thinking outside the box from time to time and changing your perspective.

In practice, this requires two things in particular: on the one hand, clearly defined tasks, responsibilities and interfaces. And secondly, the all-important personal responsibility. Everyone must be willing to achieve the best result that he or she is capable of. This sometimes presents managers with major challenges. Their task is to eliminate any disruptions and to respond individually to the professional and personal sensitivities of all team members. All of this is a question of corporate culture.

What role does focus play in the P.C.F. model?

IM: The decisive factor is where we focus our energy and what we make time for. We must not lose sight of the jointly defined goal. And we must always critically question whether our actions are still contributing to the goal. In principle, it's like sailing: A renovation runs in waves. You have to keep correcting your course in order to achieve the desired goal.

During a turnaround, you set the course?

IM: Not necessarily. I have different tasks - depending on the renovation phase. Initially, I'm the emergency doctor who saves the patient's life. I analyze the reasons why the company got into crisis and initiate "life-sustaining" measures. Once this has been successful, I am the rehab therapist who gets the company back on its feet - in other words, someone who coaches, communicates and mediates. This often involves making use of the employees' existing know-how. I experience time and again that the workforce has a great deal of specialist knowledge. However, there may be conditions that prevent employees from contributing their expertise in a targeted manner. Changing this is one of my most important tasks. In the best-case scenario, the team develops new processes itself. If this is the case, I can release "my patient" from my care with a clear conscience after successful rehabilitation.

This interview first appeared in our Theme Special "Ways out of the crisis". It provides you with proven best practices and first-hand expert tips for reorganization, restructuring and turnaround. Download now for free!