Most turnaround efforts fail. The current stellar example of a success is Apple where the founder came back, cut the firm back to the basics, and then rebuilt a very different company that spectacularly survived his death. The elements of success are to build a loyal team that can execute (assuring core skills), cut once-cut deeply, and then rebuild the firm much like you would a startup into a successful company.
Failure in this area tends to follow a very different path. Here the example is HP, a firm located close to Apple and who’s old property Apple is building its mammoth new headquarters on. A firm that has been demonstrating over and over again an expertise in the more pervasive less fortunate path.
Let’s talk about how to fail a turnover in 5 easy steps.
1. Start with BS
One of the reasons turnarounds fail is they are generally attempted by people that have never actually been through one and people who are new to a business or an industry. This means their initial comments are pretty much BS. Often they will contrast themselves with their failed predecessors but the skills they showcase generally have little to do with the operation of the firm or the execution of a turnaround.
They’ll make promises they can’t meet and when they don’t, they’ll lose the trust of their backers, employees, and customers. For Whitman this was about connecting her past at eBay to her future at HP. eBay was smaller, far less complex, and even in a different industry than HP. There was no similarity. It was far different when she was there than it is now. Her personal brand was tied to the word “<href=”#.VWiA8WZFD5o”>together” yet currently she is splitting the company in two.
2. Leave in Place an Executive Team
Steve Jobs basically replaced all of Apple’s key executives by a handpicked team that mostly came across from his other company NeXT. He already knew what they could do and they were loyal to Steve and this allowed him to hit the ground running. But a CEO who has come from out of the industry doesn’t have that pool of loyal followers to pull from and will often leave in place the existing executive team (who were clearly part of the problem they are trying to fix) and some of these folks think they should have been selected as CEO (and may actually be right in that belief since, often, they are more qualified by experience).
These CEOs then set unreasonable goals while cutting budgets and resources. The end result is high executive churn and an executive staff that spends much of its time planning for their next job out of the company. You can see this with HP, executives who were underperforming were left in place too long and stories continue to hit that top executives still there are out interviewing—not doing their jobs.
3. Layoffs as a Recurring Event
The reason you want to cut once, cut deeply, and execute quickly is because you want to provide opportunities that people can work towards not a reason why the people you have left should be looking for jobs elsewhere.
The failed CEO treats people like a flexible resource and does serial layoffs. This creates a very hostile musical chairs kind of environment where employees feel they need to work against their peers in order to survive the next layoff.
Collaboration becomes very difficult, job satisfaction drops, and voluntary turnover layers on top of the layoffs to create organizations which increasingly lack critical skills, critical mass of employees, and the will or ability to execute. Whitman is only one in an impressively long list of CEOs at HP that have done layoffs wrong. But Meg has been spectacularly bad at this she does lots of slow layoffs leaving people that don’t have a future with the company in place to lower morale make the turnaround far more difficult than it otherwise would be.
4. Broken Promises
Whether you are talking customers, employees, or investors trust is incredibly important to a turnaround. However if the CEO both doesn’t understand the business and is aggressively cutting costs and employees they have no idea what the firm will be capable of and that makes any promises they make very difficult to fulfill.
Promises not to sell certain units, to have the turnaround done by a certain date, to assure (or even build) certain products, or to promote from the inside are all likely to be unmet. As these promises are missed customers, employees, and investors tend to lose faith and simply don’t believe in the CEO and that the turnaround will be successful turning this belief into a self-fulfilling prophecy over time. Whitman made a number of promises that we are seeing fail today.
5. No Strategy
Now the prior points point to the ability to execute which degrades badly under the failed turnaround CEO but these folks also tend to lack the ability to form a strategy that results in eventual success. Part of the problem that the turnaround is attempting to correct is to realign the firm with the market as it currently exists.
Steve Jobs turned Apple from a marginal PC company into a very successful Consumer Electronics company. The failed CEO instead focuses on just keeping things running. The layoffs, site and business sales, and rapid pace of acquisitions and divestitures keeps everyone focused tactically and on day to day operations unable to spend time to discuss or plan for the future. The end result is a lot of furious activity but no destination to point it towards so you get fits and starts and no visible process towards an ultimate goal because the key players have no idea where the firm should be going.
Ironically Whitman was very big on talking strategy early on but there doesn’t appear to be any evidence of a strategy now. In this instance this likely has more to do with her not understanding the business than in her not understanding the importance of a strategy.
Wrapping Up: It is Harder to Fail than Succeed
I don’t want to say that what Steve Jobs did at Apple was easy, but it actually is easier than what HP has gone through with their revolving door of CEOs. Steve’s early moves made Apple easier to manage and fight, and this meant that when the consumer electronics concept became clear with the iPod he was able to pivot the firm to that new opportunity and history was made.
By not making the critical early moves basically HP remains simply a different mess than it was when Whitman took it over thus even when opportunities like 3D printing and Internet-of-Things (IoT) emerged they were unable to pivot to take advantage of them. The right timely 3D printing solution could have been HP’s iPod. HP’s plan of record is to instead spin the printing division out with an, as-yet-undelivered 3D printing solution.
In the end if we fail to learn from the successes and failures of the firms around us, we deserve what happens when we instead learn through our own failures.