Veteran interim executive Don Bibeault has more than 30 turnarounds under his belt, ranging from steel mills to financial services companies.
Bibeault knows something about leadership. He’s been doing turnarounds, 9 of which were interim CEO assignments, since the 1970s. He was the first ever recipient of the Turnaround Management Association’s lifetime achievement award.
His best-selling book, Corporate Turnaround, How Managers turn Losers into Winners, has for years been a key text in the study and practice of turnarounds.
Bibeault currently plies his trade at Verto Partners, a partnership he founded that currently includes 30 consulting, operational and managerial professionals.
The key in changing the trajectory of a corporation from loss to profitability is leadership, Bibeault said. And he has one critical piece of advice for those looking to follow in his footsteps, the “secret” to making a turnaround work.
It’s not advice for those looking to maintain the status quo, but for those looking to dramatically alter it.
“There is nothing more powerful, I’ve learned, than (focusing on) a small number of customers, products, and sales people, that account for vast majority of profitable results,” Bibeault said. He noted Pareto’s Law, otherwise known as the 80-20 rule, basically assuming 80 percent of the results come from 20 percent of the causes.
Bibeault cited a turnaround case where a multi-billion-dollar company in question was “literally starving its winners to feed its losers,” a recipe for disaster. The multi-billion dollar company had 1,600 dealers, yet 20 percent accounted for the lion’s share of profitability. “Worse still, 60 percent (of expenditures) were wasted on underperforming dealers,” Bibeault said.
According to Bibeault, resources applied to the top group of performers will generally get 5 times the result of those applied to the bottom group.
“Our cases would make (Pareto) roll over in his grave,” Bibeault said. Welcome to the world of turnaround.
The following lessons come from an address Bibeault made to the 2010 graduating class from the Berkeley-Columbia Executive MBA program and in a recent conversation with the association.
1. Managers administer, leaders innovate.
Most losing organizations are over managed, but poorly led, Bibeault said. (Indeed, Bibeault said he struggled with the MBA title his audience had just earned: administering is a bad word, implying mediocre growth. Business is all about leadership.)
A good turnaround manager must favor the venture-capital approach over the maintain-the-status-quo strategy, according to the San Francisco-based Bibeault.
“Venture capital supports innovation before experience has proven its value,” Bibeault said, and leaders need the skills and courage to do the same.
“Leading is about penetrating new markets.” It’s about fighting humankind’s general resistance to innovation until experience has proven its value, he said.
2. Managers maintain an existing vision, leaders develop a new and more powerful vision.
Bibeault presented a case study to expand upon this point:
In 1988, Bank of America called Bibeault in as a turnaround advisor to deal with 78,000 acres of California farmland in foreclosure.
It was cotton land, but cotton was down and the land was selling at $1,200 per acre. But Bibeault wasn’t going to let a definition constrain his approach. He recognized that 70 percent of this cotton land could be used for dairy land. BOA ultimately was able to sell the land at $5,000 per acre, and got its money back.
“A leader has to have the capacity to create a compelling vision to take people to a better place, Bibeault said. “Don’t be o.k. with the status quo, particularly when the status quo is killing you,” he said.
3. Managers move people, leaders motivate people.
No organization can excel without strong leadership, Bibeault said. A leader must energize his or her employees to embrace the new vision. A vision is not enough: a leader must be able to motivate people and to translate the vision into practical action.
Bibeault favors the concrete to the theoretical: leaders need to show the exact steps on how to get from Point A to Point B. Most importantly, don’t just ask sacrifice from others, but be the most active and willing-to-sacrifice person in the room.
Although Bibeault acknowledged that we live in difficult economic times, he is a firm believer that “creativity trumps adversity nearly every time.”
“Don’t avoid troubled situations. Seek them out,” was Bibeault’s advice. After all, the difficult stuff holds the greatest promise.