The two words are frequently used in the same breath, but is it possible to do both at once? Are they simply two sides of the same coin? Or must one precede the other?
Spot the dissonance in these statements by a troubled CEO:
“The pressure is mounting… as a group, we are still loss-making. Year end was not good – revenue is up on last year, but not universal across all P&Ls. And we only just met revised projections. The trajectory is not what we committed to in our long-term plan. We are now way over the halfway mark in our five-year plan that we submitted. I am nervous; the board are over-active. They are starting to tell us what to do… and how to do it. Non-execs are crawling all over this place. We need to do something different – it is serious and we need remedial action, quickly. We need the turn the performance of this business around by end of this new year. This has to be our focus. We can do this. We still have 10 months. This business is viable. All our strategic choices are the right ones; we just have to focus on better execution. There are still so many opportunities – we need to grow, transform and make this business scalable so that it can provide the full spectrum of services, and surpass the competitors. Let’s make sure that within the month we have a plan of action and that we have communicated this plan to the whole organisation – we need to line up all the P&L leaders to deliver to this. We have to be careful however; the Board will not approve of this as a cost-cutting exercise. As we launch and communicate this, we cannot use the words ‘efficiency’ or ‘productivity’ – we don’t want to create any fear or uncertainty. Let’s position this as transformation and make it all about scalability and growth.”
Turnaround or Transformation? Does the distinction matter?
This statement is not atypical – and the scenario is a common one too. Many a CEO is challenged by their Board to turnaround the performance of a business,while at the same time transforming it to ensure it is scalable and that opportunities are seized – or created.
But is a struggling business capable of transformation? And can transformation include a turnaround? Or are these two separate strategies for two separate situations? Even in his dissonant statement, our CEO recognized that the communication content and tone is very different for each.
In truth, transformation and turnaround are two separate concepts. Consider the differences between:
- Decorate vs. Renovate
- Detox diet vs. Balanced diet
- Burning-platform vs. Blue-sky
- Reactive vs. Creative
- Threats vs. Opportunities
- Symptom vs. Cause
- Pills & Plasters vs. Lifestyle
As you think through the opposite ends of these scales, it helps to bring to life the distinction between turnaround and transformation. We often see the words used interchangeably and yet they are two very different strategies to achieve two very different sets of outcomes. But the misuse of these terms per se is not really what matters: if you are in a turn-around situation and you begin outlining your problems in the context of transformation, you aren’t being clear about the situation you’re in, or the goals that you need. And if you aren’t being clear about your goals, how can you hope to achieve them? Therefore, who is this ‘re-dressing’ of the real situation serving?
What matters is that an organisation is clear on outcomes it wants to achieve and to then embark upon an approach that aligns with achieving those stated outcomes.
Turnaround and transformation are akin to two different paths. Both will take you forward, and the paths may cross at times, but the journey of each is different and the destination of each is very different for sure.
“It’s really all about how you mobilise effort behind it”
We asked a number of credible leaders about their experience of both strategies. Some of the leaders are executives of private organisations; some are operational leaders in large corporates; some are board members. All expressed a view based on their experiences – multiple industries and market dynamics, and across different economies and countries. Their experience, combined with ours, is what has informed this post – which we hope will help readers navigate the right strategy aligned to outcomes being sought.
“Both need a plan and governance otherwise you don’t realise the benefits”
A big difference is the starting point. Think of an organisation that needs to perform the way it should be (as-is), delivering known outcomes, to known needs, in known markets at the expected margins for the product or service. Then compare this with an organisation that is looking to fundamentally change the way business is done to deliver a new or better proposition which generally requires all aspects of the value stream to be enhanced.
Turnaround helps to build a strong platform to go from underperforming to performing. But, in a turnaround situation, you can quickly hit a ceiling where legacy decisions constrain how much you can do with current models, systems, structures. It is at this point transformation takes the organisation into the next phase of evolution.
“You can’t transform an organisation that is not delivering the basics”
The key determinants are really about time, scope, investment and whether the focus is strategic or operational.
| Turnaround | Consideration | Transformation |
|---|---|---|
| Direct financial performance in the short term | Outcomes | Drivers of mid to longer term financial performance |
| The outcome is on getting head above water, the business is underperforming | Strategic Driver | Status quo is not good enough, even if business is performing well; There is a headwind coming so fundamental change is needed |
| Survival mode!…it’s about proving the viability of the business | The Focus | Thriving in the future… it’s about venturing into the unknown |
| We have to do better with what we already have | Investment | We need to invest in this business |
| As soon as feasible | Timeline | Time horizon is at least beyond the next year |
| Needs execution amongst strong operational leaders with accountability being held and singular direction coming from the top | Leadership | Needs an unambiguous vision from the top and trusted collabo-ration with managers and teams – critical to get commitment, which is above and beyond compliance |
| Fast decisions, remedial actions, quick impact – need to hold to account to see it through | Decision Making | Considered decisions, building actions, longer term impact – needs conviction to see it through |
| Requires careful management of motivation and disruption in day-to-day business | Culture | Wholesale culture change and engagement is a core focus |
The table above serves to help you decide which strategy your organisation needs and how to ensure you design an approach that is appropriate for the choice you have made.
What remains important is that you make a conscious choice between the two. And that your focus, pace and communication align with that choice. This includes making conscious decisions about what to STOP doing also.
Furthermore, consider your organisational capability in being able to decide and then design the appropriate approach in a way which ensures follow-through and execution to agreed tangible outcomes. Do you need external support for the approach you are embarking upon? Or even to make the decision on which approach to take in the first place? Organisations can benefit from external support, but the need for and value of this will depend on the different skills required and how these complement or supplement your own internal capabilities. Internal accountability is critical, regardless of which approach you embark upon.
In a turnaround situation, there are often sensitive and tough conversations to be had. The leadership often know the areas where financial impact can be made quickly, but an external partner can contribute with critical thinking and, in particular, execution discipline and strong governance.
In a transformation situation, there is more ambiguity around the “what” and the “how”. A clear vision has to serve as a strong anchor. The approach often needs to encompass some diagnostic and exploration work. Whilst internal accountability is still paramount, there is often a need for more direction in a number of organisational elements such as strategy, structure, systems, measures … all of which need to be examined and designed in congruence.
Four Points has helped organisations with both turnaround and transformation. As always, we help by asking the relevant questions, in the right way. Our approach is simple and fluid, based on situation, context and desired outcomes – and as things change, we adapt.
If you think we could help you can find us ravi@fourpoints.net or aahuti@fourpoints.net
Our deepest thanks to all of the people that contributed to this article:
- Alastair Mitchell – Chief Operating Officer
- Alex Stukalov-Stone – Finance Director
- Baba Awopetu – Group Strategy & Marketing Director
- Campbell Fitch – Global HR Director
- Rupert Eastell – Strategic Advisor
- Colin Drummond – Director of Operations
- Bob Horton – Operations Director
- Steve Swientozielskyj – President CIMA
- Sunita Bhagat – Strategic Transformation and Business Excellence Leader
Four Points Consulting Team: Andrew Bidnell , Steve Cabrera , Cameron Bird, Victoria Greensit, Shirley Haywood, and John Packham
Do you have a related story to share on this topic? How have you seen the “Tell” approach being applied (effectively) in your business to overcome resistance to organisational change?