After I published the post below, it occurred to me that you might be interested in a prior post about what leadership qualities are required in turnaround  situations.  Here is a link.

It’s easy to blame e-readers and associated technological changes for Borders’ predicament, but they are merely the symptoms and not the disease.

When companies face the double whammy of game-changing technology and a sagging economy, they simply must have a sound strategy and consistent, capable, visionary leadership. Since 2005, however, Borders has had 4 different CEO’s.  How could the company possibly develop or effectively execute a company-saving strategy while there was a revolving door at the entrance to the executive suite?

Wednesday, I am leaving for the Distressed Investing Conference of the Turnaround Management Association and am eager to see whether presenters spend much time discussing  leadership considerations.

Many investments in distressed companies  fail because the investors (most of them private equity firms) pay too little attention to selecting and managing company leadership, but the last time I attended this conference, 2009, there was only one session (really, it was only one panelist) who highlighted this very important issue.

Mike Heisley discussed the fact that distressed companies require a leader with traits that are very different from those required to lead  a “healthy” company.  He was exactly right.  Click here to view my post from that event.

On the 16th, I promised to provide some unemployment statistics today that will answer this question: The unemployment picture has improved, but where are we compared with prior years? Is this a real turnaround, or are we simply slowly headed in the right direction?

I am going to be a day late because I want to upload a chart from the Bureau of Labor Statistics that provides the promised information, but the download has been frozen yesterday and today. (The website says this is probably due to the Bureau updating the information.)

As soon as the report is available to download, I will fulfill my promise. (But I can give you a hint: It is a pretty pathetic picture.)

In the 9/20-9/26 edition of Bloomberg BusinessWeek, Matthew Lynn (and the photo that accompanied the article) implied that Stephen Elop, who became CEO of Nokia on 9/21, is not the best person to lead the turnaround because Elop is not a “phone expert.”

I do not know a great deal about Elop except that he was recently “the Canadian head of Microsoft’s business unit” and that he has software experience and a reputation for “shaking up” businesses, but I do know that Lynn’s apparent assumption—that “industry experience” is central to a turnaround—is just plain flawed.

One needs to look no further than Alex Mandel’s leadership of Teligent in the late ‘90’s to see that “industry experience” does not guarantee success. Mandel had been president and COO of AT&T, but Teligent failed spectacularly under his leadership. Although the failure was blamed on “the downturn and overcapacity,” the underlying issue was that on the ground and in the trenches, Teligent was simply unable to provide the reliable wireless services it promised. The lesson: The leadership skills required to launch a technology start-up with no existing infrastructure are very different from those required to lead a long-established company.

In a turnaround, where time truly is “of the essence,” the most valuable commodity is effective leadership, not industry expertise. I’ve had 34 clients. Of those, 3 were in one industry; 2 were in another; the rest were all “one-off.” Based on that experience, it is clear to me that industry experience is not, by any means, the determining factor.

The most important skills needed in leading a turnaround are

· The “power of the glance;” i.e., the ability to see quickly what needs to be done
· Common sense
· Ability to establish the right priorities
· Clarity of vision and the ability to convey that vision
· Decisiveness
· Ability to mobilize the troops to provide ideas and support the effort

Is having industry expertise a plus? Yes. But it is no substitute for having the right leadership skills. No matter what the industry, it is relatively easy to find someone with industry expertise. It is much more difficult to find someone who has the right leadership skills.

I’m rooting for Stephen Elop and hope he proves Mr. Lynn wrong!

Recently, I sent an email to key business contacts letting them know my turnaround client needed a new CFO.  I received approximately 160 resumes.

The quality of the  emails most candidates sent was appalling.  Based upon what arrived in my inbox, here is my advice to those looking for work:

1. Read the job announcement. If you send a lengthy email in response to an ad that includes the word “turnaround”, you should  assume you will not be considered.  Turnaround experts are looking for people who can cut to the chase and won’t waste their time.
2. Use bullets not paragraphs. Time is money. Cash is king.  Make my life E-A-S-Y.  I am getting hundreds of emails a day.  Which emails do you think I am likely to read? Those with 5 lengthy paragraphs or those with 5 concise bullets?
3. Make sure that the file name of your resume includes your name. If your resume does not have your name in the file name, you are out-of-the-running with me because I have to take time–my time–to change the file name before I save it.  Please, make my life E-A-S-Y.
4. Don’t be a pest. If the job announcement says “send email to,” please don’t call.  If you do, it appears that you have no respect for my time.

Renee’s Rule™: Think before you respond. If you were in my shoes, what would you want to know?

• What has the applicant DONE?
• What is he/she LIKE?
  • Will he/she be able to work in a highly charged, fast-paced environment?
  • Will he/she be the kind of employee who anticipates what his/her supervisor needs?  who will make my life E-A-S-Y?

Renee’s Rule™: Make my life E-A-S-Y!

Some years ago, I recruited a first-rate controller to a client company.  To accept the position, she had to sell her home and move to a new city to take a job in a troubled company. She proved to be a wonderful person who did a superb job.

Part of her job was to try to get better rates for health insurance, so she contacted several benefits brokers, one of whom landed the account.

Today, I learned that the “winning” broker and controller are getting married, and I am as happy as I can be about it!

In turnarounds, I am always an agent of change–but this is the first time I know about  that I was an agent of romance!

I’ve seen some pretty scary hiring mistakes.  Here is an example in which “The Emperor Had No Clothes.”

In the 1990′s, I became  Interim CEO of a  company that was experiencing the worst production problems I had ever seen.  The company had hired a new Director of Materials Management.  He had been referred by a management team member who had worked with him elsewhere, and his references from former employers were excellent.  Everyone told me–and seemed to believe–that this guy was a genius.  During meetings, he typed on his own notebook computer (fairly unusual at that time), looked impressive,  and made “pronouncements.”

I, however, couldn’t understand a thing the guy was saying (plus, of course, materials management  was still totally out-of-control.).  I said to myself, “I have an MBA, am pretty darned bright, and  have run more than 10  companies.  If I can’t understand him, maybe he isn’t saying anything.  Something is wrong.”

HR had checked his references, but I asked them to contact the universities listed on his resume to verify his degrees.  Surprise, surprise:  this fellow had lied on his resume and had no college degree.   Needless to say, that was the end of his employment with the company.  (The company, by the way, was successfully turned around.)

The question in my mind remains:  Why in the world hadn’t someone else called his bluff?  (A question to be explored in a future blog..)

At least three of Renee’s Rules™ apply:

• If you can’t understand what someone is saying, he may not be saying anything.
• Too often, people are afraid to speak out when they think something is wrong.
• Check references thoroughly.

When is it “safer” to hire a “big” professional firm rather than a smaller one?  This is a topic I’ll be exploring in several different posts.  For the moment, here is an instructional story. (The names and some details have been withheld to protect the guilty.)

Some time ago, a principal from PE (private equity) Firm A, with investments across the country, called me to take the place of the CFO they had hired because he was a consultant with a national (“big”) consulting firm.  Why was the PE firm replacing him?  When the portfolio company’s lender conducted its audit, guess what they found?  The “F” word: Fraud.  (I did not accept this engagement for a variety of reasons I’ll discuss in a later post.)

Several months later, PE Firm B interviewed me for a turnaround in an industry in which I had successfully turned around more than one company.  Did they hire me? No.  Why did they pick someone else?

• He’s from a national firm, so that’s “safer.”
• He has industry “experience.”
• We know him.

Here is what I know about this person:

• He IS a consultant with a national firm.
• He was involved with a company but definitely did not lead a successful turnaround in the “industry.”
• He was the person who was removed by PE Firm A because bank fraud occurred while he was CFO.  (Evidently, PE Firm B didn’t really “know” him.)

I also know that the company was not, in fact, successfully turned around.

Let me be clear:  There are some times that a bigger firm really IS safer; nonetheless, there are many lessons to be drawn from the above story.  Stay tuned for further posts.

In the meantime, remember these Renee’s Rules™:

• When hiring, RESULTS are more important than “experience.”

• Always check references.

• There is no substitute for common sense.
  

Too often, people make hiring decisions based upon “experience” rather than “results.” A true story illustrates my point.

Several years ago, at the beginning of what ended up being a very successful turnaround project, the CEO told me, “We have a new CFO who has experience in turnarounds.”    (I’ll call the CFO “Jill,” to protect her real identity.)

“Oh?” I said, “What kind of experience?”

To make a long story short, Jill had been CFO at company A, and it went out of business.  Then, she went to company B, and it went out of business.

During my tenure in this extremely troubled company, it soon became apparent that although Jill talked a good game (and, indeed, sounded very impressive!), she was simply unable to make needed changes.  She fancied herself a turnaround expert but was absolutely unable to fulfill even her most important job function; i.e., producing timely, accurate financial statements.   I replaced her with someone who could.

Not long ago, I read about a company that expected to have to shut down if it could not get additional financing very soon.  Guess who had recently been a financial officer for that company?

The companies that hired Jill undoubtedly made “experience” their key criterion.  Instead, they should have asked about and verified what RESULTS she had actually achieved.

Please note: Although Jill, who marketed herself as someone who could turnaround a company, was neither capable of doing that nor able to accomplish basic accounting functions,  there are many extremely capable CFO’s who have found themselves in distressed companies through no fault of their own.  I have had the pleasure of working with some of them.

Renee’s Rule™ – When hiring, RESULTS are more important than “experience.”