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How to do a Turnaround in 5 (not so easy) Steps

2009 July 23

As an ex-pat active in emerging markets, I’m usually called in when things look pretty bad.  I’ve had my fair share of distressed situations over the years, and I know there’s no shortage of turnaround situations in this environment.  So I thought I’d share some of what I’ve learned from some hard experiences.  The following is a 5 step process that has produced results.

1. Identify Heroes, Holdouts and In-Betweens

Heroes: Every company has a group of committed, talented people who love what they do. They are usually frustrated by the events that led up to the crisis and have been holding on, hoping things will change. These people will be the key to your turnaround strategy and the first thing you need to do is identify some of them.

Holdouts: These people don’t want anything to change and will fight you every step of the way. Fortunately, they are a small minority, but they can do a lot of damage. Figuring out who these people are is never very hard. They are usually proud of their role as a “status quo evangelist.”

In-Betweens: Most people are fence-sitters and will go along with whatever seems easiest. They don’t really mind the status quo that much, but would like to see things improve. Usually, you are just the newest “change initiative” so they are going to wait and see how things will go. Unlike Heroes and Holdouts, In-Betweens are trying not to be noticed.

2. Start small and easy

The most common turnaround mistake is to try to change too much at once. Usually people are exhausted, demotivated and frustrated. Moreover, you haven’t proved yourself and probably don’t understand the business or its problems very well yet (even if you think you do). Trying to do too much too soon will inevitably end in failure and you will lose your momentum even before you really had any.

Your first initiatives should be relatively small and play to your strengths. Although it might seem that you don’t have time and need to move quickly, overreaching will not make things move faster, it will only set you back and you will lose valuable time that you really don’t have.

3. Fire away!

Within 3-6 months (and sometimes faster), you will need to do your first round of firings. This is usually surprisingly easy, since the people responsible for the poor performance of the company are usually still around and quite proud of their role as a thorn in your side. These “holdouts” are invariably incompetent, nasty and fighting you every step of the way. Moreover, they are not usually well liked outside a small circle of loyalists and most people are happy to see them go.

4. Re-organize and build momentum
At the same time you are doing your first round of firings, you need to start building momentum. Hopefully, by this time you have had some small successes, identified some heroes and solved some of the problems that were destroying value. Now you can start moving your heroes into key positions, bringing in some new talent and start solving some tougher problems.

5. Formulate a long-term strategy

By the end of the first year, you will need to formulate a real long-term strategy. The tendency is to want to do this first, but that is always a big mistake. When you come into the company you do not understand the business or its problems well enough to know what its long-term strategy should be. Besides, you will spend most of the first year fighting fires, so formulating an “eye level” strategy is not something you’re going to have the time or energy to do.

The key to formulating a long-term strategy in a turnaround is to identify the unexpected successes within the company. Most companies have people, processes or products that can create enormous value, but have been overlooked. Usually, the company is so focused on its failure, that it has been blind to the potential for success. Get your heroes together and build a strategy to move the company forward and start killing the competition!

I hope you have found this helpful. Please let me know your comments.

– Greg

53 Responses leave one →
  1. Olga permalink
    August 11, 2009

    Have you been to the companies where hold-outs are the majority?

  2. August 11, 2009

    Fortunately, no.

  3. Filip permalink
    August 13, 2009

    Good strategy, but I do not think for the crisis time when you need to be really quick in also major decisions.

  4. August 13, 2009


    Whenever you’re in a turnaround situation, it’s a crisis.

    – Greg

  5. Toro permalink
    September 4, 2009

    Beware the holdout with a hero mask.

  6. September 4, 2009

    Hi Greg,

    Great breakdown of the situation most people are likely to face.

    The holdouts will rally behind a leader and try to stop any good initiatives succeeding so an easy way to identify them is to propose a few simple ideas and watch them scramble to ensure that these will not be implemented.

    I recently restructured a company where the CEO thought that the Holdouts should be taken on a journey…to change with the company – he had no concept that these Holdouts were the poblem and were not interested in the company succeeding at all. Thankfully I was able to move these people outover time…

    The turnaround I effected was successful and rapid – 3 to 6 months but as per your framework I documented the new strategy last, to set the platform and then left….

    The company is now more successful – we doubled revenue plus 20-30% above budget every month.

    So although I wish I had seen your framework earlier I can confirm that I took a similar approach – it works and I wish I had seen your framework earlier – my journey would have been simpler…and more enjoyable.



  7. Todd permalink
    September 4, 2009

    I think your plan is well presented and I agree with this strategy. My own experiences have worked in a similar fashion.

  8. September 4, 2009

    Good advice!

    – Greg

  9. September 4, 2009


    Thank you. I’m glad you liked it!

    – Greg

  10. September 4, 2009


    Thank you for your comment. Congratulations on your successful project!

    I do think we have a small discrepancy in terminology. In my mind the project you are describing is more of a restructuring. There are times when this is appropriate and companies like Alix consulting have had some amazing success bringing companies back from the brink of destruction.

    A turnaround, at least in my mind, is a longer process that actually builds a successful company and I don’t believe that can be done in 6 months. A company can be restructured and saved in 6 months (or even faster) but to actually change the institution takes longer.

    Thanks again for visiting Digital Tonto!

    – Greg

    – Greg

  11. Sanjay Diwan permalink
    September 4, 2009


    A very crisp & pragamatic outline for any transformation for turn-around.
    I had an opportunity to lead one such program couple of years back in India.

    We had an additional action item was the “Metrics & Milestones”.
    Metrics was about Whats & Hows, measured and tracked every quarter and a composite score of the 3xWhats & 5xHows help communicate with the organization on the direction being right to return to profitability with delighted customers & growing revenues, measured as Whats.
    The Hows, was about prioritizing the intiatives across key functions as lead indictors for the Whats in a longer run.
    It took huge PR initiative internally to gain the momentum.

  12. September 4, 2009


    Good point!

    – Greg

  13. Shesh permalink
    September 8, 2009

    Hi Greg, great article.

    I have observed that every organization has the proportion of heroes, inbetweens and holdouts. The hold outs do not just do it for new ideas. For whatever reason they like to make life difficult for others, new ideas and new-comers especially. 3 months down the line they will try to be heroes (a total flip, good for you!), if they see there is support for your ideas from upper management.

    Now if I may play the devils advocate –
    Life becomes tougher if the agent of change, who had brought you in, had an agenda. This can happen in companies, where they like to show they want to bring in change, but you cannot deliver, every idea is struck down, the hold outs are supported – Whom would you fire? Yourself I guess. The bad part is – everyone now sees a marked improvement, no more distress as the ‘common enemy’ is gone. The good part is – The joy is transient, and they start looking for another ‘turnaround guy’ :).

  14. September 8, 2009


    Good point. It’s important to have a mandate (See Why Digital Tonto?)

    – Greg

  15. S. Narendran permalink
    September 9, 2009

    Good Article Greg. An important point that we need to add is that the sponsor of the turn around “supports” the change agent till the objectives are realised…. most of the times, these are the guys who pull the carpet beneath the change agents feet.. I have seen this a couple of times and have fallen flat..

  16. September 9, 2009

    S. Narendran,

    Yes, that’s happened to me too (Which is one reason that I call this site Digital Tonto).

    – Greg

  17. Bill Hogan permalink
    September 9, 2009

    well written and does identify many of the issues and mileposts in the turnaround process. Of note, sometimes the CEO is the fault…paternalistic and not expressing the severity or urgency of the problem (s)to the troops. I say this, having been this CEO… I am EXPERIENCED in the Thomas Edison definition…”Experience is the word we use to describe our mistakes”
    Keep going’

  18. September 9, 2009

    Thanks, Bill.

    (I have some experience myself:-))

    – Greg

  19. September 15, 2009

    You know, I was expecting some fluff based on the title but this is pretty good.


  20. September 15, 2009


    (If you’re a billionaire, can I have some money?)


    – Greg

  21. September 15, 2009

    Hi Greg

    Good article. I my experience, what often fails is the leadership to see the company through the crisis. That, I believe, is why you see so many employees in limbo whether to back the turnaround or sit and wait.

    – Frode

  22. September 15, 2009


    Good point. My experience has been the same. Usually leadership in failing companies do more to destroy value than to create it.

    – Greg

  23. October 17, 2009

    Hello Greg,
    I enjoyed reading the article. Brought a number of reminiscences to light. I’m also an “experienced” person having performed a few turn-arounds in biotech essentially.
    A key point I found when landing on such situations is to secure the operating funds for the turnaround period plus 3 to 6 months. This is an essential medssage to the group and an easy one.
    The second most important lesson I learned is that most bottom line concerns are top line issues: product positioning, sales strategy. Amazing how much can be gained back with a proper new look at it, and a few visits to key accounts, if any.

  24. October 17, 2009

    Jean Louis,

    You bring up a good point. It’s important to make a distinction between a financial restructuring, which is about survival and a turnaround which is about making a company successful.

    – Greg

  25. October 17, 2009

    Thanks Greg,

    in addition the point can be seen as the longer the product life cycle, the higher the need for full financial commitment during the turn-around period. As some posters rightly pointed out, incompetent management might have driven the company in a nightmare close to bankruptcy. The turn-around will bring it back to profitability only if it can survive during the re-alignment of all customer focused processes (new products/services, new strategies, new customers, policies etc).
    It’s usually fun to go through this phase and rebuild on the good foundations that usually exist.
    thanks for staying up so late.

  26. October 17, 2009

    Jean Louis,

    I couldn’t agree more. Product cycle is a factor that is too often ignored, in both finance and marketing.

    Another important point is that durable goods are much more sensitive to business cycle downturns than non-durables and services. It’s fairly easy to put off capital investment for businesses and large purchases such as cars and home appliances for consumers.

    So while I think you’re previous point is valid for any business, it is especially pertinent for companies that depend on long product cycles and durable goods.

    – Greg

    P.S. I’m in Kiev. It’s morning here:-)

  27. Thomas permalink
    October 19, 2009

    Thats a great article and I have similar experience.
    What do you recommed if you are in stage 2 and find out the company owner is a “hold out” ???

  28. October 19, 2009


    Then you’re in real trouble. One way to avoid this problem is to get a mandate before you start.

    – Greg

  29. David permalink
    October 25, 2009

    Thanks Greg,

    I enjoyed the topic and having been through a similar self-developed turnaround process. I’m not ashamed to admist that in my first turnaround, I broke rules 3 and 5 and paid the price for it by taking longer to get things sorted.

    One challenge with 5 is that if you are a Business Unit head, CEO’s/MD’s often want a strategy for change before you start the turnaround process. i.e. what are you going to do?, how long will it take?, how much will it cost?, what will it deliver? Mandate and trust are required, neither of which are guaranteed.

    One challenge with 3, is that you need to quickly extract retained knowledge from anyone you have in your sights. That can be tough when they are suspicious of your motives. Ultimately, you have to bite the bullet, and that’s where I erred on the conservative side in my first turnaround. I wished later I hadn’t, as retained knowledge is generally overrated.

    I also agree with Jean-Louis, in that a (short-term) focus on the top line is often a good medicine for the bottom line.

    Cheers, David

  30. October 25, 2009


    Thanks for your input.

    I have also run into the problem where I was expected to offer a solution before I started. Usually, there is so much trouble that stakeholders are just happy that anybody is willing to take the job on. However, sometimes they expect a ready made solution. You just have to manage expectations as best as you can.

    – Greg

  31. Gregg permalink
    November 1, 2009

    I had the fun job of turning a company around this past year. Even in a recession, it is possible.
    Four months after I started, I fired my holdouts. I made sure that I fired all of them on the same day. I could not believe the amount of “water cooler” talk about the remaining employees relief that these people were finally gone. The work output from my employees increased. They finally saw significant changes and wanted to come to work to be part of the change. I made my “reorg” the next week after the firings. It was a big shakeup, but my employees were in need of change and jumped in and made it work.
    I just put together my long term strategy for the company and my position needs to be redefined. Do not be afraid to change your own position for the long term survival of the business.

  32. November 1, 2009


    Thanks for sharing. Sounds like fun!

    – Greg

  33. November 15, 2009

    Good outline Greg but based on your description, I must take issue with your rather relaxed timing. Appreciating that you/we are “called in” when things look bleak, this eliminates the luxury of time. Once again, it is smart to follow a matrix such as yours, but if a company is in crisis, I feel strongly that the following steps are a more effective addendum:

    1. The single most important objective is to secure a comprehensive evaluation from the C-level. Key probative questions requiring candid answers will supply you with:
    a) The true issue(s)
    b) An accurate estimate of the actual time remaining before fiscal disaster
    c) Their perceptions of the heroes, holdouts & in-betweens (I call them freeloaders)
    d) Securing the proper parameters of the actual task at hand
    e) Securing a mandate to “do what needs to be done”

    2. While there will always be reasons for avoiding the “too much – too soon” scenario, my experience is that most companies in this predicament have been in protracted denial and simply do not have a year or more to effect meaningful change. If you are relatively unfamiliar with their business, profound change will certainly be a longer ramp but if the obverse is true, you owe it to your client to move swiftly and decisively. You are there to save a company not to make friends or seek consensus.

    3. Develop a pre-planned strategy based on your high-level conversations before calling a meeting with the second tier and take meticulous notes. Amend your strategy to incorporate the “new” information and present a plan of action to the board. This can be done in 30-days or less and will identify the H-H-I’s and slate the folks they need to keep and nurture. Under the premise of “people don’t change,” everyone else must go. Knowing that the issues are being properly addressed, “keeper” senior managers will thank you. Once second tier management is adjusted, middle management and staff will independently retrench and either prove their worth or be subjected to reevaluations later. Changes at this level are not time-critical since new leadership will now be monitoring their performance more closely.

    4. Now that we have stopped the bleeding, the remaining time can be invested into repairing the damage done by the actual systemic and or procedural causes.

    In closing, in deference to simple process improvement environments, in crisis, effective consultants cannot afford to entertain internal politics when evaluating difficult decisions. Rather we have an ethical obligation to our clients to save their company and to do so with alacrity. Once out of immediate danger, both short-term (6-12 months) and long-term (1-3 years) strategies must be adopted and implemented by every department.
    Anthony De Rubeis
    Forte Enterprises

  34. November 15, 2009


    Everybody has their own experience, but I think it’s important to make a distinction between a financial restructuring and a turnaround. While I agree that a company has to be financially stable (which in my mind is a restructuring and not a turnaround), eventually the company has to be able to compete and that requires a different process.

    – Greg

  35. November 20, 2009

    I would agree except I wouldn’t call the ‘holdouts’ rather Saboteurs. I suggest bucketing your easy steps into a “Soft Phase” which includes establishing leadership & credibility, restructure communications, change attitudes and identify the heroes, saboteurs and meets expectations. At the same time, earn trust and establish opportunities for individuals. Phase 2 – organization design and Phase 3 Process & architecture.

  36. Jay Foster permalink
    November 27, 2009

    I basically agree with your outline as I have followed a similar process for quite some time. Other challenges which I have seen but were not addressed in your brief outline are the holdouts who are also key SME’s (software authors, etc) and have inextricably woven themselves into essential roles in R&D and operations. The executives in the company are afraid to get rid of them, fearing the loss of expertise and los of support of current products. These people unfortunately are the first that need to go, to rid the organization of the cancer that prevents open and honest evaluation of the product against the market and how things need to be done in the future.

    The other big challenge which you addressed is time. Companies allow themselves to get into a critical situation before they call for help and then want an instant solution. I have been in turnarond situations where the company has floundered for a decade, invested in product that doesn’t meet market demands and they want instant change without being willing to make the hard decisions or further investment required to make success possible. As a hired gun, education and constant communication are critical to turnaround success.

    My final comment is to the statement that top line success makes everything easier and, while that statement is fundamentally true, if the product/service that the company is providing is not aligned with market needs or expectations (the most common problem in many companies in crisis) top line growth will not be achieved simply by increasing sales efforts else the company would not be in a crisis. My experience is that companies in crisis are there for a variety of reasons including structural and product and that turnaround efforts are never easy, clean, simple or quick and are always accomplished with a great wailing and gnashing of teeth.

  37. November 27, 2009


    Thanks a lot for a great comment.

    I wholly agree with your point about holdouts that are key people. I have also had the problem with both technical and sales people. My experience has been that they are usually not as “key” as they appeared. I have even had situations where results immediately improved once I got rid of a “key” holdout.

    I also think it’s important for me to point out that it took a while for me to realize that I had to pull the trigger faster.

    I have come up with a motto that has been helpful for me:

    “Professionals solve problems, amateurs cause them.”

    If somebody is causing problems you don’t need, they are not “key. Get rid of them.

    As for the rest of your comment, I can oly say that I agree 100%.

    Thanks again.

    – Greg

  38. November 27, 2009

    Hi Jay,
    I was happy to read your post. From experience indeed top line is an essential issue: wrong product positioning, wrong sales persons, both, all contribute to a company ending “in the middle” of any business matrix.

    It is so important that we have started a business out of it.

    The issue of prima donnas (or people you can’t imagine letting go at first) is corny. However I have developed 2 guiding principles:

    1. Cemeteries are filled with people who were thought of as being irreplaceable

    2. If you don’t cut the dead wood off the dead wood will cut you off for 2 reasons: yon won’t be able that you have improved performance, and you won’t get employees commitment, you might even have a surge in personnel turnover.

    If you’ve been rowing on a 2 or on a 8 you’ll know what it means to have everyone aligned to achieve the goal, and working in unisson.
    good day.

  39. Steve permalink
    November 28, 2009


    Great topic, and great responses. I agree with your approach and have utilized it with varying degrees of success.

    I have particular sympathy for Thomas. My experience and having talked with enough PE firms to learn that many founding entrepreneurs are the obstacles themselves to the change and growth they desire and they become a hold out. These entrepreneurs anchor themselves on their success that has built the company up to that stage, and are concerned in deviating from their approach.

    I resigned from a similar situation. It became clear early that the founder was the subversive hold-out, bonding with several of the identified hold outs with whom the founder built strong personal relations in building the company. I established and presented a financial restructure plan along with organizational restructure plan ( including position profiles and requisite experience) to the founder. The founder reviewed the financial restructure plan with the key hold out managers who argued the plans were not achievable. The plans were achievable, but not with those managers (many of whom had no formal business education or prior relative experience). I was asked to mentor those managers instead of replacing them. I made attempts to mentor but it became a huge drain on my time while still being held accountable to delivering financial results. The end result was that I resigned having concluded the owner was not vested to truly change the organization.

    I whole heartedly agree with Greg that obtaining a mandate is critical. But it is not an easy proposition (with smaller companies) to extract the founder from the business who may very well be an impediment to the change that is desired.

    Best Wishes and thanks for this discussion. Happy Holidays!


  40. November 28, 2009


    Thanks for your input. One thing that I have never understood, but have come to accept as truth, is that some people will be willing to accept anything except for change.

    Please have happy holidays as well.

    – Greg

  41. Vali permalink
    December 11, 2009

    Greg very good article. I don’t have experience with turnaround projects, however I did couple of reenginering projects in Supply Chain. I have a question for you – what is your approach in finding in a small time (let’s say in 2 – 3 weeks time frame) what are the critical areas where to cut? Many thanks


  42. December 11, 2009


    That is more of a restructuring question than a turnaround question, and I’m not an expert on restructuring.

    However, I would say if the answer isn’t obvious from a financial point of view, you will need to form a consensus on what goes and what stays. Also, you need to be sure that you cut enough, so it’s a good idea to cut a little more than you think you have to.

    Whatever you cut, you’re going to have to manage what is left.

    – Greg

  43. John permalink
    December 16, 2009


    Merry Christmass

    Turnarounds remind me of when I was learning to fly as a teanager. When the (flight) plan breaks down and you have an emergency you must have a well practised alternative plan.

    1st, Fly the plane. Reconfigure so you are flying (operating) most efficiently. Jettison dead weight, as it only brings you down faster. (No, you are not allowed to throw your mother-in-law out of an airplane) This buys time.

    2nd, Diagnose the problem and try to affect a solution. (assuming the problem is not catastrophic and you have enough altitude/time)

    3rd, Look for a place to land. (i.e. new strategy)

    It seems to me that financial restructuring would be analogous to “fly the plane” while steps 1 through 4 fall into Diagnose/solution. Failure to have CEO/BOD total comittment is catastrophic.

    Good advise and guidelines for affecting constructive change in an orgaization.

  44. December 16, 2009


    Great analogy!

    I’ve run a business in the middle of a revolution, but never flown a plane (which for me, seems about right:-)

    – Greg

  45. Paul permalink
    December 27, 2009

    I have made the same observations, and have been at that point where hopd outs need to be side-lined (worked around) as the companies current environment does not allow for firings (the hold outs are those favoured by my predecessor and promises were made to ensure these people remian within the company). subsequently I need to reorganise and restructure in steps.
    A real pain, and very time consuming. Any ideas?

  46. December 27, 2009


    That’s a tough one. I guess you just have to do your best to marginalize them.

    – Greg

  47. December 27, 2009


    from experience, legacy spells death. There are good reasons why the company you are dealing with has been in a position to ask for professional turn-around assistance. You can build only on solid foundations, not shaky grounds.

    So make sure first that it’s not the business systems that were hampering people to perform.

    If your analysis is that some people ought to go have them go. You have few shots with respect to the board. They have to be informed and they have to decide: either they follow your recommendation, and you’d better deliver, or they don’t, and they take responsibility.

    Be prepared in any case. Have your suitcase ready, this gives you much more strength in defending your position.

    best for 2010

  48. December 30, 2009

    Great insights from an experienced turnaround expert. Completely agree with your thoughts and five point guide. I would add that in certain environments that are very toxic, financially (i.e. hemoraging money) and culturally, becoming a ‘dictator’ at first, with complete control has worked for me. After a short while, and after the first round of firings, I then move to becoming a benevolent dictator, then into a democratic process with checks and balances after some stability is reached. Also, I might move a little faster than a year for the long term plan, unless I do not know the business. In that case, a year is a good timing for the LT strategy.

  49. December 31, 2009


    Unfortunately, I completely agree. You usually have to be a complete bastard at first. You’re not there to make friends. Most of the time, you can build up relationships later, but inevitably, some of the wounds never heal.

    – Greg

  50. Jeremy permalink
    February 10, 2010

    Hi Greg,

    Great advice and having just come out of a turnaround situation, it’s the process and procedure part which is the easier part of the equation…!! we did turn the business around, at least in terms of it’s profitability, but the hardest part by far was the hostility of the “holdouts”.

    The company was a small business in a group of companies with a group CEO; despite continued lobbying, the CEO wouldn’t fire the main holdout leader despite them having a very negative and destructive impact on the day-to-day business, due to a potential shortfall in revenue – in my opinion, a very short-sighted and mis-guided approach which will only lead to increased issues over time.

    So, I would add a 6th point to your list that ‘you’ need to have complete autonomy to make decisions as you feel appropriate and MUST have the support of the snr. management (board, Grp CEO, Chairman…) in order to fully succeed.



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