Michael Teng
Managing Director, West Pharmaceutical Services Singapore
Singapore
 

"To keep the corporate doctor away, take three meals - vision (breakfast), feedback (lunch), and action (dinner) - a day."

Michael Teng deserves to be called a "turnaround manager." He has rescued two troubled companies - first, a Singaporean company, then a multinational firm - from near financial collapse. And he accomplished both turnarounds within his first year as general manager of each company.

To bring these companies back from the brink, the 45-year-old Teng treated each one like a sick person. As reported in The Straits Times, one company had serious management and operational problems. So Teng performed "surgery" and cut off the diseased parts - non-performing staff and business units. The other had people management problems
and an inappropriate corporate culture. So he "resuscitated" it by using fresh strategies. Then he "rehabilitated" it by changing its culture.

In this article, adapted from an article written by Teng for Today's Manager magazine and a presentation he has delivered before several professional organizations, he elaborates on management principles which can benefit not only ailing companies but even healthy ones.

A company falls sick just like a person does. There is a strong parallel between physical health and fiscal health. Companies can suffer from internal and external viral attacks. The former may take the form of a major project failure, incompetent management, or poor financial control. The latter includes government intervention, economic recessions, the presence of low-cost competitors, or natural disasters.

To extend the analogy, the turnaround manager acts like a doctor while a financial institution functions like a hospital. When a company experiences financial collapse - death - it is turned
over to a receiver, the company's undertaker.

When a company falls seriously sick, it needs to undergo three phases to heal itself: surgery, to restructure the organization to deal with the new and harsh realities; resuscitation, to revitalize the business to improve on its sales revenues; and nursing, to rehabilitate a healthy corporate culture for sustained long-term growth.

In a corporate turnaround process, mere surgery is insufficient. Resuscitation alone is also inadequate. You can have the best resuscitation strategies but it will come to naught if your people are not behind you.

For a complete healing of a corporate illness, nursing - i.e., building a healthy corporate culture and winning the people's mindset and heart - is critical. The soft issues in nursing are just
as important as dealing with the hard issues of surgery and resuscitation in a corporate rescue. A healthy corporate culture is the immunity system of the company that keeps viruses and
diseases at bay.


Surgery

There are four Cs in the first phase of a corporate turnaround: Communication, Cost control, Cash flow, and Concentration.

Communication. Communicate regularly with your staff, customers, board members, suppliers, and bankers on your turnaround plan and update them on the progress made. Articulate clearly ideas and procedures using unambiguous language.

People are not against bad news per se but they want to see results quickly. Get the bad news over as quickly as possible. Also, openly share credit for success with other members of the
turnaround team.

Cost control. Remember that any first-year business student can cut costs. The difference is that a good turnaround manager is one who reduces costs without further hurting the sick company.

Avoid the "corporate anorexia" syndrome practiced by some companies which literally starves the corporations to death. Sweeping cost cutting is tempting, but it will hurt in the long run
if it is not properly planned. During the cost reduction exercise to bring overheads in line with realistic levels, remember to set a good example yourself by not spending unnecessarily.

Cash flow. Most troubled companies require immediate improvements in cash flow. Watch your balance sheet items. Start control of inventory levels, outstanding debts, currel1cyexchange,
payments to suppliers, collection of receivables, and the like. The basic principle is "look after the pennies and the pounds will look after themselves."

Concentration. Focus the troubled company on its core competencies. Troubled companies usually stray from day-to-day operational issues into acquisition and poorly thought-out expansion
programs. As Jack Welch, chairman of General Electric, once said, "If you are not number one or two in the business, you will increasingly find it very difficult to survive in business today." Work on laser sharp focus in your industry and divest non-related businesses.


Resuscitation

Surgery is not sufficient in a corporate turnaround process. The company needs to be further resuscitated. In this phase, I recommend the following steps:

Ascertain corporate objectives. Ensure that everyone is working toward common goals.

Obtain support from shareholders and all business associates. Constantly keep them informed on the progress made. Without the support of these people, the turnaround manager will face an uphill battle.

Implement aggressive marketing strategies. At one company I turned around, to steer the staff away from wallowing in self-pity or playing the game of shame and blame, I implemented an
aggressive ISO 9000 implementation program. This program. directed staff's energies towards constructive activities.

Conduct market research. We started talking to suppliers, customers, and even competitors to better understand the industry. This process included rejecting past market assumptions that got the company into trouble in the first place.

Get the right product at the right cost. We successfully implemented multisourcing to make cheaper products available to the price-sensitive market.


Nursing

Phase three involves the following steps: incorporating a new corporate philosophy; instilling a strong corporate culture; and increasing communication and training to reinforce the corporate
philosophy and culture. A company without the right corporate philosophy and culture will still fail in the long term even if all its resuscitation strategies (phase two) are in order.

A new corporate philosophy. In ancient Chinese medical tradition, it is believed that a person will be healthy if he or she can release the internal energy or qi. Similarly, in corporations, human
resource energy should flow freely and not become blocked.

Today, businesses are getting very competitive. The key to corporate success is to learn our mistakes faster. To accomplish this, I encouraged the free flow of ideas. and new ways of doing
things to establish the new corporate philosophy.

Even our project management philosophy was changed. The former philosophy consisted of starting with enthusiasm, disillusionment and panic, hunting for the guilty, punishing the innocent and rewarding non-participants. The new philosophy emphasizes a "ready, shoot, aim "strategy and views, project management as a continuing process of trial and failure.

A healthy corporate culture. In today's competitive market, it is difficult to differentiate your products and services based on technology or pricing alone. But if your company has a healthy
corporate culture, it will take a long while for your competitors to follow.

Communication and training. Both are needed to support the new corporate philosophy. As the CEO, I communicated with staff at training sessions, team briefings, and informal gatherings.

Ken Blanchard, author of The One-Minute Manager, once said that feedback is the breakfast of champions. However, I believe that in the communication process, vision is breakfast, Le., without the healthy corporate philosophy, the company's efforts can be de-railed. Feedback is lunch. And acting on the feedback is dinner.

Many corporations receive feedback reports but are not able to act on them. Vision, feedback, and action are the three meals a day that will keep the corporate doctor away.

Training and development are other important aspects of the nursing stage. I trained my team managers, as change agents, to assist me in instilling a more positive mindset in staff. Increased
training resulted in an added benefit: It resulted in engendering staff loyalty and reducing staff attrition.

Turnaround situations can be difficult. If you take too long to show results, staff members gets impatient. Bankers withdraw your credit line when they smell trouble in your company. Even bosses and shareholders give you little margin for error.

Overall, managing a turnaround is a trying and rewarding experience. Ultimately, it is nothing magical, but simply a matter of going back to the basics.

 

The biographical sketch was drawn using the following sources:
"Men Who Turn Red into Black." The Straits Times: March 16, 1996.
Dayao, Dinna Louise C. "Rx for Sick - and Healthy - Companies." World Executive's Digest: October 1997.