If the executive team gets stuck in any of the five stages of the “process of depression” during the turnaround management, it is likely to lead to the bankruptcy of the firm. Severe troubles of a firm are often paralleled by a situation of rapid change, where the dynamics of (involuntary) transformation keep accelerating and exceed the management’s level of control. Individual psychological deficits (e.g. narcissistic characteristics) can be a reason for not reaching the state of Acceptance, more often, it is observed, the turnaround management consumes too much time, to fully understand the severity of a crisis and to seek external experts for help. In a rough model, executives under the impression of a distress situation can be categorized into four groups:

• Ignorant towards the facts, hence, no need to take eligible actions. A lack of managerial skills, technical access to critical information or fear to face reality, may cause ignorance in distress situations.
• Activists may be very eager, to prove their managerial skills. They may be trying to resolve a distress situation, however, without a thorough understanding of cause and effects, actions are arbitrary and results are uncertain. Hence, activists may add value, but this will happen only randomly and cannot resolve the situation. On the other hand side, activities of Activists can be dysfunctional also. Disregarding the facts may affect the business in other, but the desired ways.
• Paralyzed under the impression of the facts, unable to take any / eligible actions.
• Turnaround Executives taking eligible actions, in full awareness of cause and effect of the facts.

With regard to the “five stages of depression”, as outlined by Elisabeth Kübler-Ross in 1969, the behavior of executives can be linked. The five stages of grief and depression are:

• Denial
• Anger
• Bargain
• Depression
• Acceptance

• Ignorants can be still in the state of denial, not recognizing the distress situation.
• Paralyzed executives may be in the state of anger, or in the state of depression.
• Activists can be in the state of a bargain.
• Only executives, who have reached the stage of acceptance, will show effective & efficient behavior

It is not certain, individuals move to the next state. Executives hold the risk, to retain at a certain stage. This will reflect on their activities towards the distress situation. While being in the “process of depression” most likely, the executive will not be in a position, to perform functional behavior, but will be passive or even dysfunctional for the organization.

All the same data, yet different results.

We have all been to the same Business Schools and are reading the same books and business magazines; executives hold the same competences and, hence, are exchangeable within one industry. For the assessment and selection of turnaround executives, understanding what causes differences in the performance during a turnaround is essential. Technically, all Senior Executives should have access to critical KPIs. KPIs are to indicate, if the business saves and sound, or carrying increased risk for distress. Accessing the same data, the behavior of executives varies. Some remain ignorant towards the facts, others are paralyzed, some create a lot of buzz without traction and others again, act early and bring the company back to save grounds (or avoid drifting into rough waters). The latter are few in numbers. Turnaround experts are specialists in distress situations. Yet, they suffer from the stress level, late nights, lack of time and resources, high degree of uncertainties and pressure, and emotions from various stakeholders, too. However, not being paralyzed or engaging in the blame game is core for their success.

“Experience is simply the name we give to our mistakes” (Oscar Wilde)

It all starts with the awareness of the situation, leading to meaningful conclusions for the short and mid-term future. Formalizing this requires:

• a KPI universe
• regular reporting
• thorough discussion and challenging of the relevant data
• scenarios of what the near term reality could be for the firm

Looking ahead, executives require the experience, to understand the sustainability of revenues and the relevance of business risks. Obviously thorough analysis can help for better understanding. In order to succeed in a turnaround situation, executives need to draw the right conclusions and prepare for scenarios, which are clearly outside the comfort zones. Including possible inconvenience in the consideration for future scenarios is key. This requires a sense and understanding of the underlying behind the numbers.“Having done this, been there before” is a strong asset, to get things right and also manage the emotional impact a distress situation can have on the management team and yet, creating short term impact. This may translate into a type of personality, who is maybe not the easiest type to be with on a day to day basis. Turnaround specialists are experts, who are called in when needed. Yet, they are not the perfect match for management positions in organizations without the urgency and special challenges of a heavy transformation process.

The know-how and the do-how for turnaround management

Only after understanding the crisis situation as an immediate reality and the interdependencies as the cause and effect of actions, the executive, will be able to start acting accordingly. Many executives believe being prepared and skilled, to deal with (any) crisis situation. With regard to the very special requirements of a turnaround situation (more on that in another posting), very often, this self-estimation is wrong. Also, the management team at the helm might be responsible for the immediate distress situation, hence, they would not be the first choice, to fix exactly that situation again. An effective & efficient Turnaround Professional is adding value by having a reliable toolbox for distress situations at hand, and also a thorough understanding of

• her own impact to improve the situations (and its limitations)
• access to useful partners and networks outside the existing eco-system of the firm
• achievable low hanging fruits, that can help to improve the situation immediately.

The competencies, to interpret the numbers right, understanding the underlying, having a reliable instinct for cause and effect, within the organization as well for the market and finally a sure command of a variety of instruments and tools are the result of many years of experience.

Take away:Transparency is key for the successful management of turnaround situations. Knowing the numbers and understanding the numbers are two different things. Experience is core to understand the underlying and the cause and effect of possible actions to address the distress situation. Scarce resources create additional complexity. Turnaround Professionals are experienced, to deal with distress situations under the rule of constraint resources.