Business Turnaround

Things need to get worse before they get better. As analysts forecast that the worst has yet to come, it seems like this has become our motto. According to recent data, retailers worldwide were hit hard as sales at major American and European retailers declined in December amid global economic downturn. The fallout has already begun with well-known retailers such as Circuit City and Sharper Image filing for bankruptcy protection. This is just the tip of the iceberg according to many financial analysts who forecast bankruptcy filings to begin after February 2009.

The manufacturing sector also fell victim to the economic downturn. The manufacturing index fell to its lowest point in 28 years to 32.4 in December as the manufacturing industry reporting no growth. With the overall unemployment rate at 6.7 percent in November, the highest in 15 years, manufacturing continues to be one of the hardest hit sectors. The sector lost 85,000 jobs between October and November, according to the most recent data from the Bureau of Labor Statistics. More losses are expected in coming months as demand continues to weaken.

Hitting the bottom is not always a bad thing; it might actually deliver critical lessons to companies. However it is not easy to get back in the game and rebuild confidence. What are the key steps you need to take before you embark on a major business turnaround? There are five key strategies according to Ahmed Fahour, National Australia Bank chief executive, who was invited to address the topic of Business Turnarounds - the Strategic Leadership Agenda, at the Australian Graduate School of Management. Mr. Fahour has shared his direct experience in guiding NAB's recent re-emergence to a position of corporate strength in the wake of NAB's "very public" fall from success.

According to Mr. Fahour, the first step in his plan to put NAB back on track was to put the right people in the right positions. Mr. Fahour acknowledged that the most significant decision in NAB's turnaround story to date was restoring confidence in employees through the appointment of a new leadership group within the bank. Leadership matters, especially in unsettled and critical times.

The second strategy to follow, Mr. Fahour states, is to know your DNA. To understand the DNA, or traditional strengths, that had made the almost-150-year-old organization good in the past was critical because "great companies not only produce great products or deliver outstanding service ... they are founded on a core set of beliefs, not policies, and they leave an enduring legacy of personal relationships and community trust."

Of course, without developing a simple and compelling game plan, you cannot proceed too far. That is the third lesson. "In any turnaround - business or otherwise - people are looking for hope; not the tired clichs of 'management speak'," Mr. Fahour insisted, and NAB's fresh approach has shunned "the banality of business language" with its simplicity.

Last but certainly not least, promoting the right type of behaviors is as important as the other four key strategies. Mr. Fahour's ultimate test was to create an organizational culture in which people feel, believe, and behave differently because behaviors are hard to change - and executive behavior forms the foundation of organizational culture.

Implementing a business turnaround was challenging as Mr. Fahour says, but he was successful less than two years after he took on the top managerial role at NAB in August, 2004, with the bank being named the 2006 Bank of the Year by Money Magazine and receiving the Australian Marketing Institute's National Award for Brand Revitalization.

While we are constantly reminded by the analysts, we do not really know what lies ahead. The future might bring more failures and bankruptcies, as no industry is insulated from the economic crisis, but these failures can deliver some key lessons to organizations as they can pick up from where they left and come back stronger. As they say, things need to get worse before they get better.