two questions before implementing
the plan: ( 1) Does every individual/
department know what is expected of
them? and ( 2) Can their performance
be measured? It is imperative that
the answer to both questions is "yes"
before beginning to execute the plan.
3 Track Performance, Plan Adoption
Earning employee buy-in is only half
the battle. Leadership must maintain
adherence or risk losing buy-in
midway through implementation.
The costly process of regaining
employee engagement diverts time,
energy, and resources away from
execution, but can be largely avoided
by tracking performance and making
corrective actions as necessary.
Tracking performance and results
helps to maintain the momentum
generated in the development of the
plan. Employees can measure how
their actions contribute to the overall
goals of the company. To effectively
measure performance, operating
metrics established at the department/
individual level must be directly linked
to the desired results of the overall plan.
For example, an airline company has
a plan to increase profitability. Part of
the plan requires reducing idle fuel
costs by speeding up repair times on
airplanes with maintenance issues. The
maintenance technicians are the key
group that will need to change their
behavior for the plan to be successful.
What would be an effective method of
tracking their performance? Sharing
the company’s consolidated income
statement with the technicians—or
even the maintenance department’s
income statement—would do little to
inform them if they are meeting plan
goals. Rather, showing them operating
metrics of repair times against standards
that are tied to the plan would be
more effective. From that perspective,
they can make any corrective actions
necessary to hit and/or exceed the plan.
When analyzing a department and/
or individual’s performance, the
following two questions should be
asked: ( 1) Are results consistent with
the plan that was agreed upon? and
( 2) Are results favorable or unfavorable?
The answer to these questions will
dictate the suitable course of action.
It is important that the metrics selected
are almost entirely controllable by the
people being measured. For instance,
a large metals company measured
its plant performance based on plant
operating income. However, it did not
adjust operating income for commodity
price fluctuations. Thus, operators
were often rewarded or penalized
for things outside of their control,
which both demoralized management
(inhibiting buy-in) and distracted
them from more important tasks.
4 Reward, Recognize Outperformance
Adam Smith was perhaps the first
person to document what is now
business gospel: people respond to
incentives. From commission-based
salespeople to garment workers paid
by the piece, turnaround leaders see
this in practice every day. Thus, it’s
no surprise that the same principle
applies to employees of a distressed
business. Giving employees incentives
to adopt a transformation plan is thus
critical to the plan’s success. A meta-analysis of incentive programs found
that well-designed incentive programs
increase performance by an average of
22 percent. 1 Therefore, leaders must be
thoughtful in the design of incentive
plans and deliberate in their execution.
Three critical elements set apart well-designed incentive plans from the
rank and file. First, they are tied to key
performance indicators (KPIs) that are
measurable, directly correlated with
desired behavior, and are under the
control of the target group. These can
be the same KPIs used to measure
the turnaround as detailed earlier.
Second, they include both financial and
nonfinancial components. While leaders
typically focus first on dollars and cents,
many employees find just as much if not
more satisfaction in being recognized by
their colleagues. In-person celebrations,
calls from the CEO, and company-wide
newsletters can all work wonders.
In one materials business, for example,
turnaround leadership tasked a midlevel
engineer with leading an important
element of an operational improvement
initiative. Under the engineer’s direction,
the project was successfully completed
ahead of schedule to significantly more
financial benefit than expected. Division
leadership celebrated the engineer and
lauded his accomplishment in front of
several dozen colleagues and invited
his wife and children to attend. Stories
of this celebration spread throughout
the division, which quickly became
the best-performing in the company.
Finally, well-designed incentive plans
target a broad swath of the company,
not just a handful of senior executives.
By going down multiple levels into the
organization, incentive plans motivate
employees who might not otherwise
fully grasp (or be motivated by) the
dire situation their company faces.
5 Remove Resistance Individuals react differently
to change. Buy-in requires not
just lip service, which is easy to
provide, but actual behavior change,
which is harder. Thus, turnaround
practitioners are likely to encounter
resistance as they roll out the plan.
For example, an underperforming
company developed a plan to increase
gross margins by 5 percent. The
entire organization participated in the
planning process, and all departments/
individuals had clear goals and
objectives. After a month, results
showed that margins actually fell by 1
percent. After investigating the causes
of underperformance, results showed
that the sales department sold several
large orders at very low margins, citing
their need to keep sales volume up.
Does this example demonstrate that
the sales department bought into the
plan to increase margins? They may
have nodded their heads in agreement
throughout the planning process,
but their actions did not demonstrate
buy-in. So, how can leaders overcome
resistance to turnaround plans?
Considering the time-sensitive nature
of turnaround management and the
often serious implications of failure,
decisive and swift action must be taken.
The first step in overcoming
resistance is providing additional
training and increased oversight.
However, practitioners cannot afford
to wait long. Ultimately, employees
who refuse (or are unable) to buy
in cannot be tolerated. Dissent can
spread like cancer throughout an
organization and destroy any chance
of a successful turnaround.
Removing resistance speaks to
the heart of Jim Collins’ theory of
taking organizations from Good
to Great. Leaders, he says, “start by
getting the right people on the bus,
the wrong people off the bus, and