Are quality employees vital to a successful business turnaround?

Businesses can start to falter for a whole host of reasons. Problems occur despite the best efforts of those in charge to keep things moving in the right direction. As a result, perfectly viable businesses sometimes come onto the market as loss-makers, or fall into administration, and it’s up to buyers to turn them around.

Although this is never an easy feat, it can be achieved with the right know-how, dedication and most importantly, according to successful businessman Mark Levey, the right people on board.

Mr Levey is one of the many business people - experienced in successfully turning around struggling businesses - who will tell you that getting your staffing right is one of the main factors that contributes to returning a business to profitability.

He has spent years working as a business adviser for a chartered accountants and recently had the opportunity to invest in a football brand business that was struggling. Within two years Levey returned the business to a profit of £400k per year. When he initially invested, the firm was losing £1.2 million each year.

We spoke to Levey to find out what his advice would be to anyone else facing a turnaround project. His first piece of advice was not to be afraid of hiring in expertise. Hiring in an accountant and a turnaround practitioner can be hugely beneficial to buyers faced with the sometimes mammoth task of trying to make a business profitable again.

Working with a turnaround expert at the beginning of a project will help buyers to develop a strategy that they can then communicate to the entire workforce. Having clear business objectives is vital and ensuring everyone is “on the same page” so to speak, is one of the first priorities in a turnaround project.

Levey is keen to point out that staff members will respond much better, in terms of playing their part in achieving business objectives, if they themselves are set to benefit. Providing clear incentives, such as salary increase in line with profit increases, for example, will save owners having to ‘check up’ on whether staff are
pulling their weight.

Communicating strategies and objectives to staff can be difficult, but holding monthly operations review meetings can help to monitor progress and re-establish staff loyalty and motivation. Buyers need to take these opportunities to reaffirm priorities and assign responsibilities to staff, without fear of making them accountable for both the good and bad results.

The importance of the right staff and a motivated workforce should not be underestimated, says Levey. “Staff is the most critical aspect of a business turnaround,“ he asserts. “Decent accountants and lawyers can sort all the other stuff out for you.”

In light of this, time and effort needs to be invested into the recruitment process after a buyer takes over a struggling business. Staff may have been let go after a purchase to cut costs, but those that are staying need to feel motivated and those that are brought in need to be the very best people for the job.

“Surrounding yourself with people smarter than you” is a great recruitment strategy, claims Levey and a host of other turnaround experts, who insist on the value of hiring the very best people and paying competitive market rates. Levey explains that establishing a workplace atmosphere where “winning new business and improving customer service” are seen as crucial will help turn a struggling business into a success. This is easier under a regime where bosses do not necessarily feel they need to be the most skilled staff in the company.

Seeing eye-to-eye with managers and owners is imperative for new investors, explained Levey, who himself parted ways with the owner/manager of the football brand business after the understanding between them started breaking down.

The quality of a company’s management can make or break a turnaround project. Levey explained, “From what I have seen most distressed businesses are in that position because of poor management by the current owners/managers.” Poor management often leads to poor staff motivation and the failure to keep on top of basic management accounts, both of which can lead to the collapse of an otherwise viable business. Levey claims that a lack of discipline can lead to businesses losing track of when their accounts need to be submitted. They lose track of how they make their money and take too much cash from the business. Failure to submit accounts on time can also lead to mounting tax bills from HM Revenue & Customs.

Spending is another area that needs to be brought under control by those buying businesses out of administration. Levey explained how when he first invested in the football branding company, the manager was driving a £80,000 car and his spending needed some work to bring it under control. Spending must be brought in line with what a business can afford, and this may well involve making redundancies.

Once control of costs as been regained, Levey suggests that establishing an open dialogue with creditors will help to get them onside with the turnaround plan. Honesty is the best policy in this situation and explaining your plan for the turnaround of the business can help to improve terms and buy time.

In conclusion then, surrounding yourself with the very best staff and ensuring everyone is focused on achieving the business’s top priorities is key. Keeping on top of staff communication and motivation is vital, while appointing experts to help with accountancy and legal issues will benefit any busy buyer faced with a challenging turnaround project.

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