Giving companies a second chance
Our turnaround experts bring specialist skills and operating experience to companies in distress.
– "My wife is a doctor. She fixes people. I think of myself as helping to fix organizations," says Richard Hudson, a London-based McKinsey partner and one of our growing team of corporate-recovery experts. "Often I'm the last stop before a business fails, and I help it get back on its feet."
Our Recovery & Transformation Services (RTS) group was created five years ago to address the unique business, financial, and legal needs of companies in distress. While helping clients turn around businesses has always been a part of McKinsey's work, recovery situations sometimes require specialist skills and capabilities. These might include a nuanced understanding of local insolvency laws and/or the ability to step into an interim management role—becoming a company officer, as opposed to a consultant/adviser. Since RTS was founded, our restructuring experts—partnering with industry and functional experts from across McKinsey—have served clients in 20-plus countries on five continents.
"Restructuring is all-consuming work," explains Greg Fern, who held senior operating roles at Motorola Mobility and Sears Holdings before joining McKinsey RTS. "You have to thrive on change and enjoy teaching people to do things differently. We become personal trainers at all levels of an organization, from the CEO to the front line."
First impressions are critical to gaining credibility, especially when the stakes are very high. "The magic of this work is you have to go in quietly and prove your value quickly—and then inspire people to change," says Richard, whose restructuring experience spans industries as diverse as helicopters and telecoms and countries from Ireland to Greece.
RTS specialists help leaders, managers, and employees design and implement new processes, identify and track key indicators, model new behaviors, and motivate people to change.
"One of the cornerstones of effective restructuring is accountability or the 'say-do ratio,'" says Greg. Weekly meetings with company managers track progress across a raft of operational, financial, and strategic initiatives. It quickly becomes apparent if individuals or departments are not living up to their commitments.
Every turnaround has its own psychology and cadence. First comes a "down into the valley" phase as managers and employees acknowledge the critical nature of the situation. Then they work together to come up with a plan—"the hope agenda." In the execution phase, the emphasis is on painting a picture of a better future and recognizing tangible milestones along the way. Then comes the point at which people start to believe. "You can literally feel the tide turning," says Richard.
Unfortunately, most restructurings do involve job losses. What is the best way to deliver bad news? "I think you need a strong fact base&mdmdash;emphasizing that it is an objective decision, not a personal decision. Listen to the other person. Counsel them on what they will do next," advises Richard.
But while restructuring may require layoffs, the long-term result may be saving jobs—or even creating new ones as a business moves in a new direction. "I spent nine months helping restructure a mining company that employed 80 percent of a small town," Greg recalls. "The company had job reductions early on...but as we reorganized the procurement group, focused on factors related directly to the bottom line, and tightened up management...people recognized what we were doing would help the company and, thus, the community overall."
Read more about McKinsey RTS here.