Upon the start of a business turnaround, and when a turnaround management consultant is engaged, there are many stakeholders interested in hearing about their findings. Management, as well as owners, want to know what the consultant plans to do and why, and when positive results can be expected. No doubt about it, they are concerned about managing the costs associated with the consultant fees, and getting full value in return!
Management is also concerned about confidentiality. The business turnaround consultant is normally bound by confidentiality in its engagement letter, and communicating important information to outside stakeholders should be done with the knowledge and consent of management.
Senior lenders are anxious to know about the consultant’s initial findings, the key elements of a turnaround plan, all significant challenges, and risks that are achievable and within what time frame, and what support is requested from the senior lenders.
Cedar Croft Consulting addresses communication concerns during a business turnaround process by implementing a formal communication protocol in all engagements.
The business turnaround communication protocol
- Each week the turnaround consultant prepares a draft Weekly Report that discusses the key business elements of the turnaround in brief, bullet point document. The report also includes an update of the 13-week cash flow forecast, a variance analysis of actual cash flows versus forecast, and a dashboard report on key operating metrics.
- The draft Weekly Report is reviewed with management and ownership to get their input and agreement with the contents. During this review the consultant’s going-forward work plan, deliverables and associated fees and expenses are discussed and agreed to.
- The Weekly Report is then finalized and circulated to key stakeholders, and a Review Meeting by teleconference is scheduled, although a face-to-face meeting may be required from time to time to more effectively address certain critical issues.
- The Review Meetings are hosted by the turnaround consultant and the Weekly Report itself serves as the agenda. Participants include management and ownership, and other the senior lender(s). In the development stages of the turnaround plan, key issues are identified and corrective actions discussed.
All participating stakeholders have an opportunity to understand actions being contemplated, voice objections, concerns or support, and request additional information. In this way, a turnaround plan is developed that gains the necessary support of the key stakeholders before it is finalized.
- Once a turnaround plan is finalized and adopted, the weekly Review Meeting sets expectations on the timing of completion of the various implementation steps, and reports on the results achieved.
Advantages to the communication protocol for a business turnaround:
- A process is established to assist management in monitoring and controlling consultant fees and expenses, and to enforce confidentiality agreements.
- Reasonable expectations for deliverables are set with all key stakeholders.
- Reduces surprises, and identifies roadblocks as they arise to facilitate steering in a different direction, if required, with the knowledge and support of key stakeholders.
- Makes efficient use of all stakeholders’ resources by providing a regularly scheduled forum for discussion, inquiry, decision-making, and reporting.
- Provides a documented trail of decisions made and actions taken throughout the turnaround.
Overall, this communication protocol will always meet the needs of management, owners, and senior creditors in many, if not most, turnaround situations. Communication with other constituents (customers, employees, suppliers, unions, government bodies) is also very critical, but the appropriate protocol must be specifically tailored to each engagement.
Patrick Walsh is the Managing Director and Founder of Cedar Croft Consulting