The Anatomy of a Turn-Around (a personal story)

The following is a true story to the best of my recollection; names and locations have been slightly altered. I apologize in advance for the overall length of this post, it’s more than double my average, but I felt it important to lay out a lot of detail in the beginning to give my readers as much context as possible.

This story takes place in 2001; I had been working for my current employer for a little over a year when things started to unravel.

Founded in 1996 the partners originally decided that the best way to rapidly spread their vision was to hire representatives in various territories across the country. Lacking the capitol to pay these individuals they instead settled on a franchise model which would attract highly talented and motivate people to the job with the promise of high return on a small initial investment.

The model worked. Within 4 years the organization had gone from two founding partners, one in Ottawa, the other in Vancouver, to a highly integrated network of entrepreneurs in 8 regions from Halifax in the east to Vancouver in the west. By the time I joined the founding partners had both sold their original franchises and moved to Toronto, the industrial and financial hub of Canada, to centralize operations and build a franchise in the country’s largest market.

I joined the company in 1999 as a franchise owner in the region of Southern Ontario, my territory stretched from the Windsor/Detroit boarder across the north shore of Lake Erie to Niagara Falls and around to the town of Oakville on the western edge of the Greater Toronto Area (GTA).

Cracks began to appear in the system as early as 2000. Entrepreneurs are by nature impatient type A personalities. The more the corporate partners in Toronto tried to build an integrated system the more the free thinking franchisees fought for their autonomy. As franchise agreements started to come up for renewal (they were all 3 year contracts), frustrated franchisees started to opt out. First Vancouver, then Winnipeg, Montreal, and Halifax all pulled out within 6 months of one another. Edmonton changed hands and was hanging on by a thread and Ottawa hand never fully cut ties from its original owner who was now running the Toronto office as well.

The final nail in the coffin so to speak occurred in the spring of 2001 when the company’s biggest customer decided to centralize its ordering system. Suddenly one of the main functions of the franchise office was cut off at the knees and the need to quickly re-establish the network was eliminated.

Due in part to my proximity to the head office and my unfailing work ethic mine was the last franchise standing.

Without a strong franchise network however the company had a new problem. What to do with all the smaller customers that still relied on their local rep? We had managed to salvage our biggest account mainly due to lucky timing but were haemorrhaging the smaller accounts and an alarming rate. That’s when I got a phone call, at the end of July that would change the course of my career and eventually save the company.

It was the end of a long day. I had been talking to all of my remaining accounts, reassuring them that since the centralization of our biggest account I would have more time to focus on them. Word had leaked that some of the franchises in other parts of the country were closing so they were understandably nervous.

“Mitchell’s out and he’s trying to take Halifax with him!” It was the voice of Gary Tremblay, founding partner and president in Toronto. “I need you here to help retain our customers.”

Mitchell Anderson had been a rising star in the organization but also the loudest critic of the integrated model head office was promoting. Everyone knew that if he left angry he had the potential to do a lot of damage in the crucial East Coast region he controlled. Gary offered to buy out my franchise if I would move to Toronto and help him consolidate operations while fighting off the new competition. It was a bold move but the company was bleeding and something had to be done.

That’s the day I became a turn-around artist.

There are two ingredients to a successful turn-around; rebuild trust and aggressively seek new business.

My first task when I arrived at Head Office was to rebuild trust with our remaining customers and suppliers. Trust is a funny thing. It implies a long term relationship but is incredibly fickle. As such it’s hard to gain, easy to lose and even harder to regain.

Building and maintaining trust really comes down to 4 steps.

1) Full disclosure.
In a crisis there is absolutely nothing to be gained by playing it close to the vest. Lay all of your cards on the table right from the start, if people sense you’re hiding something they will probe until they find it. Never underestimate the power of the bullshit meter.

2) Listen.
Allowing the customer to speak their mind back to you shows respect. It’s important not to interject too much at this stage, just let them speak.

3) Ask Questions.
Often people will ask, how do you know you’re getting all of the pertinent information from a customer? Sure you are giving full disclosure but how do you know that the customer is giving it back to you? A few well placed questions show the customer that you are engaged and are truly hearing what they have to say, that will in turn encourage them to say more.

4) Make and plan and follow through.
No amount of disclosure, listening, or questioning is going to amount to a hill of beans if you don’t walk away with a workable plan and follow through. Rebuilding trust is hard enough when it’s damaged once, it becomes infinitely harder if it’s damaged a second time and nearly impossible beyond that.

So this was my life for 3 months. Starting in August right through until the end of October, I spent day and night talking to customers, giving them the straight goods, listening to their concerns and following through with plans but in the end it still wasn’t enough. Over all we lost about 15% of our business, Halifax was down nearly 40% and Montreal all but disappeared.

We had stopped the bleeding but it was now time to focus on the second phase, aggressively pursue new business.

When it came to time pursue new business all the same things I demonstrated in regaining trust still applied, full disclosure, listening, asking questions, planning and follow through are just as important to a new customer with the final addition of persistence. I found on average it took 3 phone calls to get past the gate keepers, (receptionists or voice mail boxes), and two or three more conversations to get a meeting but in the end persistence pays off. I can’t tell you the number of times I was told, upon signing a deal that the only thing that kept me in the game was my persistence. The average time from initial contact to purchase order in our business is about 8 weeks. But I have worked some contacts of over 2 years before getting an order, it’s all about persistence.

After the initial 3 months focused on solidifying existing customers the rest of my career has been spent in growing sales and maintaining the business. I permanently relocated my family to the Toronto area and until the current recession our business was on a consistent growth pattern of about 20% per year.

We are now faced with a new crisis, not only are we mired in recession, like the rest of the world, but we are also dealing with the overall decline of our industry. Did I mention we are a manufacturer and distributor of CDs and DVDs?
So this time the turn-around is being made infinitely more difficult to due to the fact that new technology has emerged that has eroded customer desire for our core product line. But as we fight the downturn and develop new products to fill in the gap, I’m finding that the same principles apply.

Now, back to work...