Scott Powers - Alvarez & Marsal: Managing Talent in a Corporate Turn-Around Environment

Steve

Hi, this is Steve Hunt with People Performance Radio. This week we spoke with Scott Powers, who's the Managing Director for Alvarez & Marsal, which is a company that specializes in turning around organizations that are really struggling financially, and Scott talks about what that means from a talent management perspective, why companies tend to get in the position where they need turnarounds, how they could avoid it, and what they do in those turnarounds. As he put it, he said, "A lot of what we do, all we really do is we come in and get the people in that company to act differently than they were in the past, so they get back with the winning attitude and a road to success." It's a very interesting interview of the art of turning round underperforming companies and getting them back on the right path. So let's listen to Scott Powers this week on People Performance Radio.

Hi, this is Steve Hunt with People Performance Radio. We're talking today with Scott Powers, who's the Managing Director for performance improvement at Alvarez & Marsal. Scott, welcome to the show.

Scott

Thank you.

Steve

So can you tell us a little bit about what it is that you do at Alvarez & Marsal?

Scott

Sure, Alvarez & Marsal first and foremost is a lean restructuring and turnaround firm, so we do bankruptcy, indebtor advisory, that's our legacy and heritage. We also have other performance improvement services which is what I focus my time on, and that includes helping companies, challenged companies, get better, in addition to a variety of other business services, real estate advisory, tax, dispute, forensics, etc. So I lead the performance improvement practice on the west coast, and my area specialization is really helping companies from an operational standpoint go from a challenged environment to a better environment, whether it's a cashflow problem, or a lack of personnel problem, or a turnaround of a company before it becomes a liquidation problem, that's my area of specialization.

Steve

Great, so I imagine sadly you must be pretty busy in the current economy with a lot of downturn. I'm curious, when you look at the companies that you work with, and when you get a company that needs to be turned around, from a people perspective, do you see any themes in terms of things that get companies in trouble, in terms of how they manage talent?

Scott

Yes, I would say there's a handful of things that really are consistent when we get into this situation. First of all, most of these companies haven't been in a winning environment in a while, so the winning attitude has gone, or they don't know what success looks like, so the first thing is really getting your people into understanding what success looks like. So, for example, there's a high tech company that I personally spent a lot of time at over the past three years, locked in, they really had no measurements of success, and so we had to help them really define what success looked like again, and how to get there, and managing metrics relentlessly until we got there. So you have a kind of a winning attitude problem that you have to deal with initially with many of these things.

And then a lot of innovation problems exist, and I'm not just talking about product innovation, I'm talking a lot about process innovation, or continuous improvement of the culture within an organization. So many times you get companies that maybe were built on innovation in a better time, and time has passed and they've got competitors and they've lost that edge of how to innovate, so it's how do you get people re-energized to innovation in everything they do, not just products, but processes and every job function, every function within the company.

Steve

So it sounds like, those two things I imagine are connected to some degree, because one, if you don't know what success is, that is you don't know how to score points, then you really don't know how to be effectively innovative, you're just kind of running around doing stuff, as opposed to doing stuff that's going to get points. When you talk about defining that, is that really defining the things people need to accomplish in their goals, or is it more focusing on defining how they need to treat each other, and how they need to interact? —or is it both?

Scott

It's definitely both, you have to start initially with defining what success looks like for the company, because a lot of these are going to be, don't have a lot of time to make improvements, because by the time a firm like ours is in place, they've already made the decision, somebody's made a decision in a senior position to make change, and so you've really got to come in quickly and stop the bleeding, to use an analogy, but then start saying, "OK, what does good look like again?", and most times you find people in the organization who really do know what good looks like, it's just getting that creativity out on the table and clearing the barriers to make success happen.

Steve

So what's the process you go through? —like to define what good is, and once you've defined it, how do you get the company realigned around that, sort of saying, it almost sounds like you're saying these companies, they start out with a good idea, but then the business environment changes, they lose their way, then you come in —can you sort of step us through maybe an example of working with a company to define what good looks like, and getting communicated that out, then getting people held accountable against that? —what sort of steps you go through?

Scott

Yes, I'll use a private equity firm that we worked with recently, who manufactures cosmetics and distributes them through a personal selling network. So in this example, this was a company who had an excessive inventory, and they had supply chain problems, from a personnel standpoint were well under-staffed, really did not define what the organization needed to be, what success looked like. So part of this was getting, the first step was really going through and collecting data and saying OK, what does exist? —so working with a fact baseline is always a first step, and that includes interviewing people who've been in the organization. So that's the first step.

The second step was taking that data and developing your hypotheses and sitting down with the organization, to key members of the organization, in a working session, so think of these as like daily or every other day sessions to say, OK, here's what the data's telling us, here's where you're deficient, here's what good looks like, and letting them help define that, and so enlisting them, investing in them, it allows you to do two things, it (a), gets the people involved to moving to a better place, but (b), it helps you define who doesn't really want to go to a better place in dealing with those people head on.

Steve

So I think that must be a key challenge for you, I would imagine, from a leadership perspective, that you come into this company, and suddenly you're parachuted in, to use the phrase; I imagine a lot of people are viewing you, "Oh, here comes the hatchet man" kind of mentality, and you're trying to get these people inspired, and say, "Hey look —we can turn this company around", and trying to get them engaged. What do you find is key to getting people on board and getting them back to that winning attitude that you talked about?

Scott

Well, there's a couple of fairly simple things and I'll go back to the technology company example, which I think typifies the problems you've just stated. The first is really to be transparent in what you plan to do, so communicate frequently, so the first thing that we would do is get the people in a room and say, "OK, here's why we're here". We also want to ensure that we have, whoever's brought us in into those discussions to say, "We endorse these people, you need to listen to these people", so some person of credibility who requires the audience to listen to us important, but then once they hear, that gets you in the door. From there you just have to be very transparent in what you expect, and why you're there, and what we've found is, for the most part, people, if you tell them why you're there, what you have to get done, and how they fit into that, they can accept that, and what we've found is, at least at this company, is no-one had ever really done that for the organization, so there was a certain group of people who really appreciated that, and that got some of them won over, and there were others who were very skeptical and did not get won over through that conversation.

So it's really transparency, increasing the communication, in this example, twice a week we'd get the team together to talk about progress and measure our metrics, and define what business processes we need to get people engaged. So there's there types of people that we found, as you go through that, in a situation like this: there's the group of people who are happy that you're there, because it's been mismanaged, there's the second group of people who want to see you fail, and there's the third group of people who are on the fence, and a key is determining where the people land in those three categories, and shifting the ones who are on the fence to be committed, or deal with them to find out if they're not committed, and figure out how to manage them out of the organization so that you can have a winning attitude again.

Steve

So it's really kind of the current economic time, and I'm sure a lot of companies are struggling —what advice would you give to leaders who are getting into difficult times, that are struggling, so that they don't find themselves in the position where they have to do this sort of more radical kind of turnaround, if you were managing a company that was a little bit on the ropes right now, what would you say, "These are the things you really need to focus on to keep from losing that winning attitude"?

Scott

Depending on the type of company you're working with, I think they fall in a couple of different categories, and I'm working with a manufacturer today and we're having these discussions, and the first is really innovation, focusing on innovation, and it's creating an innovative attitude. So everyone should understand how they get better, or they should have some kind of internal metric that says, "Here's where I need to be for benchmarking", or just saying, "I need to become world class, whatever that might be, in what I do". So creating a process and a mechanism to say, "How do we continue to innovate?", because that gets people more energized to come to work on a day-to-day basis, versus just saying, I've got to come in and do the same thing I've done the last four, five years.

That's first, the second is really staying customer-focused in this environment. If you think about any company who's cutting costs right now, which most are, they're looking at, "How do I reward and do business with people that meet my needs, who bring innovative products to the marketplace?", and you don't want to be on the tail end of that, so if you're customer-focused, your likelihood of retaining your customers is kind of job one.

And then I would say the other couple that go together is really, ensuring meritocracy exists within a company, and one of the things that we clearly see in this environment is a lot of, your good people still have many opportunities to get good positions and build good careers, but if they believe that their talent is being wasted, whether it's pay or getting new and better opportunities within a company, they'll find other places to go. So it's really ensuring that your higher performers are rewarded and they have a reason to be there, and we're finding that that in particular is something that gets overlooked in this downturn is, people tend to get treated often times as just dispensable, and as a result we need to make sure we're keeping companies focused on keeping their higher performers engaged.

Steve

I think that's so interesting, and getting back to your earlier point, that you really can't identify and reward your high performers if you don't keep a clear definition of what success is, what high performance looks like within the organization. Are there any tools or techniques that you commonly introduce into companies when you come in and are looking, like, typical processes, methods that you always pull out of your toolkit each time you come into an organization?

Scott

Yes, we do —it's not anything completely elaborate, the tool is really having a plan for each one of your leaders in the organization, so what I typically do is first sit down and say, "How are you graded today as a leader within this organization?", and then, "What does success look like? What does failure look like?". So understanding that, and then saying, "OK, well I think, based upon that, these are good items, these are bad items, and by the way here are some other areas that we need to infuse into what makes you successful", and really just jotting that down, and then putting a process in place to initially, weekly, say, "How are you managing towards what success looks like", and forcing that conversation, and again, in a turnaround situation, most of these people have not had that level of rigor, so it's usually new to them, but really just writing that down, having a weekly discussion on it, and keeping them focused on doing things that lead to the success, their personal success, which should be tied to the company's success. So it's as simple as that.

Steve

Yeah, it sort of comes back to just focus, focus, focus —figure out exactly what's going to get you out of this situation, and stay laser-like focused on it, and reinforce the metrics in conversation.

I guess the last question somebody might ask, and I'm sure you've encountered this, is, all right, if we're just going to identify this goal, it'd better be the right goal —how do, I guess you could never be certain that you're focusing on the right goal, but how do you say, "Look, I'm going to build this organization around a few specific critical performance factors" —what do you do to make sure these are the right performance factors? —and we're not chasing the wrong opportunity?

Scott

Good question, I think, and I'll give you an example of a technology company, a different technology company that I've been working for, and you get this question, is, if you haven't been measuring anything, number one, or you haven't been measuring it consistently, the attitude you have to take is, I've collected data, I've looked at your competitors, here are the five to ten things that we're going to measure relentlessly that are going to be factors for your success. If you get 60 to 70% of those right, and let's say 40 to 30% of them wrong, it's still going to be better than what was done there before, so you can't approach this with, "I have to be perfect", you have to approach it as, "I have just to be a lot better than where we were before I got to the organization", and so you have to take that mentality that you're going to make some mistakes, but you've got to try to make these decisions as fact-based as you possibly can with whatever data you can get to make those decisions, and get the company on a path to being decisive, and making decisions.

So it's really a bit of trial and error, but I would say the most important thing is make sure you spend enough time collecting data and facts, so that you don't take the company even further down a black hole, making sure that whatever you're doing, you've analyzed it enough to say, "Here are where's the gaps, and here's where I need to go".

Steve

What comes to mind is the analogy of a sailboat caught in a storm, where it's adrift, and the first thing you have to do is, "Look —we need to get the sails up and start moving in a direction, so we have some steerage and ability to control the direction, and then, once we start moving in a direction, let's just make sure we're not heading straight towards the rocks, but then once we're moving, then we can start fine-tuning the sails, but the first step is, look, we have to start going somewhere, we have to take control", so that's the analogy that comes to mind —is that a good analogy, do you think?

Scott

Yes, it's good, and the other one we like to use along those lines is, you have to triage the patient first, so if somebody's coming in, and you're not saying, well, this person shouldn't have been smoking for 20 years, and admire their problem, it's, "Hey, if we don't work on the patient now, the patient's not going to be with us any more", so either stabilize the patient, and then work on improving their lifestyle, their habits, to keep it from happening again.

Steve

I love that phrase, "admire the problem"! —you certainly need to spend a lot of time talking about what a problem we have, and just how can we fix it. Well, Scott, thank you so much, this has been a really insightful conversation, I guess to summarize what I'm hearing is, you come into these organizations, and so much of this is about focus and direction and measurement —don't lose focus and be overwhelmed by your problems, focus on the things that are likely to be solutions, and stay focused on it.

Are there any last comments or thoughts or advice that you could give to our listeners, in terms of keeping their organizations with that winning attitude, and focused in the right direction —if you sort of said, "If I had my own company, this is what I would be telling my employees right now" —what might that be?

Scott

It's really investing in your people, in most businesses people are what will carry you forward, your culture will carry you forward if it's a healthy one, or it'll sink you if it's an unhealthy one, and so, everything you said, Steve, it's really just focusing on getting better, this is the time to invest in getting better versus letting people sit around and talk about how bad things are. The people who invest in their business right now are going to come out much stronger a year or two, three years from now than those who don't, and it's the people who are going to get you there.

Steve

That's great advice. Well with that, I'm going to wrap up the interview. Thanks again Scott. We've been talking with Scott Powers from Alvarez & Marsal, and we'll have a link to Scott's website, if you want to learn more about what Alvarez & Marsal does, and Scott, thank you again so much for appearing on People Performance Radio.

Scott

Thank you very much.

Speaker

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