In a bid to forge a collaborative approach to dealing with companies in financial distress, a company doctor and former president of the Turnaround Management Association, which seeks to save companies and does not work for banks, has approached several unions in the UK.
Employees are rarely involved in decision-making these days when a company’s survival is threatened, but successful business turnaround relies heavily on the support of your employees.
Unlike formal insolvency proceedings, restructurings are consensual. Teamwork, leadership and communication are essential to implement change. Engaging with staff and involving them in the business introduces accountability and responsibility into a business and is crucial to its success. This is even more true with a twist where change is necessary.
Historically, turnarounds have been coordinated by banks as secured creditors, or by new investors driving the turnaround from a purely financial perspective, geared toward achieving the goals of a single stakeholder. What gets measured gets managed.
Many stakeholders have compromised their credibility with employees by this pursuit of short-term goals.
Why should investor shareholders care about survival after their financial engineering has paid off 100% of their acquisition investment? Are secured creditors more interested in reducing their exposure or saving a company? Professional managers tend to have their own attractive exit packages, and new management can more easily make a quick buck by pursuing short-term goals.
So who is really interested in employees, let alone securing their employment for the future?
Unions are still believed to be the true representatives of workers’ interests. It is recognized that the relationship between management and union representatives has been polarized in some cases. Negotiations are often characterized as confrontational, with management and unions trying to bind each other to a bailout.
This is not helpful at all when it comes to saving a fragile business. It can be compared to the surgeon who fights with his medical team when a patient’s life is at stake on the operating table.
This new initiative to collaborate with unions is based on developing mutual respect and understanding of each other’s goals outside the constraints of a recovery situation.
It is intended that respect and understanding of each other’s roles be brought to the table by engaging union representatives early in the process and especially when considering options for change.
For example, input from unions can be valuable when considering the thorny problem of how to reduce personnel costs, where difficult decisions must be made between reducing numbers, wages, hours or benefits.
The great advantage of having union representatives involved in the decision-making process is their commitment to help implement the agreed measures. It is useful to remove fear among staff by reassuring them that their interests have been taken into account during the development of the turnaround plan.
The support of a union representative made it possible to achieve a recent change.
It resulted in an agreement to reduce contractual staff hours from 60 to 32.5 per week at a slightly higher rate with the possibility of overtime above this level when business picks up.
The union negotiator was tough but realistic and introduced some worthwhile initiatives that led to better facilities for staff and an update to the staff handbook.
Although not financial, these initiatives helped reassure employees that they were largely essential to the survival of the business. The workforce accepted the changes and the change was a success.
Copyright (c) 2010 Alison Withers
