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  • 10 July 2019 11:22 | Anonymous member (Administrator)

    Six “Don’ts” for Turnarounds in Asia

    Bob Fonow
    July 10, 2019

    Turnarounds are intense forms of management practice. The demands on time and energy are magnified and often unrealistic. And every turnaround is different; getting a grip on a troubled company or corporate division can be challenging.

    But after long years of practice I can at least offer some advice on what you shouldn’t do in an Asian turnaround. Happy reading:

    1. Don’t accept a turnaround assignment from a friend or colleague, especially if they are associated - in any way - with the target company. In every turnaround your integrity is challenged. You may be tested by your friend, who asks you to look the other way, or not make a fuss about suspect numbers, inter-company loans or operations issues. If so, you will lose your friend, your integrity, or both.

    2. Don’t accept the first reason offered for any business problem or personnel issue. In any troubled organization backbiting is the normal operating milieu. My standard operating procedure is to keep my mouth shut and ears open. In any Asian turnaround, the least likely people will offer the best explanations if you observe and listen. Often younger, lower level finance and operating managers are still less confused about right and wrong.

    3. Specifically regarding China, don’t assume you understand the country or the business problem you were hired to resolve. You don’t understand China. No one does. It’s a complicated country with an opaque governing and legal system, and many regional business cultures. Refer to number two. Mouth shut, ears open. Be very wary of spreadsheets.

    4. Don’t get too close to your interpreters. They cannot be loyal. They will be co-opted by owners or government officials. Enough said. And in China, don’t think you speak enough Chinese for negotiations. Even if you are fluent your interpreters can help you to cross check your own instincts and understanding.

    5. Don’t assume that the corporation or people hiring you are guilt free. Europeans and Americans can prevaricate and “position the truth” as much as anyone. Many of the problems you will encounter in Asia will have their source in the United States or Europe – or Hong Kong or Sydney. Remember, you may be hired to take the heat and take the blame.

      Solving the problem is the only clean way out, and that’s where the turnaround manager’s skills count the most.

    6. Finally, don’t have sex with your staff. Many turnarounds have sexual dimensions and the turnaround manager sets the standard for appropriate sexual behavior. This is not a small consideration among consenting adults when dealing with different cultures. Complexity is the rule, not the exception. However, we can be reasonably clear on two dimensions.

      First, you may be dealing with job losses in production lines or services industries with large numbers of lowly paid staff. This may lead to sexual harassment or special job inducements in the turnaround company. When livelihoods are threatened people will do almost anything to stay employed, especially if job opportunities are rare. The turnaround manager must be strong enough to stop harassment, predation, and bullying.

      Secondly, foreign managers have been known to harass both female and male Asian staff, which may be one of the causes of the turnaround. We’re no longer talking just about white middle aged opportunists. In a LGBT world harassment is multi-cultural and equal opportunity. I’ve been requested by women to assure that doors are left open with meetings with foreign female executives. And really, it isn’t appropriate for visiting senior executives to insist that young women or men from provincial offices stay with you at the glamourous Beijing, Hong Kong or Shanghai corporate apartment - to save money on hotel expenses of course.

    Every turnaround manager must decide their own moral boundaries. But predatory behavior and outright failure to deal with fraud are when I notify the board that this stops or I leave. Both are too corrosive for a turnaround to succeed. Don’t accept either as normal or acceptable.

    What makes turnaround management so interesting is the breadth of challenges and innumerable tests of skills – coming thick and fast and unpredictably. Turnaround managers must be able to deal with ambiguity and conflict. Turnaround managers without those two essential qualities will get sick or worse, give up and go with the flow, and take their money and try to recover their damaged reputations later. You stand a much better chance of success, and maintaining your reputation, if you keep in mind these essential “Six Don’ts”.


    Bob Fonow
    Managing Director
    Revenue Growth International Ltd.

    RGI Ltd. has offices in Beijing and Northern Virginia. Bob is a founding member of the Asia Transformation and Turnaround Association (ATTA).

    This article is available in PDF.

  • 15 March 2018 13:50 | Deleted user

    Turnaround practitioners and professionals need a clear understanding of the needs of private equity-backed companies in order to provide appropriate service offerings and to deliver these in step with their client’s developing requirements.

    Since 2014, the value of venture capital deals in Greater China plus India has been consistently larger than that in Europe.

    Limited Partners invest in a Fund which invests in a stake in an Investee.  Typically, of any gain upon the disposal of the stake (or other liquidity event), 80% is paid to the Limited Partners.  A General Partner manages the Fund; typically the GP receives an annual fee of 2% of the fund plus, at exit, 20% of the gain is paid to the General Partner.  Any stake looking unlikely to deliver gain may be referred to a “living dead” and receives little attention from the GP.

    The GP (fund manager) agrees a business case with the Investee.  Unless some major mistakes are made in due diligence, the business case should be deliverable with good planning, hard work and little drama.  The main risks are the same as for any other successful company: ill-conceived M&A, supplier solvency, market disruption and inter-personal friction.

    The GP’s priority is not making a great company but about changing a poorly performing company into growth opportunity.

    GPs tend to prefer to engage over-qualified people.  They do not want to take much risk with key people but are prepared to pay good money for validated experts and to incentivise with equity.  GPs also prefer to experts with a track record working for PE-backed businesses.  A changeover of half of the senior and mid management during the early post-investment period is common.

    The average time horizon for a holding is five years.  At ground zero, the main appetite is for fresh management (with equity) and consultants.  Readiness for restructuring and M&A will grow over the first months but drop off in the third year.  Year 2 sees the peak in capex.  Year 4 is about stability and earnings record as the selling process proceeds.

    Valuation is driven by performance (EBIT) but also by multiple, a function of a buyer’s perception of the quality of earnings and of management quality.  Therefore GPs are keen to engage over-qualified operational expertise to maximise their exit valuation.

    This was the consensus which emerged from the panel discussion at ATTA’s recent annual conference by Warren Beese, T.T. Chen,  Dwight Nordstrom and Olivier Cotard.

     



  • 01 November 2017 17:12 | Deleted user

    It’s easy to be convinced that China should be the Utopia of the turnaround sector. Overcapacity, inefficient capital allocation, imitation of enterprises leading to gluts of products – a prime recent example the curious issue of shared bicycles. On my morning walk, I can count up to 600 new bikes available for a rental population estimated at no more than 150 people. Multiply this across Beijing and you see huge market inefficiencies.

    Yet, for turnaround executives Chinese culture defines constraints and limitations. 

    Click here to read the IFT's Swift October 2017 article by Bob Fonow, Managing Director of RGI Ltd., a turnaround  firm based in Beijing and Northern Virginia, and a founding director of the Asia Transformation and Turnaround Association (ATTA).

  • 04 October 2017 14:14 | Deleted user

    Celebrate your successful transformation and turnaround projects with ATTA at our Annual Conference on 10 November in Hong Kong and show-case your achievements, great and small, at the annual ATTA Awards Dinner.

    Applications are now being received for ATTA's 2017 Awards. The winners will be announced at the ATTA Awards Dinner at Club Lusitano. 

    For more information on the submission process and criteria plus the application form, please visit: Awards



  • 16 March 2017 13:19 | Deleted user

    A successful digital transformation requires making trade-off decisions. Here's how successful CEOs guide their business's reinvention.

    Being the CEO of a large company facing digital disruption can seem like being a gambler at a roulette table. You know you need to place bets to win, but you have no idea where to put your chips.

    Of course, digital transformations aren’t games of chance. But they do require big and bold commitments in the midst of uncertainty to reinvent the business rather than just improve it. Read more...

  • 16 February 2017 09:43 | Deleted user

    A new survey suggests that for their transformations to succeed, organizations need employee buy-in at all levels, consistent communication, and better people strategies.
    Organizational transformations are hard work, and according to the latest McKinsey Global Survey on the topic, companies are no more successful at overhauling their performance and organizational health than they were ten years ago. A particular blind spot seems to be the failure to involve frontline employees and their managers in the effort. Read more

  • 25 January 2017 13:10 | Deleted user

    Lessons from an executive who has done so three times in the past dozen years.

    Few executives lead corporate-transformation efforts at three separate businesses before they turn 50, let alone businesses in three very different industries. Davor Tomašković is one of them. The CEO and president of the management board at Hrvatski Telekom (HT), Croatia’s biggest telco (and a subsidiary of Deutsche Telekom), first came to wider attention in 2004, when he took the top job at the struggling Balkan retail and distribution group Tisak. After helping the company to stave off bankruptcy and helping turn it into the biggest national player in its sector, Tomašković was, in 2006, appointed CEO of TDR, a successful regional Croatian tobacco manufacturer that nevertheless faced a challenging economic and regulatory environment in the wake of the global financial crisis. Read more...

  • 01 December 2016 14:15 | Anonymous member (Administrator)

    The individual charged with leading change must have multiple capabilities.

    An experienced and highly capable leader—the chief transformation officer (CTO)—will significantly improve the chances of a successful transformation. In our work with scores of companies that have embarked on this course, we’ve seen CTOs single-mindedly drive the organization forward and hold accountable those responsible for the hundreds (even thousands) of daily actions and initiatives that underlie a typical program.[...]
    Click here to read more of this article from McKinsey & Company.


  • 01 December 2016 14:12 | Anonymous member (Administrator)

    Five elements can keep bad habits from reasserting themselves.

    Six years ago, the executives of a North American engineering business realized the company’s earnings momentum had stalled. Shareholders were restive, and the board was pushing to set a new growth trajectory. The CEO and senior colleagues responded in a logical and determined way, embarking on what proved to be a Herculean and seemingly successful effort to transform the business. The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by more than $100 million, and its cash position improved by $150 million (both of these figures were higher than the original targets). [...]
    Click here to read more on McKinsey & Company.


  • 06 June 2016 09:40 | Anonymous member (Administrator)

    This article was posted on McKinsey & Company website on May 2016.

    Click here to read more

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