How have others managed?

How have others managed? What should I avoid?

To answer two of the most common questions that come my way, let me first say something about my role. When I come in as a problem solver for distressed companies - either as a CRO (Chief Restructuring Officer), CTO (Chief Transformation Officer) on the board of directors, or as a manager with a general power of attorney - the reasons usually go back many years. Very rarely an isolated incident is the cause of a crisis. Most often, it is a complex chain of different circumstances.

Which brings us to the failure analysis. How and why does a crisis occur in the first place? Are there no early warning systems? Would management not have been able to intervene earlier??The short and sweet answer is yes. A crisis doesn't happen overnight, nor does it simply disappear. What has been neglected for years simply can' t be cured within a few weeks. It's like a tumor which also doesn't appear all of a sudden. It usually develops very slowly, with the body fighting back and sending signals. The sooner you go to the doctor, the higher the probability that the tumor will be detected in time. Conversely, for people who do not perceive these alarm signals from the body in time, any help that is put in place, no matter how quickly, could end up coming too late.

?It is the same in a company: Obviously, there are different phases of a crisis, which are also recognized formally or informally by risk management in every company. In larger companies, sophisticated controlling and reporting systems, usually surrounded by an armada of lawyers, tax advisors, auditors and management consultants, are supposed to support the management. Corporate governance and compliance, like the star of Bethlehem, light the right path for those in charge, so that decisions are made in a correspondingly compliant manner. But then corporate culture suddenly takes control: fear of losing face, fear for one's own future, threatened loss of control and power, liability claims, to name just the most important psychological pitfalls, lead to decision jams and even more analysis.

Let's take a closer look into the corporate culture referred to. We are faced with a prescribed lethargy, and this is often not inconvenient for many managers. After all, they can use it to confidently delay unpleasant decisions and calmly hope for the factor time. This has worked very well in times of continuous growth. If the market environment deteriorates, this condition is fatal for a company's weakened immune system. It subsequently threatens the company's immune system and ultimately makes the entire company sick.

A typical disease is a corporate culture that promotes or even demands harmful power plays. It paralyzes the organization, wastes human, financial and time resources, and is detrimental to performance. The resulting insecurity and frustration among employees are concealed and the true reasons for the crisis remain below the surface. The consequences quickly become apparent: results and margins melt away, and at the same time a project is opened for every problem. This leads to more complex structures and a more bloated organization. Employees are overworked, the organization is tired, which leads to a lack of willingness to change. The "not invented here" mentality becomes more and more prevalent, trust and appreciation towards employees are lacking, and since nothing works anymore, superiors engage in micromanagement. Analyses get out of hand and are broken down in detail to the n-th degree. Yet no decisions are made.

Basically, it's like an underperforming soccer team. Everyone plays, runs a lot, is totally sweaty and still loses in the end because the tactical allocation between the individual team sections is just as lacking as a stringent game plan that is based on the available potential of the individual players. Only a change of strategy and tactics can put an end to the losing streak.

Let's now move from the "why" to the "how". " By what specific measures do we solve the problem?" vs. "Why do we have the problem?"?In a crisis, all the frustration of stakeholders come knocking on the door. Managing stakeholder emotions becomes the ultimate success driver. But a crisis can only be overcome if transformation and turnaround management are integrated as a strategic function. That's why I also prayerfully recommend that a CRO be given mandatory entrepreneurial responsibility on the board or in management. In my case, I also bring in a hand-picked Industry Taskforce of my trust. Simply because one individual can' t fix what has taken years to build up in the organization.?In a crisis, time counts, and in most cases the task is to tackle several challenges at the same time as quickly as possible.

In the situation described above very vaguely, I approached the Chairman of the Supervisory Board and described to him my perception of the situation. Needless to say, he was aware of the situation. Referring to the duties of care and responsibilities of the Supervisory Board under the German Stock Corporation Act (which incidentally also applies to co-determined GmbHs) and after submitting appropriate recommendations for action, he convened an extraordinary virtual Supervisory Board meeting and requested appropriate measures for decision. A gamechanger here was a management assessment that identified the strengths and weaknesses of the managers (m/f) and assigned them to the right roles and responsibilities.?

Which brings us to a key factor. It is pointless to discuss with frogs about lowering the water level in their pond. In this particular case, why did I turn to the Chair of the Supervisory Board and not to the management? According to the German Stock Corporation Act, the supervisory board of a stock corporation does not take operational action. However, it does have a duty to monitor the management of the company. In addition, the supervisory board appoints and dismisses members of the management board. Anything else, therefore, would have been a waste of time in a tight time frame, as management has allowed the continuous negative development to continue for years.?

So why should management have acted now? Unfortunately, for obvious reasons, this kind of problem solving is very rarely initiated and solved from the inside. The internal power is too big for that and the fear of losing one's job paralyzes any initiative. In order to initiate a break with the past, external pressure is usually necessary, for example from shareholders or investors. ?

What are my first steps as a crisis manager? When I start a mandate, at best you imagine it as in a monster wave, in which I as the CRO am whirled around like a rubber ball by the many stakeholders. You may sense that you are far below the surface, but you can only guess where the top and bottom are. In tranquility there lies strength, we say in Bavaria. Meaning, the only chance of survival is to remain calm and rational now. This is the only way to drastically reduce your own tension, avoid wasting unnecessary energy and ensure that you stay highly focused. Because now it is important to get an overall view in the shortest possible time and to make the right decisions in a well thought-out manner. If I decide in this situation on the wrong direction, it will be fatal. In addition, I still have to calculate the time I need to reach the top.

With regard to the challenges mentioned above, most companies only respond reactively instead of strategically looking for a sustainable solution. The countermeasures introduced are very rarely proactive. The common pattern of argumentation is that the cause for these problems is not to be found in the company itself, that it has done everything right and yet is still one of the sufferers.?

This is where vision and strategy come into play. Where do we see ourselves in 10 years and how will we get there? Even if the measures in a restructuring/reorganization are reactive and have to be implemented quickly, they probably only make sense if a company knows where it wants to go in the future. Otherwise, we are constantly going in circles and we end up with restructuring loops.?

The current situation at many companies requires rapid action.In industrial companies, material bottlenecks and rising purchasing and energy prices are jeopardizing results, while their customers are vehemently demanding contributions for efficiency improvements.?Semiconductor availability remains poor, yet electrification continues to accelerate rapidly. Supply chains have yet to prove sustainable, debt levels are at an all-time high, and digitization and ESG are drivers for new or adapted business models in the future.?All this reads like a huge management task. It is! And yet, companies have neither the resources nor the know-how to meet all the challenges in a sustainable manner. So the rule of thumb applies: where there is the biggest need, the highest priorities are set or in other words: Where one hole is closed, a new one is opened.?

So what are the main reasons for a crisis? In my view, the answer is clear: 1st management 2nd management 3rd management. All other reasons for crisis are merely the consequence of suboptimal management. After all, it is the human being who is always at the center and who makes the decisions. I am absolutely convinced that transparent companies have less friction, a better corporate culture and more innovation - and thus achieve an effect that leads to higher growth and at the same time increases the satisfaction of employees and customers.