Alliance Consulting had taken a shellacking. The loss of seven of its key people in the Sept. 11, 2001, terrorist attacks in New York City, the bursting of the telecom and Internet bubbles, and a general economic slowdown coalesced to break the momentum of the once-burgeoning IT consulting firm.
Safeguard Scientifics Inc., a tech operating company that acquires and develops companies in software and IT, bought the foundering firm in 2002, anticipating that an industry turnaround would naturally right Alliance Consulting. That resurgence didn’t come, so Safeguard opted to engineer a turnaround of its own.
In 2004, Tony Ibargen, then managing director at Safeguard and chairman of Alliance Consulting, took on the task of reversing the Conshohocken company’s flagging fortunes as its new president and CEO.
Ibargen, a 25-year veteran of the IT industry and no stranger to turnarounds, moved quickly to assemble a team, analyze the 725-employee company’s strengths and weaknesses, and put a plan into action. The turnaround is still in progress, Ibargen says, but he adds that Alliance Consulting is well on its way to achieving its goal of consistent profitability and above-market growth by making key acquisitions and leveraging its existing resources.
Ibargen advises CEOs working to pull a company out of a tailspin not to become dispirited by the obstacles at the outset. With the right plan and the right team in place, he says, things will get better.
Says Ibargen: “If anyone reading this is at the beginning of the process, it’s a heck of a lot of fun at the end of it.”
Ibargen talked with Smart Business about how to engineer a successful turnaround.
How do you manage a distressed company differently from one that is in a normal growth and profitability mode?
I think in a people business like ours — and I say that to differentiate it from a product-oriented company or a company with significant infrastructure — our assets are really the great people and the key deliverables that we have. In a people-oriented business like ours, it’s important that we act and behave as if we were very successful, even when we’re in the middle of a turnaround.
A lot of what happens in a turnaround has to happen quickly and decisively, and I’d say that’s probably the key difference between a normal growth and profitability mode and a turnaround mode. When I first came down here full time in the summer of 2004, the decisions made about the management team, about the structure, about the direction were all made fairly quickly. And executing them has happened over the course of four quarters because you can’t do everything all at once.
How do you implement a turnaround?
The truth is, you start with having a good sense of where you want to end up. You align a team of people who are similarly motivated in terms of character and entrepreneurial spirit, performance orientation.
We did a full review of our team before I came on board, and one of the reasons I came on board was to drive some change, but many of the folks who are helping me run the company have been here a long time and were ready for a change in leadership that showed them a way to be more successful in the future.
It sounds like a lot of different things, and on any given day, those plates can be a bit overwhelming, but it reduces itself down to having a good sense of where you’re heading, having a good team of people to go there with and then working hard every day. It comes down to the individuals, the selection of the team.
If I were to provide insight to others who are in the middle of this, the selection of the management team that is going to represent you is very important.
How did you start putting together the turnaround of Alliance Consulting?
It was really a combination of assessing what the company was already good at, what we have that we had references and capabilities in, but also looking externally, taking the vantage point that I had prior to coming in as CEO, when I was chairman of the company, talking to analysts, clients, a lot of third-party folks in the industry to determine over the next five to 10 years what we saw as significant growth opportunities.
Clearly, off-shore development of applications and maintenance and support is a very hot area at the moment, and increasingly, with the pressures on corporate managers for compliance with Sarbanes-Oxley as one example, but also for increased visibility into business intelligence for better business decision-making, we felt that that was another great area that leveraged existing competencies within Alliance.
How did you move through the process?
The on-the-ground reality of running a business is that you never have the luxury of doing things serially or even in the order in which they make the most sense. Sometimes you have to take things out of order and do several things parallel.
There were many days a year or so ago — and even some days now — where the 11 or 12 plates spinning at one time made you wonder whether or not you could keep them all going. But in fact in the case here, we did reorganize pretty dramatically in the summer of 2004.
We brought on some new management, forced a fair amount of change organizationally and structurally, acquired this company in India, forced the reorganization of our back office operations to capitalize on the availability of our India operations to perform some of our basic services at a lower cost, moved our headquarters, got out of several leases across the country, restructured compensation program, all the while keeping everyone excited and motivated about becoming the nation’s most successful business intelligence company.
So it is part of a turnaround to make sure you can manage through those various, sometimes conflicting operations in parallel.
How do those conflicts arise and how do you resolve them?
One of the key areas that you manage through is the trade-off between that which has a compelling, long-term value proposition and the need to achieve profitability in the short-term.
So we chose to focus on our investments in these two areas, the acquisition of a key investment and putting in place people dedicated to selling those services, and the investment in creating our intellectual property to enable us to implement solutions on a repeated basis rather than do things on a one-off basis.
They were investment areas that were not going to have an immediate payoff but felt like they were consistent with our overall strategy and would help us in the mid-term, at the same time having to curtail investment or get out of areas of the market that were contributing marginally, but not going to be long-term contributors.
So that trade-off is the most important conflict to manage through.
How do you communicate to the entire company what is occurring during a turnaround?
We put in place various communications methods and tools, quarterly calls where we do an awful lot of recognition of people who are modeling the right behavior and really posting great results, great numbers. I took a bunch of folks to Puerto Rico with spouses and will do so again early next year to recognize their efforts.
We do regional and practice-level recognition as well. We’ve increased our communications, including a blog that I have now that is especially targeted at consultants that work onsite at clients who don’t often get to take time out and come to our meetings in our various offices but feel the need to be connected and aware of what their role is in the company.
Which management skills are most critical to a CEO in a turnaround?
I think keeping an even keel probably is important. I know managers I’ve worked for and worked with, great executives, emotional and fairly volatile, and that style can work as well. In our particular case, giving the people orientation of our company, having an even keel during good and bad times is important because you show things will be OK.
Constantly reinforcing that through collaborative work styles and communication, hopefully, gets people through those times when things aren’t going well for them at a personal level.
How to reach: Alliance Consulting, www.alliance-consulting.com
