Plan around cash
D’Angelo says the first thing you do in any turnaround is assess the situation in general and get your arms around the issues.
“The actions that we take on day one are all around minimizing the outflow of cash and maximizing the inflow,” he says.
That means looking at places where the company is bleeding money.
“Every turnaround is really around cash, cash flow and how much liquidity you have and how long you can operate on that liquidity,” he says. “That takes some time and really getting your arms around that — trying to understand what you have as opposed to what management might think that they have. You find in a lot of these companies a lot of the tools and a lot of the focus in a turnaround is much different than when a company is operating over a long period of time like Dick Corp. had.
“A lot of the measures and the tools that are necessary to really manage in a turnaround are not available. So, really assessing the situation, determining viability, putting tools in places and structuring things in a way to try to stabilize operations and put things into, I wouldn’t say a normal operating mode, but into a mode where people can operate on a consistent basis.”
At Dick Corp., the company was very focused on P&L but not necessarily cash flow, so D’Angelo put collection processes in place and addressed accounts payable issues.
“In some cases, we termed out certain payables, we froze certain past due payables, and we kept current payables current,” he says.
“It was really coming up with an overall strategy to bring in as much cash as possible and then, at the same time, preserve as much of that cash as you could, while also operating the business.”
But, don’t be afraid to alter your basic strategy if you aren’t seeing the results you want.
“If you’re measuring the plan and you’re measuring success and that plan is starting to deliver success, then you need to keep improving that plan,” he says. “If that plan is not working and not generating the success you thought it would, then you would need to rethink the plan and adjust it.
“But you have to be careful in the early stages of a turnaround. You just have to stay very focused on what the plan is. Your window becomes two months. Your successes are measured on a weekly basis.”
While it’s helpful to be positive when devising a plan, that can hurt a leader when dealing with a turnaround.
“We tend to think that things will always get better,” he says. “In a turnaround, you really need to know what your downside is. You need to be reasonable about that. You don’t have to be ridiculous about it, but you need to be reasonable about it. You need to have some bookends. You need to have a plan to really deal with the situation in what you project as the worst case.
“Normally, what we would do is we would run a worst case, a best case and maybe a likely case. And we would try to manage our cash to the worst case and try to push the business to the best case.”
