Transformative turnarounds: Strategies from the front lines

By Bruce Van Saun | Citizens CEO

Many of today’s business turnarounds aren’t about salvaging a failing company. Instead, they’re about positioning a company for the future, increasing its value, and delivering sustainable growth. While many companies have done well during the long U.S. economic expansion, that doesn’t mean they’re prepared for the future. From rapid advances in technology to heightened customer expectations and global competition, companies must proactively shape their futures.

But executing a successful turnaround can be challenging. Seventy-five percent of major transformation efforts don’t achieve their expectations for target value, timing, or both, according to the Boston Consulting Group.

Over my career I have helped drive a number of challenging turnarounds. Successful execution requires strong leadership, forward thinking, and good alignment. In my experience, there are three key elements to a successful turnaround: 1) set a clear strategy, 2) ruthless discipline, and 3) future-focused leadership and talent.

Set a clear strategy

No turnaround can succeed without a clear strategy. Earlier in my career, I helped lead a transformation at Bank of New York that was focused on migrating the company from a regional bank profile toward becoming a leading securities servicer and asset manager. The strategy was articulated early on to all stakeholders. That clarity was essential, given the many changes we instituted.

Over a decade, BNY shed many traditional bank activities and acquired multiple servicing and asset management businesses. In one major initiative, we exchanged BNY’s 338 retail branches for JP Morgan Chase’s global corporate trust business. The strategy culminated in a large merger-of-equals with Mellon Financial Corp., which created the world’s largest securities servicing and asset management firm, Bank of New York Mellon Corp. Our investors, customers, colleagues, and regulators were all supportive along the way, given our clarity around what we wanted to achieve.

The importance of crystallizing a long-term vision can’t be overestimated. A BCG study found that that maintaining a long-term strategic orientation led to an increase of four percentage points in three-year average total shareholder return.

Ruthless discipline

Once a strategy is in place, successful turnarounds depend on leaders being exceptionally disciplined. This ensures strong prioritization and execution which, in turn, increase the likelihood of success. This structured approach makes it possible to develop and execute against a detailed plan and associated metrics.

This is particularly important if you need to move on aggressively from past issues. In 2013, I was tasked with spinning off Citizens from parent Royal Bank of Scotland and preparing for an IPO. Citizens was hobbled by some of the difficulties experienced by RBS and had fallen behind in many respects, including its business model, capabilities, technology, and risk management. To move forward, we benchmarked Citizens against its peers, developed a strategy, and aligned on goals.

While it was critical for a successful IPO that we had a clear long-term vision of where we wanted to take the bank, it was also very important that we could deliver short-term improvement in results.

To accomplish that, we had to put in place the leaders, systems, and culture that would drive our ability to execute with discipline.

We instituted very strong management routines around business reviews, we instilled strong communication around performance and expectations, and we added empowerment and accountability to the culture. Once we had those critical elements in place, we were able to execute effectively and generate the results we needed.

Future-focused leadership and talent

A company in the grip of change faces many challenges. To successfully navigate those challenges and achieve a successful turnaround requires strong, future-focused leadership. Future-proofing the organization through talent means bringing in (or promoting) people who have the skills needed to shape and lead the company as it evolves. This could be people who can build out new business lines, for example, or expand a company’s technology capabilities so it can compete in new ways or be more efficient.

At the senior leadership team level, strategic hiring involves bringing in a group of executives who have seen what “good” looks like somewhere else. They want to build something great and have a vision for what that might be, and they have the talent and skills to take the organization to the next level. They understand the importance of working effectively as a team, and have good followership.

Those leaders — and leaders throughout the organization — also need to engage the workforce. Through clear communication and expectations, leaders can help employees feel they have a role to play, energizing them and making them more productive for the journey ahead.

Investing in talent and nurturing a strong, growth-oriented culture also attracts other high-quality colleagues, furthering the development of a workforce that can move the company forward.

Conclusion

In today’s rapidly changing business environment, turnarounds are focused on enabling companies to proactively shape their futures and stay competitive for the long term. While there is no ‘one size fits all’ formula to steering a course through these complex situations, I have found the principles described above to be to the key elements in repositioning an organization to successfully face the future.