The First Five Steps Every Executive Should Take When Taking Charge
by William T. Monahan

At the end of 1995 I was given the opportunity to form and lead a $2.4 billion business made up of units being spun off from 3M Company. Most would jump at such an offer, but I knew it wasn't going to be a rose garden. The units were being let go because they were a drag on 3M. Still, I don't mind taking a calculated risk every now and then, and I'd been successful in previous turnaround situations, so I took the job. In short order it was apparent I had a bona fide bucking bronco on my hands. If I'd known what I know today, life could have been a lot easier, which is why I'm now sharing some of that hard-earned knowledge.

To bring our costs in line, we had to take a big restructuring charge. Before long we found ourselves in debt to the tune of $450 million. To make matters worse, some of our businesses, such as Photo Film and Printing & Publishing, were in markets moving rapidly from analog to digital with the smaller margins that typically accompany these products. To illustrate how things were, on Christmas Eve, 1997, members of my financial team came to my door and shuffled into my office. They pushed an appointed spokesperson to the front of the group.

"Bill," the spokesperson said, "it looks as though we're not going to make payroll in January."

I felt my brow furrow. "And a Merry Christmas to you, too," I thought. Then I said, "We will make payroll. We will not run a company that misses payroll and doesn't take care of its employees."

As it turned out, we had considerably more cash available than we had first determined because we were in the middle of so much change. Even so, the jolt I received that Christmas Eve brought home the importance of a cash mentality in a company or business, particularly during a turnaround.

If I had it to do over again today, I'd repeat many actions I took back then, but I'd also do a lot of things differently. What follows is a check list I hope will be of value when you get put in charge:

1. Conduct an immediate strategic analysis
   You need to determine right away what the business's core competencies are vis a vis the competition, and which way the markets you're in are headed. If you're in more than one market, should you be? Studies have shown the most successful companies concentrate on what they do well and do not stray from this. Silver bullets typically aren't going to save a company that isn't fundamentally sound, so you need to force fundamentals and question everything rather than simply look for an easy fix. Most managers are optimistic and will project annual sales increases even when there may be no justification so insist on zero-based budgeting. Everything must make sense financially.
2. Under promise and over deliver
   Projecting optimism is healthy, and enthusiasm is essential to success, but both should be tempered with realism. If you paint too rosy a picture and don't clearly acknowledge obstacles that must be overcome, you will lose credibility with your employees and your investors as soon as something doesn't go according to your optimistic predictions. Credibility is hard to recapture, and without it, progress may be impeded or come to a halt.
3. Rely on employees you already have on board if at all possible
   People who have been with the company are known entities, but you can never be sure what you are getting when you hire from the outside. Plus people who have been with the company a while are likely to know and understand the business you're in, which means no learning curve will be required. When you look outside, focus on functional skills and experience you may be missing such as finance and legal.
4. Communicate, communicate, communicate
   It's a fact of life. If the message is getting boring to you, it's probably just starting to get through to everyone else. You have to keep pounding key messages in a clear and logical way until you are sick of them. Then pound them some more.
5. Cut the cord from the mother company fast
   When a business is spun out from another as ours was, we learned it's best to separate physically from the mother ship as quickly as possible. Don't share space unless there is no alternative because it will be virtually impossible to create a new corporate culture. In countries where we separated completely and did not cohabit with 3M, we became a separate, independent, aggressive and self-sufficient entity much faster than in places where we shared space.

YOU MAY BE wondering how things turned out after that fateful Christmas Eve. We sold businesses operating in markets in which we had no chance to be a leader, and we focused on an industry we believed had a big future and in which we had considerable expertise. The result was that by spring 2004, the company, Imation Corporation, was not only profitable, it had $475 million in cash, no debt, and we had repurchased almost $200 million of its stock. That's a billion dollar swing from being $450 million in the hole--hence the title of the book I wrote about the experience, Billion Dollar Turnaround.

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