Successful Business Turnarounds Mean Working With Trades Unions to Promote Consensus

Copyright (c) 2010 Alison Withers

In a bid to forge a collaborative approach to dealing with companies in financial difficulties a Company Doctor and former President of the Turnaround Management Association, who seeks to save companies and who does not work for banks, has approached a number of UK trades unions.

Currently, employees are rarely involved in the decision-making when a company's survival is threatened, but a successful business turnaround relies very much on the support of its employees.

Unlike formal insolvency procedures, turnarounds are consensual. Teamwork, leadership and communication are essential to implementing change. Engaging with staff and involving them in the business introduces accountability and responsibility to a business and is crucial to its success. This is even more so with a turnaround where change is necessary.

Historically turnarounds have been co-ordinated by banks as secured creditors, or by new investors who drive change from a purely financial perspective, oriented towards achieving single stakeholder objectives. What gets measured, gets managed.

Many stakeholders have compromised their credibility with employees by this pursuit of short-term objectives.

Why should investor shareholders care about survival after their financial engineering has repaid 100% of their acquisition investment? Are secured creditors more interested in reducing their exposure or saving a company? Professional managers tend to have their own attractive exit packages and new management can make a quick buck more easily if they pursue short-term objectives.

So who is really interested in the employees let alone securing their employment for the future?

The trades unions are still believed to be the true representatives of employees' interests. It is acknowledged that the relationship between management and union representatives has in some instances become polarised. Negotiations are often characterised as confrontational, with management and unions trying to hold each other to ransom.

This is none of it helpful when trying to save a fragile business. It is rather like the surgeon fighting with his medical team when a patient's life hangs in the balance on the operating table.

This new initiative of collaborating with unions is based on developing mutual respect and understanding of each side's objectives outside the constraints of a turnaround situation.

It is intended that the respect and understanding of each other's roles is brought to the table by involving union representatives early in the process and especially when considering turnaround options.

For example, union input can be valuable when considering the thorny problem of how to reduce staff costs, where hard choices might have to be made between cutting numbers, wages, hours, or benefits.

The great advantage of having union representatives involved in the decision making process is their commitment to helping implement the agreed measures. It helps remove fear among staff by reassuring them that their interests have been taken into account when developing the turnaround plan.

Support from a union representative enabled a recent turnaround to be achieved.

It resulted in agreement to reduce contractual hours for staff from 60 to 32.5 per week at a slightly increased rate with scope for overtime above this level when business picked up.

The union negotiator was tough but realistic and introduced some valuable initiatives that led to improved facilities for staff and an upgrade to the staff handbook.

Although largely non-financial these initiatives helped reassure the employees that they were essential to the business's survival. The employees accepted the changes and the turnaround was a success.