The Right Leadership Style for a Turnaround

Operating a company or business unit through a turnaround is unlike operating an organization through normal business conditions, and therefore, requires a unique type of leadership for it's success. Today, the transformational leadership style is being accepted more and more by CEOs, and many companies have embraced transformational leadership, along with servant leadership, as the saving grace of leadership styles. But can a transformational leader, lead a company through a turnaround?

Turnarounds become necessary when an organization takes a severely downward turn financially, or when some other existence-threatening decline has occurred. The deterioration of an organization doesn’t happen over night, nor is it caused by a single event, but rather is perpetuated by a cycle of events of poor decision-making by leadership, lack of communication and a lack of support of the employees. And by the time a turnaround becomes necessary the organization is laden with staff that feels a sense of helplessness, characterized by employees who harbor secrets, place blame on others, and point fingers. Employees also become protective of information, refusing to share information with one another, even to the detriment of the company.

As I’ve said before, turnarounds can be excruciatingly painful because it often requires extreme changes to occur if the organization is going to recover from its slump. If the leader decides to cut spending, close an office or terminate ineffective employees, then this further exacerbates any confusion and distrust that exist in the employees. It’s important for leadership to work to restore the confidence of the employees, because doing so will produce the effort and persistence needed to bring stability back to the organization. And transformational leaders have a penchant for restoring confidence in their employees, but this quality may or may not be the most important competency needed for the turnaround.

Turning around a failing company requires putting accountabilities in place. And building accountability involves setting production targets, developing performance management systems, and establishing consequences for poor performance. So does this mean that a transformational leader cannot be effective at leading a company out of a crisis? No, but the nature of transformational leader is not prescriptive and this inevitably means that a transformational leader will have to employ additional skills in order to be successful.

To sum it all up, leaders will require intricate and detailed knowledge of the company and their key stakeholders if they’re going to bring the company back to black. Researching and analyzing the past and present performance of the organization will impel both employees and stakeholders to a place of trust and confidence in their leadership. It has been said that, the difference between leadership and management is, leadership is deciding what to do while management is deciding how to do it. Therefore, in the end, the success of the turnaround will largely depend on the extent to which the leader leads but also manages the process.