Conversation and collaboration are essential, said leaders at the Finance Indaba.
In a frank discussion entitled “Facing the storm: The art of the tough turnaround”, attendees heard how both finance leaders managed to successfully navigate their organisations and teams through very trying times.
A deer in the headlights
Megan shared that she joined EOH in January 2019, but by February the Microsoft bombshell hit and unleashed an investigation into corruption at the company. She candidly admitted that for a long time she felt like “a deer in the headlights, just trying to work through the basics”. She added that no one could tell her what was going on in the business, and the balance sheet made no sense.
“I did know, however, that we had R4 billion of debt. So, I had to go back to basics, like understanding daily cash reports, instituting cash-flow forecasts where there had been none, and sorting out the capital structure,” said Megan. She added that because EOH is largely a service business, they needed to be cash light, but most assets were working capital. Eventually, the entire exco and finance team had to be changed – but, added Megan, this couldn’t happen all at once as it would put the business at even greater risk.
A baptism of fire
Walter shared that his baptism of fire happened in 2018, when the South African government introduced its sugar tax – and Coca-Cola Beverages was woefully underprepared for this development. Suddenly, said Walter, the company – which manages and distributes 27 brands – had a new expense line that equated to a massive 11 percent of turnover, and prior to the tax, Coca-Cola Beverages had seen three years of consecutive profit decline.
“Red lights were flashing, and it forced us to do things completely differently; we changed our product portfolio and price points, which involved significant planning and product testing,” said Walter. “From 2018 to today we’ve clawed back market share, but we were slow to react – some of our competitors reformulated their products to be in-line with the new sugar requirements in less than a month. It took us months.”
Being okay with ambiguity and creating trust
Both Megan and Walter agreed that for a leader to navigate a tough turnaround, they need to be agile, and they need to be okay with ambiguity. “During turmoil you’re not always sure about what the right thing to do is,” added Walter. “It’s okay to be uncertain. Ask for input, participation, and consultation; above all, the plan should – and does – evolve.” For Megan, making mistakes is also part of the process, but you need to learn from them. “You will make the wrong decisions but it’s how you adapt. The worst thing to happen is if people in the organisation aren’t being transparent during a turnaround, because creating trust is critical.”
Of course, with any turnaround comes change, and the fact is, humans don’t like change. For Walter, when people are unsettled, it’s crucial for leaders to be optimistic about the future. Or, if you’re not getting buy-in, maybe there’s something wrong with the plan, he suggested. “Conversation and collaboration are essential; I can’t emphasise that enough. But everyone needs to understand the reason for the change – otherwise, you might need to change the people!” he quipped.
Due to strong leadership and innovative thinking, as well as a willingness to roll up their sleeves, both finance leaders have turned their organisations around, despite incredible challenges.
EOH has made a strong improvement in operating profit, and they’ve significantly reduced debt – but, said Megan, she couldn’t reveal too much, as the company’s financial results will be released imminently (attendees were told to watch this space!).
Megan concluded by saying:
“Don’t shrink to greatness; look at what the core business is, focus on stabilisation, and then you can implement a growth strategy. That’s where EOH is now, but it’s involved going back to the basics, one step at a time.”