Manufacturing Business in need of Financial Restructuring, Leadership Coaching and Financial Planning

Assessment Summary:

Two second generation brothers/owners had previously hired a President to accelerate the growth of their profitable, 50 year old manufacturing business. After a two year period of significantly declining financial performance, the President was relieved of his responsibilities. The owners returned to the Company to manage the challenges of their now unprofitable business which was under significant pressure from its bank.

The Company was in default on its bank covenants as a result of continued operating losses and bloated inventory levels arising from the former President’s misplaced growth strategy

The Company’s bank was exerting intense pressure on the owners to increase their equity contribution or seek an alternative source of capital

Due to the lack of prior leadership and poor financial performance, employee morale was being adversely impacted

Guidance from the Company’s financial institution resulted in their engaging See Change Management to address the financial restructuring and leadership challenges

Evolution:

See Change Management’s engagement focused on:

Implementing, within 60 days, a financial restructuring plan significantly enhancing profitability and cash flow
Defining new leadership roles for the owners
Introducing a team building model detailing the trust, conflict, accountability, commitment and focus on results necessary for organizational success
Preparing a quarterly bank reporting package and coaching the owners and key financial executive as to how to present their financial information and progress on their restructuring plan to their financial institution
Establishing an annual financial budgeting process providing for the needed financial discipline to meet plan targets for the upcoming years

Transformation:

As a result of the above evolutionary process:

*The Company’s financial restructuring plan provided the following results:

	$ in millions
	Company Forecast as of August*	SCM Actual Results	First Full Year SCM Actual Results
EBIT	$ (0.1)	$ 0.3	$ 1.1**
Cash Generated (Borrowed)	$ (0.6)	$ 1.2	$ 0.8
Company August forecast represented 7 months of actual results with 5 months of projected performance *EBIT Increase despite a $3.8 million decrease in sales to $17M

Income of over $1.1 million in the first full of the financial restructuring was greater than triple the EBIT of the original year of restructuring and continued to generate significant positive cash flow for debt liquidation
Due to the over $1.2 million of cash generated in the first five months of the restructuring plan, the Company ended the year and has continued to be in full compliance with its bank covenants. The organization has been restored to favorable status with the bank
The owners’ successfully assumed daily operating/sales roles with a focus on both internal and external growth. To their credit, they have successfully grown the business and profitability subsequent to the implementation of the original restructuring plan
The top financial executive chose to exit the business as part of the restructuring. He was replaced by a capable candidate who has become a strong and positive resource/advocate for the owners and the company
A goal oriented, leadership team is in place and effectively addressing the key issues of Company growth
Periodic meetings with the financial institution have been instituted, increasing the confidence and understanding of the bank with the owners and leadership team
A detailed, annual budgeting process has been formalized, providing for financial goals for key team members
The owners have begun discussions on exit strategies and what long term roles, if any, their family will play in the business

As the owners/management have continued to increase the Company’s profitability and develop effective leadership and strategic capabilities, the need for See Change Management’s services was dramatically reduced after the first two years of the engagement. See Change Management continues to meet informally on an annual basis with the owners to celebrate their success.

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Company Feedback:

"Mike joined us within a few weeks of our lender stepping in.

"He was great at giving us an honest assessment of where we were at. He asked the tough questions and offered creative solutions. He delivered on time and professionally!

"His strongest asset is his ability to challenge our management team and owners to take action. If you are honest with yourself and want to improve, Mike is the guy.

"Mike worked with us in preparing a financial plan of projected results required to return our company to a solid financial footing. In addition, we collaborated on developing action plans for the changes that were needed to achieve the projected results. He coached us in delivering a presentation to our lender of the plan outlining the new financial projections and action plans.

"As the months went by, we successfully delivered on our projections. During this stressful period, he guided us in increasing our communication with our lender. The combination of improving our lending relationship and delivering on our results turned our situation from dire to solid! Our results have continued to improve each year since we established our relationship. We are fortunate that Mike put us in a position that forced us to take action!"

Bossidy, Larry and Charan, Ram, Execution-The Discipline of Getting Things Done, New York, Crown Business, 2002, L, C, P

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