Getting Back on Course After a Disruption: Elements of a 360˚ Assessment
Serious business disruptions come in many shapes and sizes, from changing economic conditions to the “Dismal D’s” (death, divorce, disability, disagreement and departure). In the midst of disruption, it is all too easy to feel beleaguered and overwhelmed and to become fixated on the immediate crisis.
An English friend told me this is known in the British Army as the state of being “head down, bum up” — when troops crawl along the ground to avoid enemy rifle fire. While concentrating on keeping their heads down, they instinctively raise their hindquarters to compensate, thereby avoiding getting shot in the head but inviting an entirely unintended wound!
Whatever the type of business disruption you encounter (short of your own death!), your chances of getting your business back on track and returning to cash flow positive will be increased significantly if you take the time to properly and thoroughly assess your business and options, then create a strategic plan to go forward. Because time is at a premium for those enmeshed in crisis, it is advisable to engage an outside expert to conduct a 360° Assessment.
What is a 360° Assessment?
Not all inclusive, this process begins with a review of the company’s historical and projected financial performance, management team, functional areas, capabilities, governance, corporate initiatives, and back office structure. The following key documents and data are typically reviewed:
- Prior year audit reports
- Prior year internal financial statements – income statement, and balance sheet
- Current year interim financial statements – income statement, balance sheet and cash flows
- Backlog and vendor data
- Trial balance and other financial data
- Prior year’s budget
Corporate & Operational Documents
- Organizational diagrams
- Strategy Plan
- Capability Briefing
- Business Unit (BU) Growth Plans
- All Hands Presentation
- Management Business Reviews (MBR)
This type of assessment does not constitute an audit or review of financial statements or a formal valuation; nor should it be relied upon to disclose errors, irregularities or illegal acts. But, based on the findings, recommendations and action plans can be made to successfully return the business to cash flow positive and/or to stability and growth.
Key Observations, Implications with Recommendations
The results of a 360° Assessment typically uncover issues in the following categories:
Board and Governance
Often, the mistakes and errors that endanger businesses are permitted to occur by the lack of an effective board of advisors, which should hold the management to account, or from a poor governance model, which should establish the rules and procedures by which the company makes decisions, undertakes operations and manages stakeholder relationships.
Weaknesses in the company’s structure (direct reports, employee responsibilities, skill sets, internal controls, etc.) can prevent it from achieving the optimal efficiency that comes from having the right people, with the right skills and experience, in the right positions.
Historic Operating Results and Financial Projections
An in-depth analysis of both historic and projected financial data can reveal unsustainable operating costs, debt ratios, EBITDA margins, DSOs, pipeline and backlog, and other critical valuation considerations. These frequently lead to improved budgeting, reporting and projecting recommendations.
Back Office Function
While back-offices may seldom make a business, they can break one through poor financial control and planning. Compensation plans, technical accounting, internal controls, indirect cost rates, utilization rates, monthly closing processes, and human resources procedures are among the areas where changes may be necessary.
Making sure that business development is strategically positioned to grow and scale the business frequently requires adoption of a Future State Business Development and Marketing structure that aligns resources and delineates responsibility and accountability.
The conclusion of this assessment is a road map to implementing the recommendations and action plans. This tracks with the company’s strategic business plan, vision, goals and objectives over the next three to five years.
The road map provides focus, reduces the risk or misaligning resources in pursuit of goals, and prevents the pursuit of ill-defined opportunities that might forestall progress towards your company’s goals. It also provides a checklist of actions and something to measure progress against.
Whether you chose to follow the plan outlined in this blog or not, I hope that one key thing has been made clear: disruptions, in whatever form they take, don’t have to be catastrophic to your business provided you take time to properly assess your company’s strengths and weaknesses and your options, and then create a strategic plan to go forward.
Tom Springer is a founding partner in Springer Lawson & Associates, a consultancy of former C-level executives who help mid-market companies maximize enterprise value in advance of, during, and following major business transactions or disruptions.