Summary: All organisations, from startups to established giants, exist in a perpetual state of turnaround. Drawing on Michael D. Watkins’ STARS model, I want to explore how to diagnose an organisation’s current state and apply this lens to understand why a constant focus on renewal, adaptation, and correction is vital for long-term success, regardless of what stage it perceives itself to be in. Just as entropy degrades systems, organisational drift erodes focus and efficiency. Proactively treating every venture as a turnaround project, even from day one of a new start-up, is key to overcoming this business unusual reality.
The Inevitable Drift: Why Every Organisation is a Turnaround Project
We often think of turnarounds as dramatic, last-ditch efforts to salvage a failing business. But what if we reframed the concept? What if we viewed every organisation – from the fledgling startup to the established enterprise – as a constant turnaround project? This seemingly counterintuitive idea, I believe, holds the key to long-term success and adaptability.
For years, I hesitated to take on leadership assignments that centred heavily on “turnaround” management. I associated it with failure and situations I wished to avoid. However, I’ve come to understand that viewing every organisation through this lens is actually essential. The reality is that the relentless force of entropy, akin to the second law of thermodynamics, is always at play within our organisations or businesses. It continually works against the clarity of your mission, your vision’s coherence, and your values’ integrity. Energy becomes misdirected, core competencies are diluted, and the organisation can slowly but surely drift from its path and culture. It is business unusual.
If there is any role that is essential to leadership, particularly the more senior you are, it is this function. Building a team with deep humility, to have robust debates, and exercising courage, are essential ingredients to making this happen.
The STARS Model: A Compass for Continuous Assessment
To set the stage for where an organisation is in this perpetual turnaround journey, we can turn to Michael D. Watkins’ STARS model. Michael, an associate professor at Harvard Business School and Professor of Leadership and Organizational Change at the International Institute for Management Development, has worked with a number of Fortune 500 companies and has observed that most businesses fit into one of five development stages.
Start Up
Turnaround
Accelerated Growth
Realignment
Sustaining Success
Which state do you see your organisation in, be it a club, church, organisation, or business? This can be a conducive framework for understanding what type of leadership personality and skills you need.
However, I would suggest that in each of these conditions, you are in a constant state of ‘turnaround’. Here’s why. Let’s first diverge from Watkin’s STARS model and begin with T – first.
Turnaround Viewpoint:
Here, the organisation faces clear challenges to its survival. It could be failing growth, failing profitability or facing a significant market event. So, the need for decisive action and radical transformation is essential at this stage. This requires making painful and bold choices, cutting costs, divesting or pivoting to new markets. This is where leadership is most critical.
This turnaround viewpoint is the easiest to identify and apply, but what about the turnaround implications of the other parts of this organisational model?
Start-up Turnaround Viewpoint:
At this stage, the emphasis should be on continuously validating assumptions. The team must rapidly test and iterate while remaining open to evolution, even though many things will be in their initial testing phase.
Accelerated Growth Turnaround Viewpoint:
This stage also demands robust leadership that does not overlook the inevitable growing pains. Leaders must recognise new areas of need and opportunity and continuously challenge the existing modus operandi, but not grow too fast.
Re-alignment Turnaround Viewpoint:
This involves revisiting the company’s foundations, clarifying the mission, and re-engaging the team with a renewed sense of purpose. It is about stopping some things and doing new things in a manner that brings a better focus on the fundamentals.
Sustaining Success Turnaround Viewpoint:
At this stage, the turnaround focus is on avoiding stagnation. It’s about fostering a culture of innovation and ensuring the company doesn’t become a victim of its own success. This may mean revisiting and reinventing the value proposition or even the value chain, but the foundations are secure.
The Continuous Turnaround Mindset: This is business unusual
Viewing every organisation as a turnaround isn’t about dwelling on potential failure; it’s about adopting a proactive and adaptable mindset. This means:
- Regular Diagnostic Assessments: Regularly evaluate and confront the organisation’s current state with courage and insightful questions.
- Constant Vigilance: Proactively search for signs of drift, misalignment, or complacency and respond decisively.
- Embrace Iteration: Consider organisational change as ongoing investment, refinement, and adaptation.
- Timeless vs. Adaptable: Understanding what must be preserved (mission, vision and values) and what should evolve (strategies, tactics, technologies). [See my blog post Throwing Out The Family Silver for a more detailed exploration of this]
- Culture of Change: Nurture a culture where difficult decisions are perceived as an opportunity for growth, not a threat.
Conclusion:
The perspective that every organisation requires continuous turnaround isn’t pessimistic – it’s realistic and empowering. Leaders can create more resilient, focused, and successful organisations by acknowledging and actively managing organisational entropy. It is business unusual!
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