The “It” classes of the late-1990s revealed the secrets of the Internet and the New Economy. Five years later, offerings on China, India and international business ruled the roost. Today, courses on managing distressed companies are growing in popularity. Veteran turnaround executive and HBS professor Paul Marshall has created one of that school’s most popular elective classes.
BNET: Turnarounds are a very complex subject. How do you structure the course so students can best understand what’s involved?
Marshall: We’ve broken down our course into four modules, based mainly on the life-cycle of a turnaround. If you looked at the pages of the journal of the Turnaround Management Association, you would see hundreds of little articles grouped under the topic areas, so this is very common real world model. We talk first about triage, which is finding out if the company is worth saving. If you conclude it is, then you have to manage a short-term crisis almost always around cash levels, so the short-term concerns form a second module I call crisis management, where you really have to “stop the bleeding”. Then the third step is “how do I stabilize the situation and pull together a team that will think through and implement a plan to get us back on a stable basis?” Then the fourth section is how you create a growth strategy and, in most cases, recruit some different management team members. Turnaround are just like startups, in a way. The people who like doing them probably want to go on and do something else soon, and you’ll want to bring in a more stable long-run management group.
BNET: The class has been growing in popularity among HBS students. Could you talk about its evolution?
Marshall: This started as a half course, which is something we do to let professors try out new ideas without having to develop 30 pieces of material. We met for 15 sessions in the spring of 2003 and I had a hundred students. In 2006, I went to a full course with 30 sessions and the demand was 400 students, and last year the demand was over 600 [the number of students requesting the class as one of their first few choices in the HBS course lottery system]. We’ve added another term of the class with a new instructor this year and next year we’re going to add a third instructor and the three of us will teach five total sections of the course.
BNET: What do you teach students about the approaches to being a great turnaround manager?
Marshall: The class is officially called “Entrepreneurial Manager in the Turnaround environment.” I’m in the entrepreneurial management area, and I believe the characteristics you need in an entrepreneurial situation are the same general characteristics you need in a turnaround situation. The first similar mindset is an intense focus on cash management, simply making sure you don’t run out of money. The second characteristic is the ability to create a sense of urgency and develop sharp organizational focus on the things that need to get done quickly. And the third element that is similar to a great entrepreneur’s approach is a willingness to experiment. You create experiments on new approaches without putting a lot of resources at risk. You figure out works and you quickly scrap the things that don’t without wasting a lot of time and money.
There are some differences managers need to take into account. In startups, people naturally have a lot of optimism about the future or they would not be there. In turnarounds, there is a lot of pessimism and people are difficult to motivate. In startups, you are constantly growing the enterprise while in turnarounds you almost always reduce the size of the companies through layoffs. They key for a manager in the turnaround situation is creating s sense of urgency without creating a sense of hopelessness. They will not be afraid to get rid of people who have given up hope. The best turnaround executives are candid people who gain credibility for telling it like it is, but also offer a vision for the specific steps of how they get out of the hole they are in.
Next week, we’ll discuss Marshall’s teaching approach for turnarounds and the turnaround management career opportunities available to MBAs in the current economy.
Jeremy Dann is a lecturer in innovation and marketing at UCLA’s Anderson School of Management.
