Celebrity chefs and hotel inspectors offering cruel-to-be-kind advice to failing establishments may guarantee TV ratings, but for the new-breed chief restructuring officer (CRO), entertainment is not in the script.
Once strictly revenue-focused and working predominantly in consultancy, chief restructuring officers are now in demand in any organisation whose overall business strategy, or boardroom, is in need of a reboot.
UK commercial property operators, currently digesting a record 46 per cent jump in executive director changes in the six months to September, are ahead of the game in hoovering up any spare CRO muscle.
Yet with estimates suggesting there may be fewer than 100 to 200 UK-based, bona fide CROs to go around, customers in other hard-hit sectors such as travel, retail and leisure may be waiting for their own “company doctor” for some time.
Although surviving a crisis requires the best of an entire C-suite, an outsider’s warts-and-all perspective on topics as far-reaching as innovation, resourcing and performance can ruffle feathers, particularly as CROs tend to be imposed on boards.
Instances of an interim chief restructuring officer going on to replace an underperforming chief executive can only increase boardroom misgivings.
“It is important to recognise that CROs are often not welcome by the board and have been forced on the business by a chairman, owner or funder who has lost confidence in the management team’s ability to arrest a decline,” says Chris Clegg, chairman of New Street Consulting Group (NSCG).
The knives are out for the CEO
A criticism of many C-suite teams, he says, is they either “have their heads in the sand” or in true Nero style “refuse to wake up and smell the coffee”.
In contrast, a proficient chief restructuring officer injects “a sense of realism and urgency”, as well as a stellar contacts book, into the mix.
Separating existing management from a CRO outsider is an important safeguard for the C-suite, particularly when painful decisions must be made.
Despite this desirable delineation, together with the objectivity which allows a CRO to think commercially, rather than emotionally, about a business, there are issues.
Referring to the “Wild West of restructurings”, Clegg draws a distinction between a genuine expert and a wannabe, pointing out that former CFOs who claim to be proficient at successful restructuring vastly outnumber those with the track record and CV to back this up.
“An authentic CRO will be able to negotiate deals that existing management teams may not think achievable, including support from key customers, extended terms from suppliers or greater support from the bank,” he says.
To be effective, a chief restructuring officer will, by definition, work closely with all members of the executive team. Close collaboration with the CEO is crucial, as is knowledge-sharing with the CFO as resident C-suite expert in compliance, revenue generation and financial strategy.
However, restructuring also overlaps with the role of the chief operating officer, often considered second-in-command, overseeing day-to-day administrative and operational functions, and the chief marketing officer, whose prime function is to create and lead a marketing strategy which generates business growth.
With technology reshaping all global industries, the lead taken by the chief information officer in managing and implementing new technology is vital, as is the contribution of the chief human resources officer, who aims to sustain morale even as headcounts are falling.
“Whether the goal is cost-reduction or improved efficiency, those companies fortunate enough to have a senior human resources leader at the table will benefit hugely from their expertise, particularly in terms of the impact on culture and engagement,” says Dean Hunter, founder of HR consultancy Hunter Adams.
Warning of the impact significant change can have on performance, focus and productivity, Hunter advises organisations to “manage any restructuring within a set time period as, although phased change appears less painful, it may create the problem of change fatigue”.
Preparing for black swan events
Aside from governing day to day, the role of the C-suite must always be to look ahead and predict which way the wind is blowing for the business.
While planning for unknown scenarios is desirable, many businesses have limited capacity in this area and may need additional crystal balls, says Karl Weaver, member of the Future Strategy Club and former chief executive of Publicis Groupe’s Data Practice.
“It can be very challenging to cover both the day-to-day running of the business and the future thinking needed to adapt and stay ahead, and this may all come to a head in a black-swan event like a pandemic,” says Weaver.
As for bringing in a dedicated individual to lead a make-or-break restructuring project, hopefully without triggering a turf war, he has little doubt.
A good CRO, he says, is “a pretty unusual animal, with an ability to cover a wide range of business skills, work with stakeholders to gain and maintain trust, create clarity when all around is messy, make things happen with a sense of urgency, but without creating panic, and maintain the focus to mobilise and align people operationally”. Weaver adds: “It’s fair to say that a high EQ [emotional intelligence] is incredibly valuable too.”
While the temptation to rely on existing boardroom expertise in a crisis may be understandable, NSCG’s Clegg urges all C-suites to act fast when they suspect their business is beginning to falter.
“CROs are already in demand and as government support schemes come to an end, the urgent need for them will skyrocket,” he says. “While the best of the bunch certainly don’t come cheap, they may just save your business.”