Hitting the Reset Button: Turnaround Consulting for a Family Construction Company

A family-owned construction services company with a rich fifty-year history had lost its way. Jobs were losing money, management was exhausted, and the principals could not agree on a fix. The owners brought in Inglewood for turnaround consulting because the business, quite simply, needed to hit the reset button.

A Company That Had Lost Its Way

The high-level challenges were serious ones:

• An effort to be “all things to all people” had the company taking on a significant number of jobs, including work outside its core expertise, and those jobs produced significant losses.
• The constant need to put out fires kept management from proactively running the business.
• The management principals held significant differences of opinion about how to fix the company's problems.
• Across the company, people longed for the “good old days.”

These issues had driven significant deterioration in virtually every component of the income statement, the balance sheet, and cash flow. The cash squeeze forced a reduction in critical personnel, which only created more fires. The more management was consumed by the company's problems, the less it communicated with employees, and a pronounced “us versus them” mentality took hold. Management, in turn, was completely burnt out.

What the Diagnostic Revealed

Inglewood conducted extensive Zoom interviews with current and even former employees, reviewed management practices and controls throughout the business process, studied the profitability of jobs completed or in process during the prior three years, performed a detailed analysis of the company's operating results, and evaluated the company's go-forward options. The key findings:

• In an effort to improve profitability, the company was pursuing every available job it could.
• Its management structure could no longer support the number of jobs taken on, and there were no funds to expand that structure.
• With management stretched thin and job volume high, the estimating process was significantly missing the mark, producing more unprofitable jobs and more fires to put out.
• Between poor estimates, jobs taken without the time to understand the client's service needs, and sheer frustration with the company's distress, many jobs ended in disputes or litigation.
• After years of losses and declining operations, the company could only be sold at a highly distressed value, one below net book value.
• Without dramatic change, there was no way to fix the business and no practical exit strategy for the owners.

The situation was not sustainable. The company was racing toward an inevitable implosion.

Turnaround Consulting in Action: The Reset Plan

Inglewood's key recommendations, among others, were these:

• Immediately refuse to quote jobs outside a narrowly defined band of projects built on the company's core expertise.
• Use the freed-up capacity to properly estimate the jobs it did choose to quote.
• Stop taking jobs unless they met an elevated target level of profitability.
• Shift management's posture from reactive problem-solving to proactive problem avoidance.
• Communicate the new direction to employees, and explain the reasons behind it.
• As the company reduced its size, take the opportunity to part with personnel who were a net negative to the business.

In effect, Inglewood recommended a refocusing and a slow wind-down of the business. That path would either allow the owners to achieve an exit value in excess of net book value or let the company find the appropriate level of business for its current infrastructure. Once the company reached a sustainable level of operations and profitability, the owners would have the option to grow again, at a measured rate, and only if they chose to.

The Early Results

Management implemented Inglewood's recommendations immediately, and just as immediately began to see the long-desired improvements in the business. Whether the ultimate outcome will be a wind-down, a sustainable ongoing business, or a successful exit is not yet known. What matters is that management now has the means in hand to resolve its issues. With the path forward clear, the team has been able to start overcoming its burnout.