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Posted: August 15, 2011

The top four secrets of resurrecting any company

Whether it's GM or the corner store, the principles are the same

Todd Ordal

A recent article in the Wall Street Journal ("The Secrets of the GM Diet,") identifies the steps that General Motors took to get healthy after a trip to the "diet center" (aka bankruptcy court). When you strip away the complex language that describes large companies, the messages are surprisingly simple and apply to Bertha's Kitty Boutique just as easily as a multibillion dollar company. Ready for the secrets?

Here are the lessons the article pointed out, in my simplified language:

1. Make sure you have enough money in the bank. The language of big companies talks about stronger balance sheets, proper capital structure, contingent liabilities, unfunded pension liabilities, quality of assets and convertible bonds. All important stuff. However, when you boil it all down, you have to have enough money in the bank to run your business.

2. Build stuff people want. Large companies get all bound up in contracts, union issues, sunk costs and utilization factors. When things don't sell, marketing is extolled to market better, prices are slashed to be more competitive and expensive lobbyists are hired to berate government officials for unfair foreign labor practices. Guess what? If the dogs don't like the dog food, they aren't going to eat it!

3. Pay people what they're worth - maybe even a little more. However, when the guy who turns screws into sheet metal all day makes more money than your medical doctor, it ain't right and it doesn't take a rocket surgeon to figure it out. You shouldn't pay expensive champagne prices for beer! Big company exemption: I understand that the government protects the rights of some (unions) to hold others (consumers) hostage. I can't seem to square that with our stance toward Somali pirates. ...

4. Don't hire more people than you need. If you find you have more than you need, let them work somewhere else. It's unethical to underutilize people; you destroy good work habits. If you have one shovel and one hole to dig, you don't need five guys to dig it (unless they're pirates).

You now know the top secrets of turning around a large company. Go forth and make money. No bail out for you!
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Todd Ordal is President of Applied Strategy LLC. Todd helps CEOs achieve better financial results, become more effective leaders and sleep easier at night. He speaks, writes, consults and advises on issues of strategy and leadership. Todd is a former CEO and has led teams as large as 7,000. Follow Todd on Twitter here. You can also find Todd at http://www.appliedstrategy.info,  303-527-0417 or todd@appliedstrategy.info

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Readers Respond

Great article -- pithy, solid content and I love the Somali pirate reference! By Robert on 2011 08 15

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