To the Rescue

Those who understand the important role corporate turnarounds can play in job retention and a healthy economy know its disturbing to see turnarounds become, in this divisive political year, a disparaging synonym for heartless greed.

Mitt Romneys background with Boston-based Bain Capital has served as the object of criticism and negative comments from his opponents for the Republican nomination. And now that hes the partys presumption nominee, that business bashing, with turnaround being turned around into a dirty word, is virtually certain to continue until November.

This kind of political propaganda has an unfortunate and unacceptable impact on financially troubled businesses that need the expertise of those who can help turn companies from being at risk to being on the road to recovery.

There clearly have been masters of the dark side of corporate turnarounds, folks like the notorious Chainsaw Al Dunlap, aka Rambo in Pinstripes, who took the reins of challenged companies and tore them asunder to reduce costs in order to create profits.

But perhaps in no period during the past 70 years has the role of the turnaround, in the company-saving sense, been more important because of the number of firms placed under a cloud by the Great Recession.

Proof of the fact that turnarounds can save companies, and jobs, is in Revitalization Partners experience with Architectural Woods Inc. (AWI) of Tacoma, at its best a $60 million business with 50 employees.

The companys loans had been in full default for some time, so AWIs bank approached us about reviewing the business. Following a report of our findings, it requested that we liquidate the company in order to return as much of the debt as possible, which would have eliminated those 50 jobs.

After reviewing the situation, making management changes and determining the recovery for the bank in liquidation, Revitalization Partners told the bank that liquidation didnt make sense because this was a perfectly sound business, albeit a smaller one, with significant value. We indicated that we could save the company and the jobs, as well as have the bank recover all of its money instead of just a fraction.

Because revenue had shrunk by more than 50 percent by the time we were contacted to take it over, we eventually did have to eliminate eight jobs. But we brought AWI back to profitability and ran it successfully for another eight months while we sought a buyer who could ensure its future.

We eventually found a large hardwoods firm on the East Coast that wanted a Northwest distribution center. Today, AWI functions as a part of that entity; all the employees whom we retained have jobs today and the operations manager we promoted to general manager retains that position for the new owners.

The AWI experience is hardly unique, but a key challenge is that those turning around companies and savings jobs basically avoid visibility to protect client confidentiality. Meanwhile, the work of the worst so-called turnaround experts gets plenty of media visibility.

The fact that turnarounds have become part of the political game is not only an unacceptable expedient. It could also become a deterrent to some of the most important, beneficial aspects of turnarounds, thus affecting the effort to save jobs.

AL DAVIS is a principal at Revitalization Partners, a Seattle firm that provides interim management and advisory services to client companies.