And then there’s the kind of whack that’s more like a wallop—the market you serve collapses because of a regulatory or natural event, or a disruptive technology outright kills your industry, or there’s a staggering recession, the likes of which, say, comes ’round every 80 years.
Surprise!
Surprise—sometimes. In Silicon Valley, disastrous and sudden “disruptions” are so much a part of the fabric of everyday business, there’s even a popular acronym for them, WFIO, which stands for, “We’re F—, It’s Over.” Technology businesses, almost by nature, are whack-magnets.
By contrast, whacks can happen out of nowhere or with very little warning. Think of the businesses in New Orleans that were wiped out by Hurricane Katrina in 2005, or Superstorm Sandy in 2012.
But such outright calamities are rare. Far more often, we get whacked because our organization was not prepared; we didn’t see something coming. A competitive threat, a cultural change, a new technology, the list goes on and on. It’s as Google CEO Larry Page put it in his 2014 TED talk: “The main thing that has caused companies to fail, in my view, is that they missed the future.”
Look, why your organization got whacked isn’t all that important for our purposes here. Something bad happened. This chapter is about making repairs—about fixing things so that the organization rallies back as quickly as possible, and in the best-case scenario, is functioning in a way that makes another whack a lot less likely.
To that end, we’ve got six pieces of whack-recovery advice we’re going to explain and explore in the coming pages.
1. Own your whack.
2. Hang on tight to your best.
3. Get maniacal about the drivers of costs, performance, and growth, using data as your guide.
4. Reinvent your strategy process.
5. Reality-check your social architecture.
6. Worry more productively.
Ready? Great. Because we love talking about these tactics. They belong at companies in the throes of recovery, and, we would go so far as to say, at all companies, whacked or not. Any coach will tell you the best defense is a good offense. Same’s true in the game of business.
Code (Almost) Blue
If Hollywood ticket receipts are any indicator, everyone loves a good horror story. Watching a good horror story, we should say, because living through one is another matter.
Just ask Joe DeAngelo and his team at HD Supply (HDS). The company got its start in 1975 as a regional, California-based distributor to the building trades called Maintenance Warehouse. By 1997, it had grown substantially, and Home Depot, seeing all sorts of product synergies, snapped it up, establishing it as a division, and investing heavily in online ordering and logistics. HDS customers remained highly fragmented—plumbers, contractors, apartment building superintendents, facility managers, and the like. That fragmentation had never been a problem with the real estate market booming, however, and HDS had enjoyed a long stretch of success over the decades. (Its revenues in 2005, for instance, were around $12 billion, with earnings before interest, taxes, depreciation, and amortization [an EBITDA] of $1 billion.)
But then in 2008, HDS received two massive “body blows,” as Joe puts it. First, the long-overinflated residential housing bubble burst. That was tough on HDS, of course, but the company was able to pivot to its secondary market, commercial real estate, which is typically countercyclical with residential. A few months later, though, the entire building sector went down the tubes with the recession, and HDS’s revenues eventually fell by 40 percent. Just to stay alive, the company let go of 12,000 of its 26,000 employees, sold three of its business units, and shuttered a third of its branches.
To make matters worse, at the time of these events, HDS was already in a precarious financial situation. Recently spun out of Home Depot and sold to private equity, it was loaded with debt. Indeed, for all the good PE can do rescuing and realigning companies, this is one of the industry’s major downsides. Early on, its acquisitions often have limited cash flow and a heavily leveraged balance sheet.
“On the outside, everyone thought it was over for us,” Joe recalls of 2008. “They were just waiting for the death certificate.”
It wasn’t forthcoming. In fact, even though the HDS story is about getting whacked at the far reaches of in extremis, the company’s response provides a great example of our first four pieces of advice in action.
Own Your Whack
If you’ve ever been in an organization that’s taken a hit, you know all the behaviors that immediately start to set in. People huddling behind closed doors, whispering about “who’s going to go,” managers scuttling between meetings with piles of binders and worried looks, not making eye contact with anyone, and general fear-and-loathing in the lunchroom. There’s such internal paralysis that the main work going on, basically, is people gossiping and sending out resumes.
This kind of response to trouble is natural, because self-preservation is natural. But it’s also a self-fulfilling prophecy. Distracted, frightened, depressed people can’t fix anything.
HDS put a kibosh on this dynamic. There was no denial, and just as important, no blaming or victimhood-claiming. Comments like, “Finance should have seen this coming,” and “I can’t believe this happened to us; we don’t deserve it,” were verboten. What good were they? Instead, HDS leaders adopted a massive “we’re going to beat this” mentality, and rewarded those doing the same.
Such a mindset was achieved first by a constant invoking of the company’s mission and behaviors. “We had to set fourteen thousand people all going in the exact same direction,” Joe says. “Our mission was eight words: ‘One team driving customer success and value creation.’ We said it again and again.” At the same time, the organization’s behaviors were communicated through the acronym SPIRIT—service, performance, integrity, respect, innovation, and teamwork—and reinforced with small, spontaneous cash awards for the people demonstrating them. Importantly, such battlefield commissions, so to speak, were openly celebrated.
There’s also a bit of theater to owning your whack. Take your pick at the best approach to reignite the organization—an off-site teambuilding event, an inspiring speaker—the options can get as creative as you want. At HDS, Joe chose to assign a special SWAT team to study the special attributes shared by the most famous champions in history—George Washington, Muhammad Ali, Secretariat, among others. Their findings—insanely hard work, a defeat-is-impossible attitude, and passion to be the best of the best—were touted and invoked in company meetings for two years. “We talked about the championship project findings a lot,” Joe says. “Secretariat won by thirty-one lengths. We used that example all the time to reset how people were thinking. We wanted everyone asking, ‘Is hiring that person going to help us win by thirty-one lengths? Is going to that conference going to help us win by thirty-one lengths?’ ”
The champion project, Joe says, “really helped stopship the pity party. It celebrated how we were going to get better, and that started with a very purifying thought. Losing was not an option.”
Hang On Tight to Your Best
Far too often, when a company gets in trouble, its leadership has the knee-jerk reaction of firing people without consideration of performance. Many times this kind of willy-nilly approach happens because the company doesn’t have a performance appraisal system in place, and wanting to show the board how fast they’re acting and how deeply they’re cutting, the leadership