Earth, Inc. in turnaround
If it were a business, Earth would be insolvent
Objectively speaking, a business facing imminent collapse has two options: Close shop or invest in a turnaround. How a company comes to insolvency – whether by bad management, overextended debt or changing markets – is less interesting than how it shifts gears and reemerges as a success. Everyone enjoys a good redemption story.
As one way to squeeze the vast, long-horizon idea of sustainability into modern, short-term-focused business language, we might look at our home planet as a candidate for a corporate turnaround.
In a corporate turnaround, ideas that might have seemed radical in normal business are suddenly reasonable. Strategies that reinvent the brand for a new market, or speak to a new kind of business offering, or jettison old, debilitating priorities are designed to return a business to fundamentals and relevance. The goal is long-term survival versus the near-term pain suffered by investors, creditors, employees and customers.
Is Lee Iacocca’s late-‘70s rescue of Chrysler the greatest turnaround in US history? Where, by comparison, do we rank IBM’s 1990s reinvention amid the onslaught of tech startups? Does Apple’s journey back from the brink to world domination eclipse them all?
The case for Earth, Inc.’s insolvency is overshoot.
The demand for Earth’s resources is greater than Earth’s ability to provide them. Put another way, Earth regenerates its reserves of natural capital – cash inflow – slower than humanity draws against it. Our consumption represents Earth, Inc.’s cash outflow. A company with negative cash flow cannot cover its bills indefinitely and will not remain liquid.
As the late Stanley Goodman wrote in his 1982 executive handbook How to Manage a Turnaround, a turnaround produces “a noticeable and durable improvement in performance, to turn around the trend of results from down to up, from not good enough to clearly better, from underachieving to acceptable, from losing to winning."
This might also suit as a definition of modern sustainability. An effective turnaround, in the case of Earth, Inc. might be to achieve a positive cash position with its natural resources replenished at faster rates than humanity can draw against them.
“A company with excessive debt, stringent covenants, and inadequate equity capital is operating with little or no margin for error,” The Turnaround Management Association says. “The introduction of better working capital policies and improved capacity utilization decisions are clearly warranted in such cases. Yet, incumbent management instead often engages in debilitating attempts to grow the company out of its problems.”
If we decide that Earth, Inc. is 1) in distress and 2) beyond the help of small, incremental adjustments, there is a fairly clear turnaround blueprint to follow next.
Analyze the situation
Dispassionate fact finding, synthesis, stakeholders and their expectations, risk, issues that drive or restrain the situation, root causes, scope of the challenge
Lead
Clear-minded, steadfast new bosses who embody the credibility to lead through the necessary repairs and changes, bold new ideas and priorities, transformative new mission and vision
Craft a strategy
Blue-sky planning, vivid outcomes, tactics on a clear timetable, markers of success, capacity for error, reinvention
Restructure
Asset triage, stakeholder mobilization, executing on hard choices, communication, back to fundamentals
Evaluate success
Evidence of improvements, stability, solvency.
“[Turnaround] means doing what has to be done – when it has to be done,” says turnaround specialist Alex Wolf. “It also means not playing favorites. It means doing all of the essentials, and letting some other things go. Turnarounds are not big on formality, but big on real business discipline. Furthermore, in turnarounds, time is always of the essence.”
Is an Earth, Inc. turnaround in order?