The Role of "Plan B" Contingency Planning in a Corporate Turnaround
Planning for what may not even happen
The turnaround of a (dis)stressed business will always start with a plan. That plan will layout to the key stakeholders, such as investors, creditors and employees where you intend to focus your time and effort that will yield an ROI, improving the companies financial position. While you will always need to keep the end goal in sight, how you intend to get there may take you in a variety of directions. This is where “Plan B” contingency planning needs to be apart of that process in order not to derail your turnaround process.
While Plan B thinking is very relevant to any business, it’s especially critical to corporate turnarounds because executing on that turnaround plan will not only earn you & your parents an ROI but also create continuing support, from senior creditors, avoiding issues like asset foreclosures.
Okay, so Plan B contingency is important; what is it and how should it be implemented? I always like examples so let’s start with an office supply company, currently in our portfolio.
Plan B contingency planning is a rolling 2 week operations plan where management always must ask itself —> “if things don’t go according to the standard operating procure, what is our back up plan?”
You’ll want to think of these scenarios ahead of time as in the moment pressures may lead to bad decision making. It also gets all the line managers on board with executive thinking, stamping out any ambiguity. (higher degrees of control during the turnaround process are critical)
For example; About the Company…
Office Supply delivery company, based out of Philadelphia, PA run daily routes to over 1000 offices across several states & have defined schedules with a 1-2 hour delivery window + office setup schematics
The routes require a driver to know where to park (not easy in a downtown core), how much time it will take per stop & how each client likes their supply closet or snacking area organized (hence the schematics)
The value add of the business was the tight delivery window + the schematics as Amazon or Walmart would never organize a supply closet or snacking area
This allowed the company to earn above average margins with double digit growth, however COVID dramatically impacted the demand for services. Inventory + a new warehouse was all financed with a term loan by Wells Fargo. The company had breached covenants when we provided emergency equity as we liked the story and knew demand would eventually come back as people return to work
Turnaround & Plan B Contingency…
Turnaround Plan —> consisted of geographic expansion into more lockdown friendly states which required hiring of new delivery drivers
Being a delivery driver required more than just driving a cargo van around, it required professionalism and an attention to detail
The pre-COVID standard operating plan for a driver consisted of…
Daily Route
Allotted time per stop
Schematics per client including pictures and quantities
The issue was the existing locations relied on long time drivers, who knew the nuances of their routes like client demands, where to park & how to get up to an office through security
New drivers from new territories wouldn’t have this already built in knowledge thus making any standard operating procedure difficult to implement should a driver quit, call in sick or had to change the route
Corporate Turnarounds require strict execution of the turnaround plan. Expect things not to go as expected and prepare with Plan B contingency thinking. Here is the Plan B process…
So I have laid out a real world situation, from a company I’m running currently where we have to plan around a standard operating procedure risk of drivers having a steep learning curve around the nuances of their daily jobs
The risk comes from drivers quitting, calling in sick or new clients being added
We needed to address this head on by always having a back up driver for any route in case any of these events occurred (& they will)
We laid out on a spreadsheet each client & had PRIMARY + SECONDARY driver - if we didn’t have a secondary driver, then we needed to train someone up on it which included having a secondary driver shadow the route with the primary driver
The secondary driver would then need to demonstrate they can follow the SOP for that client both in time & in schematic layouts with pictures before we felt confident —> we’d given them a little bonus for demonstrating this
We then game planned each driver “what if” they called in sick so that the route was already reshuffled. Again you don’t want your dispatch manager scrambling on a Monday morning if Mike the Driver called in sick at 6am. This took a lot of pressure from management so they can calmly disperse out each client from the sick driver to the appropriate driver(s) who came into work
Every 2 weeks, we would review the primary & secondary checklist to make sure that it still reflected reality. Did we make a mistake & give the secondary driver too much to do? Was the client satisfied with the new driver? (yes we would call the client) Did the route make sense given traffic patterns? —> key point: we went through a rigorous post mortem & constantly reviewed to make sure our Plan B was the right choice
We would have the driver, with the expanded route, to complete a time in/out checklist so we can better understand how it impacted their routes. It also gave us another data point on how well the primary driver was doing their jobs. Maybe the secondary driver was doing something more efficient (every minute counts!)
My goal for this article is not to demonstrate how to “Plan B” for a driver route but to layout what challenge we faced & how Plan B contingency thinking significantly reduced a major risk in the business (drivers calling in sick or performing poorly). Turnarounds do allow investors to earn +25% annual ROI’s but only if they are executed correctly. We found that always having a back up plan to every step in our SOP’s helped us achieve those types of results.
Plan B thinking can & should be applied to all aspects of the business not just operations. I’ll continue to go through more examples of Plan B thinking in other areas of a turnaround; from IT to accounting.
If you have any questions or want to bounce some aspects for your business off of me on how you can use Plan B contingency, don’t hesitate to reach out.