A Checklist and Process for Conducting Rapid Due Diligence on Your Own Company
By: Michael Kanazawa
When economic storms strike businesses, often the first move is to quickly reorganize to reduce costs. This is often a necessary move to reduce the fixed cost structure of the business. However, if done without a sense of strategy and priorities, it can damage healthy parts of the business and miss the opportunity for even deeper reductions in ailing parts of the business. The ability to conduct a rapid and sound strategic assessment can create an important distinction between flailing and decisive action. Conducting a form of due diligence on your own company can provide a fast way to set direction and priorities without just relying on gut feel, politics, and outdated assumptions to make the changes. In this post we share a specific checklist and process to get through an assessment fast.
Reorganizations carry a hidden cost of loss of momentum and focus on execution that is not often considered. The following quote captures this well. “We trained hard, but it seemed that every time we were beginning to form up into teams, we would be reorganized. I was to learn later in life that we tend to meet any new situation by reorganizing; and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency and demoralization.” Does this sound like a familiar comment or situation to you?
Given the heavy costs and disruption to the business, it is worth having a clear plan, priorities and sense of strategic direction when reorganizing. However many leaders skip this step because they believe it will take too long to get to the reductions. Borrowing from the playbook of turn-around and buyout experts in private equity, these plans for intelligent reorganizing can come together quickly.
Due diligence is normally a process for assessing a potential acquisition. It is a several week process of quickly diving into the details of the financial health, legal issues, customer relationships, employee capabilities, and competitive growth options of a business. Having worked in both areas of strategic planning for large companies and strategic due diligence with private equity investors, it became clear that ongoing businesses could leverage this due diligence process for rapid strategic planning when needed for making internal decisions, not just when a transaction is pending.
Follow this link to a checklist and process for conducing rapid due diligence on your own company to generate the fastest confrontation of reality and sharpening of your strategy possible. In our work we continuously experience management teams and private equity investors driving to quick decisions that are clear, externally validated, and financially sound. There is no reason that companies can’t leverage this same process for preparing for a reorganization, except that it is intense and tough work. However, conducting a major reorganization is already tough work as it is.
Don’t fall into the trap of using a re-organization to try to spark change. Make major organization changes only when necessary to execute on a specific change in strategic direction. Conducting due diligence on yourself is a way to question your priorities and success drivers quickly and deeply in a matter of weeks.
By the way, the opening quote is from Petronius Arbiter, 210 B.C. I wish I could remember where I had first seen this to pay attribution to the person who found the quote, but the point is clear. If you are going to undertake a reorganization to reduce costs, do it with a clear purpose and strategic intent in mind.
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Michael Kanazawa shares recent insights and tips about the no-nonsense, results-driven approach to driving business breakthroughs found in his new book Big Ideas to Big Results.