Business and life lessons learnt in turning around some of the world’s biggest failing companies
Internationally rated business turnaround expert Michael Dorn is setting up a multinational turnaround firm in South Africa called the RTgroup. His story is one of valuable lessons learnt through adversity and pressure.
M Dorn - RTgroup CEO RTgroup is a new kind of business turnaround firm that is built on the team’s expertise and emotional intelligence – not the legalistic and formulaic approaches followed by so many companies in the turnaround industry. Dorn, the maverick captain of this ship, is rated one of the top business turnaround experts globally.
When Dorn is called in to help turn around a failing company – and he’s been involved in some of the biggest turnarounds in corporate history – he’s often both “good cop” and “bad cop”. He likes to think of this duality in terms of “Zuckerbrot und Peitsche”, a saying in his native German that was made famous by Chancellor Otto von Bismarck in the 1870s. Directly translated it means ‘sugar bread and whip’, something akin to the carrot and stick approach.
In the boardroom setting, it’s often hard to read people’s motives and get to the heart of a problem. As part of the turnarounds of companies such as computer giant Dell, copier maker Xerox, the world’s largest chemical company Linde and African gas company Afrox, Dorn has learnt to identify and address why companies fail and how to save them. “Companies often need data visualisation to grasp a problem, but that’s not enough. Much can be learnt from spending time with management. Finding the human being behind the business persona, making a real connection, but then also walking the talk of accountability with them, is a game-changer,” Dorn says.
The making of a world class turnaround expert
Unlike his peers, Dorn does not come from an auditing or accounting background, but credits his formative childhood for instilling in him the grittier, more useful skills for the job. As a child, Dorn was a junior weightlifting champion in former East Germany and was awarded an air force bursary at the age of eleven. Growing up in this environment, he learnt from a young age to work hard, take ownership and overcome barriers. He trained as a bank clerk after school before fighting his way into a tertiary education from the Leipzig Graduate School of Management, University of Victoria (UVic) in British Columbia, University of Bayreuth in Germany, The Wharton School and INSEAD.
Dorn landed up working in business turnaround by pure fluke, and faced his fair share of adversity in business. Dorn was retrenched from a job in his early career after calling out abuse by his line manager at one of Germany’s biggest companies. He has faced personal threats to his safety from anxious stakeholders. At age 32 he became CEO of a listed German company that thanklessly let him go – after he rescued the business, and just bought his first house with his young wife. Working inside big turnarounds has entailed major stress and sacrifice.
Life lessons from the frontlines of corporate failure
Working in a big team on the Dell turnaround, when Michael Dell took back control of the company he founded after it started falling apart under new management, it was Dorn’s responsibility to manage the tricky European stakeholders. The global management consulting firm he worked for, AlixPartners, used a clever data visualisation tool to show up the inefficiencies in the business and kickstart a multi-stage process to address problems. It was here that Dorn learnt the value of a people- and preservation-centred approach. This entailed communicating well, treating all parties fairly, and being honest about failures and bad news. “Bad news is bad news, and you have to communicate it openly and do it right procedurally.” He also learnt that when things start “rotting”, you can usually trace it back to senior management. “The fish usually rots from the head. When searching for answers, you have to follow your gut instinct too – 20% of our brain is in our gut – and by having those water cooler conversations you can really get a feel for what is going on in a company.”
But crucially, he also learnt the value of structuring businesses for preservation and sustainability. “Leaders need to take their time to do proper succession planning,” he says. When leaders retire, they must appoint strong successors. If they don’t, it sets in motion the demise of a business. “Strong leaders appoint strong teams. Weak leaders appoint weak teams.” Afrox was another interesting turnaround. Dorn was brought onto the scene in 2015 to help turn around the ailing Johannesburg-based gas company. It was the first time he managed to implement all the methods he honed over the years and that form the basis of what the RTgroup stands for today: People, Proactivity and Preservation. He helped initiate a turnaround that saw Afrox go from a BBBEE Level 8 to a Level 1 contributor. By 2015, Dorn had already worked on big tech, private equity, banks and telecoms turnarounds around the world. “The greatest challenge in the business was its toxic old English culture. The previous management lived large – they used to have very nice board meetings in the Kruger Park. Then it was bought by one of the top German corporations, who brought us in. We weren’t expected or welcomed. We found a culture of total lack of accountability – if management’s target was 5% and they made 2%, it was okay. That’s why the business was in trouble.”
“The accountability issue was solved in one meeting,” Dorn recalls. The key to saving the business was cutting personnel costs, but the old management team only made 90% of their target. “I told the new CEO, Schalk (Venter), if we don’t make the numbers we never set the company up for future success.” Venter immediately sprang into action, telling the exco that if they did not make their targets by the end of the week, drastic measures would be taken. The targets were not met, prompting Dorn and Venter to meet on the Sunday to go through the personnel list and start culling. They started with a key exco member, to make a statement, and brought the headcount in line with targets. “This sent a strong message that the time of not making targets is over. It transformed the business. Since 2016 every year has been a record year – they don’t miss targets anymore and there is a real culture of teamwork and accountability now. Venter has excellent leadership skills.”
Another turnaround that taught Dorn an early valuable lesson in 2009 was TeleColumbus – a German cable network giant that later merged with PrimaCom to become PŸUR. Dorn was appointed as their permanent Chief Restructuring Officer (CRO) and had to ensure that the companies’ cash flows were aligned to allow for a successful merger. It was in the era of the Lehmann Brothers fall and many companies were too highly leveraged, including TeleColumbus, which was €1 billion in debt to a complex web of creditors. Dorn had to deal with market mistrust over the numbers, and spent much of his time in London dealing with anxious banks, private equity firms and lawyers. “When things get tough, I get very calm and I’m able to negotiate.” Again, he had to read people and their motives. His life changed when he received a threatening call from a stakeholder while in a taxi in London on his way to a shareholder dinner. It motivated him to cut an important deal that night that set the merger in motion. “I learnt that people often need to feel pressure to act quickly – it’s a lesson I’ve carried with me.”
Dorn makes it his mission to really get to know the leaders he works with – their hopes, fears, foibles, and families – and while being kind and compassionate, he also uses the opportunity to seek real accountability from them. If they won’t do what is needed to save their business – be it addressing culture problems, cutting costs, doing proper audits, upping productivity, or changing their business model – they won’t survive.
Dorn has had to use facts combined with intuition and emotional intelligence to get to the heart of some serious corporate failures. He’s been in the belly of the beast.
Investing in South Africa
Dorn’s globally distributed team of 170 people is currently setting up a headquarters in Cape Town, with a sister office in Germany, to work with clients in Europe, Africa and the United States.
The RTgroup is the culmination of Dorn’s 20-year career, his last gig being his position as the Germany-Austria-Switzerland Managing Director of AlixPartners’ Turnaround and Restructuring practise until 2021.
Dorn was at the top of his game in Europe, but never forgot a promise he made to his wife that they would one day live in beautiful South Africa – her happy place. Also being remarkably optimistic about South Africa and its highly educated and diverse people, he knew it was time set up his own firm in Cape Town. The family packed their bags and settled in Kommetjie, where Dorn – an ocean advocate – is in the ocean every day.
For Dorn, BBBEE is not just a box-ticking exercise. He sees it as an opportunity for sustainability. “At RT, we practice a mantra called People, Proactivity and Preservation. Empowerment is about all of those things, and all businesses, no matter where they are in the world, benefit in the long run from a more diverse workforce.” It is his mission to help more companies to harness real BBBEE – not window-dressing – to ensure that their businesses not only survive, but thrive.
He is an active member of the German Turnaround and Management Association, the International Association of Restructuring, Insolvency & Bankruptcy Professionals (INSOL), and the South African Insolvency and Restructuring Association (SARIPA).