How CHROs Turn Around a Struggling Business

"Has anyone ever kept a leader in a critical role for too long?"

She waited, then asked again. Don't leave me hanging.

Hands went up all over the room.

That was the fifth panel at our 11th annual Big CHRO Event on September 11 in the Dallas, TX area. The panel was called "Turn around a struggling business or function through talent changes," and the panelist asking that question had thirty-plus years in HR and opened by listing the mistakes she had made rather than the wins she had collected.

Names, companies, industries, and job titles are left out below. These leaders were specific on stage because the room was safe.

How do you tell whether a struggling business has a talent problem or a process problem?

Ask one question before you do anything else: if we changed the person leading this operation, would the outcome change? If the answer is no, you have a process, capacity, or market problem, and moving people will not fix it.

Our moderator framed the whole hour around this. We all want to prescribe the medicine, she said, but we don't even know why we have the headache, so do we need the pill?

Here is what the diagnosis looked like for one panelist. She joined her organization about five years ago, mid-pandemic. It has roughly doubled in size since, and had already quadrupled before that. Performance in one division was slipping, and the reflex in that situation is always the same: add people or cut people.

She and her CEO asked the question instead. What they found was that the leader in charge had been there since the organization was a quarter of its current size. Not a weak leader. A leader sized for a different company.

The skill set you need at one level of an operation is different from the skill set you need at another.

The evidence that pointed to capability rather than process was decision paralysis. As the business expanded, decisions stopped getting made, and that showed up in staff output before it showed up in any report.

She works the diagnosis through four streams:

• Performance patterns over time
• External factors in the environment
• Skills capability now versus what the next stage requires
• Business processes and where they break

That division generated about eighty percent of the organization's revenue, so a wrong call was expensive. She addressed the leadership gap first, then went after the process gap, starting with the program that was supposed to be feeding the growth.

Want to hear how she ran that diagnosis? CHROs, request the panel recording and we'll send you the LMS log-in: https://www.chropartners.com/recording-request

Why does restructuring so often have to be done twice?

Because the first one answers a cost question instead of a business question. If nobody has articulated what the restructuring is solving for, headcount comes out, the number still isn't hit, and it happens again six months later.

A second panelist asked the room for a show of hands. Who has done a restructuring? Many hands. Who did one and then did another one six months later? Many hands again.

She came into HR from finance, so her first restructuring felt comfortable. It was numbers, and numbers were what she knew. Six months later they did another one. Her reaction: well, we just did one. Where are all the people going? How are we delivering the business?

What broke the cycle was one leader stopping the room to ask what they were actually solving for.

That question surfaced something the cost math had hidden. They had a services margin problem, and the plan had been to reduce headcount and outsource. When they looked closely, the group they were about to outsource was the more profitable one. The outsourcing would have eroded the very margin it was meant to protect.

The research backs up how common this pattern is. Peter Cappelli, who directs Wharton's Center for Human Resources, has summarized decades of work on it plainly: the research evidence has not found support for the idea that layoffs help firm performance. Wayne Cascio and Amit Chatrath, writing in the Academy of Management Journal, examined decades of restructuring among publicly traded firms and found that cutting employees, on its own, did not reliably deliver the performance improvement companies expected from it.

Which means the second restructuring is not bad luck. It is the predictable result of the first one being aimed at a cost target instead of a business outcome.

Which leadership changes actually accelerate a turnaround?

The ones made in the roles closest to the business outcome you are trying to move, and made on the basis of fit for that specific role rather than general track record. Targeted leadership changes outperform broad reorganizations because they change how decisions get made without destabilizing everyone at once.

Two stories from the same panelist show both sides of this.

When it worked. A business unit that wasn't hitting its numbers got sold off. The former parent kept 49 percent, the new owner took 51. Everyone braced for numbers, margin, and cuts. That isn't what happened. From the announcement forward the conversations were about capability and where the gaps were, on the premise that people deliver the result. Employees sat in decisions about how the new company would be structured.

They still had to reduce people. But by then people understood why, and when the offer letters went out, every single person accepted. This was a group that hadn't had a bonus in two years or a merit increase. They hit the target that first year, bonuses were paid, and there was money for merit.

When it didn't. A genuinely strong succession plan, the kind where a role opens and two or three people are already ready. A key leader rotated out of one of the biggest revenue positions in the business and the designated successor stepped in. He had delivered in several roles before.

Then the customer called the CEO to say he was phoning them on weekends.

He was out in under two months.

Leadership is not one size fits all. A bench tells you someone is ready. It does not tell you they are ready for this.

What are the most common mistakes leaders make in a talent-driven turnaround?

Treating it as a headcount exercise instead of a leadership and organizational effectiveness problem. The panelist with thirty years in the work named five, and put herself on the list for most of them.

1. Acting before diagnosing the root cause. Leaders assume poor performance when the real issue is unclear priorities, broken processes, capacity gaps, thin resources, or inconsistent leadership. Get the diagnosis wrong and you lose good people without touching the problem.
2. Keeping the wrong leader in a critical role too long. Her example was a CFO who stayed well past usefulness, and the complication will be familiar. He had been placed by the private equity firm, approved by the board, and was on track to succeed the CEO. The person who needed to go had been chosen by the boss's boss's boss. They made the move eventually, but not before his team and his peers had lost respect for him.
3. Changing things without a clear communication strategy. When employees don't understand the why, they write their own version. In her words, the water cooler conversations turned into little mini podcasts. Her own example: they brought in an outside coach to prepare several executives ahead of some retirements and never explained the plan to the executives who weren't in the program. They had to go back and clean it up. A related warning from the same story, hire the right coach. Theirs took the executive team off-site and ran an exercise about purple dinosaurs and unicorns.
4. Fixating on under-performers and overlooking high performers. The problems absorb all the attention while the people carrying the work feel passed over. Our moderator's version: it is like having two children, and the bad kid gets the best attention, so the good kid starts asking what the point is.
5. Confusing urgency with speed. Turnarounds need decisive action. Speed without discipline produces bad hires, inconsistent treatment, compliance exposure, lost institutional knowledge, and lower trust.

That fifth one came with the best description of bad hiring in the room. Opening a new division with mass hiring to do, they hired what she calls a whole bunch of Bobs. Bodies on board. If you breathe, come on board. Then, inside sixteen months, they replaced the vice president once and the hiring manager twice. So a building full of people hired for having a pulse, waiting for direction, and a new person giving it every few months.

Want to hear her work through all five? Request the recording: https://www.chropartners.com/recording-request

What is the one mistake experienced leaders still make?

Delaying the decision about a leader who is no longer effective but is still considered critical. Experienced executives usually spot the problem early. They hesitate anyway.

The reasons are human. The person delivered before. Institutional knowledge walks out with them. The relationships run up to the board.

The delay sends a message that past relationships matter more than performance. Then direction gets unclear, decisions slow, morale drops, and the strongest people start asking whether this is the right place for them.

The reframe she offered is the line worth keeping:

Compassion and accountability are not opposites.

You can treat someone with dignity and still make the decision the organization needs. Where she and her teams got it wrong was leading with the heart instead of the evidence and the long-term goal. Not because the caring was a mistake, but because the caring replaced the decision instead of shaping how it was made.

What is hardest to recover from in a turnaround?

Losing the team's trust. Processes can be redesigned and structures can be shifted. Trust takes far longer, and the danger is that leaders rarely notice the loss at the moment it happens.

Her image for it: a sore you never pour medicine into, so it turns into a bigger wound.

People stay. They show up. They are no longer there, emotionally or intellectually. By the time anyone has the realization, knowledge is gone, customer relationships have taken the hit, and the people who were next in the succession plan have quietly decided this isn't for them.

Her instruction for avoiding it runs two sentences. If you know, say you know. If you don't know, say you don't know. People would rather handle the truth than watch you pretend.

What are the warning signs a turnaround is going wrong?

Between the three panelists:

• High performers go quiet, then unexpected resignations land on your desk
• Turnover rises in critical roles specifically, not just overall
• People go to informal channels for clarity instead of formal ones
• Repeated restructures with no measurable improvement in results
• Employees start protecting themselves instead of solving business problems
• A widening gap between what senior leaders say and what employees experience
• Burnout, then absenteeism, then employee relations issues, then customer issues
• Disengagement in a team that was performing, with no change in the roster

That last one has a rule attached. If the players haven't changed, something else did, so go find it.

And the signal to watch above all the others:

Activity increases while clarity decreases.

A turnaround that is working produces more focus, stronger accountability, and more confidence. If people are working harder and still cannot tell you what success looks like, the organization is moving quickly in the wrong direction.

How do you tell a low performer from a bad leadership match?

Look at the history and what changed around the person, not just the performance rating. A meaningful share of so-called low performance is a mismatch between an individual and their current leader, and it reverses when the match changes.

The sharpest question of the hour came from the audience. She had inherited someone labeled a low performer, on a performance plan. Six months of real development and real attention later, that person is her AVP. So how do you tell the difference?

Our moderator answered from her own history. She has been the low performer. Same person, new leader, and she was performing. The questions she asks when a manager brings her one of these: what does the history look like, what changed, what would make this person successful, are they in the right seat, are they with the right leader, or should they not be here at all. You will get some of each.

The practical half came from the panelist with thirty years in it. Open communication, real one-on-ones held more than once, documented. And stay interviews, long before anyone is on the way out, because you learn more about what is in someone's head from a stay interview than from anything else you will run.

Then the line the room carried out with them. You are not always going to be everybody's cup of tea. There may be nothing wrong with that team member and nothing wrong with you. Your tea just isn't mixing right. And it is okay to say so.

The pattern underneath all of it

Every story in this session was about a decision that was obvious in hindsight and got made late.

The leader who had outgrown the role. The CFO the board had picked. The restructuring that ran twice because nobody asked what it was for. The outsourcing that would have cut into the margin it was meant to protect. The successor who was ready for a job, just not that one.

None of those were hard to see. They were hard to say.

Which is why "diagnose before you prescribe" is not really about analysis. The diagnosis is usually sitting right there in front of the team. What the discipline buys you is evidence strong enough to say it out loud, early enough that the decision is still yours to make instead of the market's.

A few quick answers

What should a CHRO do first in a turnaround? Ask whether changing the leader of the struggling operation would change the outcome. That single question separates a talent problem from a process, capacity, or market problem before anyone spends money.

Do layoffs improve company performance? The research does not support it as a general proposition. Peter Cappelli at Wharton has said the evidence has not found support for the idea that layoffs help firm performance, and work by Wayne Cascio and Amit Chatrath in the Academy of Management Journal found that employee cuts alone did not reliably deliver the expected improvement.

Why do companies restructure twice in a year? Because the first restructuring was aimed at a cost target rather than a defined business outcome. If nobody articulates what is being solved for, the number still gets missed and it happens again.

How long should you give a leader who isn't working out? Shorter than most organizations do. The most repeated mistake among experienced executives is delaying a decision they already recognize, and the cost of the delay is trust, not just time.

What is the earliest warning sign of a failing turnaround? Activity rising while clarity falls. If people are busier and less able to say what success looks like, the direction is wrong.

Is a strong succession bench enough? No. A bench tells you someone is ready for a level. It does not tell you they fit a specific role, a specific customer, or a specific moment in the business.

How do you know if someone is really a low performer? Check what changed around them before you conclude something changed in them. Look at history, current leader, role fit, and whether they have had real development. Stay interviews surface this earlier than performance reviews do.

Want to see the panel?

This is exactly the kind of thing we work through at The Big CHRO Event, our flagship gathering of 100+ sitting CHROs in Dallas each September, and in the CHRO Mastermind Groups that run year-round. If you're a sitting CHRO and you want to hear these three leaders list their own turnaround mistakes, request the recording here and I'll get you the LMS log-in: https://www.chropartners.com/recording-request