When Facing a Crisis, Make it Your Best Ally (Commentary by John Newman)

At age 66 my father almost died from a heart attack. After a grueling 5-way bypass operation, he let the crisis be his ally. 

He radically changed his diet and priorities, appreciating each day and showering attention on his family. For that, and 9 more years, we were blessed.

No one wishes for tough times, but when they come you can try to swim upstream through denial, or you can flow with the downturn and seek opportunities for change.

In November of 1999 I traveled to Fort Recovery, Ohio, population 1,300 and home to The Equity, a deeply troubled 80-year-old farmers’ co-op.

The company was hemorrhaging cash and had announced that they might be shutting down.

The vultures were circling.

Over the next year, through many small and large battles – some won – some lost, we achieved a marvelous turnaround.

What I recall most, though, is fear – the community’s fear of losing their cooperative and my fear of failure.

We carried the fear as one carries a heavy backpack. Some days, it just weighed us down. On many others though, inside the fear we found the energy and flexibility to power the turnaround forward.

The Equity had 2,000 farmer-owners from the surrounding countryside, with stock passed from generation to generation.

Members received dividends, a vote and a connection to the community.

Like any other business, a co-op must compete to survive.

When structured correctly, it has owners who are aligned with its business rather than simply being investors, and this creates a competitive advantage.

Unfortunately, this was no longer the case at The Equity, which was organized by corn farmers in 1919 to pool and market their corn. In the 1970s.

The Equity entered the egg business, feeding corn to laying hens and selling eggs, thereby increasing margins. The venture grew.

By 1999, the company was the 6th largest egg producer in the country and sold no corn because the 8 million chickens ate it all.

Of the 2,000 owners, just 100 housed the laying hens and knew the egg business well.

The other 1,900 simply grew corn. If they could get better prices, they might even sell their corn elsewhere. For an enduring turnaround, it is not enough to just alleviate the crisis.

Putting a derailed train back on the tracks without repairing the rail bed is shortsighted.

For The Equity, the rail bed fix was to reduce ownership to the 100 egg farmers.

This required a majority vote of the 2,000. After 80 years, we were asking them to vote themselves out of their co-op.

It was controversial. I took an hour off one afternoon and walked to the only barbershop in town. While getting my haircut I asked if any customers talked about the situation at The Equity. The barber chuckled, “Well, only about 9 out of 10.”

On one hand, we were telling them that their co-op would never be competitive without this change.

On the other, they would be giving up all future dividends and a multi-generational connection to the community. During past good times, each farmer’s dividend could be thousands of dollars.

That the farmers had been told two months earlier about plans for liquidation worked to our advantage, as it had immersed the community in the crisis from the beginning.

One corn farmer told me, “I doubt that you can save us, but hey, I voted for it because we’ve got nothing to lose.”

The vote passed, barely. In the eight years since, The Equity has thrived. Last year, they recorded a record $12 million in profits.

You don’t have to wait for a heart attack or bankruptcy. J.B. Hunt said the key to his success was that he greeted each day aware of how things might all fall apart.

Through Presidents Advisory Group, I have worked with top-notch CEOs of healthy companies. They don’t wait for bankruptcy to come knocking at their door.

With outward calm, they respond to minor downturns as if they were crises. “Yes, we are having a record year, but we lost that last bid. If we do not increase our efficiencies, we will lose them all. Now, here is the plan to lower our costs.”

(John Newman of Fayetteville leads turnarounds of troubled companies. E-mail him at [email protected].)