Bringing empathy to the restructuring industry
Restructuring is an intense industry. Everything is a crisis and you’re moving at lightning speed to extinguish the fires. Even though bankruptcy is a clearly defined process, there aren’t a lot of people who really understand and can appreciate what it takes to push the company through this painful period. This makes it a very lucrative industry in which advisory firms see opportunities to tear off pieces of failing businesses and nonchalantly sell them in court to fill their pockets. I fear the purely transactional nature of this industry is inhibiting the level of success possible for everyone involved.
Of the few firms who understand how to work the balance sheets during a restructure, even less are versed in the operations. Throughout their careers, most people have been ingrained in one side or the other and simply haven’t had the opportunity, or desire, to witness—let alone drive—both sides. Without this experience, it’s difficult to see where both sides intersect.
Understanding how restructuring affects people within a company is critical. A business is a living organism. Behind the reports and numbers are leaders who are not prepared for the onslaught of doubt, criticism and organizational dysfunction that accompany such times of distress. They can feel the burn of blameful gazes from employees who are petrified of losing their jobs. Unfortunately, the nature of this business has resulted in advisors who do not understand, nor candidly care, what happens to these individuals. There’s a level of empathy that doesn’t exist.
We need to take another approach to governance and restructuring. While it’s traditionally been a transactional process, it doesn’t mean there isn’t a way to do it differently and with empathy. Areté is focused on incorporating this essential human element into all of our transactions to achieve more successful outcomes.
Why empathy matters in restructuring
After decades of experience working on both sides of the equation, guiding organizations through some of their darkest days, we’ve learned that successfully turning around management teams requires empathy. While we recognize that sometimes it just comes down to dollars and sense, you can’t ignore that human beings are driving the process. A profound personal challenge arises from navigating organizations through existential crises. The human costs associated with “the tough decisions” can be massive and heavily weigh on everyone involved. Lost dreams, anxiety, fear over the future and a sense of betrayal are just a few of the human conditions to consider. The personal toll on the people leading the organization will be, at a minimum, life-changing.
It’s unreasonable to expect an optimal outcome if you approach distress in a purely transactional manner. Considering personal dynamics creates awareness of the gap that exists between the operational and transactional sides and how to bridge it. Empathy guides daily interactions while working on the front line to find out what’s really going on. Empathy can reduce the risk of catastrophic situations and increase loyalty. Empathy fosters trust when you’re in the trenches working shoulder-to-shoulder with management, empowering them to make tough decisions in the most challenging situations to lead the company toward success.
Areté embraces empathy to redefine what success looks like. We prefer to think like entrepreneurs rather than capitalists, viewing the troubled business as a start-up. How can we be nimble and think about things completely differently? How can we redesign processes to turn things around and help the business reach its highest potential?
This idea is where the name Areté finds roots. In ancient Greece, a person of Areté was considered highly effective, using all of their faculties to be their best self and achieve real results. Our goal is to help businesses do the same. Areté also pertains to moral virtues so, along with empathy, we’ve incorporated corporate values including gratitude, experience and character into our firm to strengthen our relationships internally and in every transaction. With Areté, we can help clients find the best solution to help the company and its employees so that everyone comes out better in the end.
People sometimes ask why we do things the way we do. While it often takes excruciatingly long hours amid constant pounding by the people on the other side of the table, we cannot think of a place we would rather be. We show up every day with gratitude for the responsibilities we are given and the opportunity to drive positive change. Our “Why” is the small thank you for the jobs we have saved, the late-night counseling sessions to reinforce the value and contribution of others, the ability to practice humility in extremely tough situations and the unbelievable life-long relationships we earn fighting in the trenches of corporate warfare. Many CEOs we’ve helped are now dear friends of mine. Those relationships wouldn’t be possible without empathy.
At Areté, we believe that the greatest personal, professional and organizational growth can often be forged out of the most difficult of situations. Having the right team with the right experience by your side can tip the scales between success and failure. We thank our clients for allowing us the honor of being your partners and look forward to contributing to an industry shift toward more balanced restructuring, ultimately leading to stronger businesses and an overall economy.