Jonathan Solursh on the role of a CRO

Jonathan Solursh
Founding Principal
R.e.l. group inc.

In a restructuring, time is more valuable than money. This is the key advice of Jonathan Solursh, who, with his team at R.e.l. group inc., has acted as Chief Restructuring Officer (CRO) in many complex restructurings. Here, he gives us an inside look at the role of a CRO and the key part it can play when a company is in a distressed situation.


1) In what type of situations does it make sense to bring in a CRO?

Each situation is unique. In general, there are three scenarios where it makes sense to bring in a CRO:
  1. Any time a stakeholder or group of stakeholders wants to ensure control and direction, but still have management manage the problem, there is an ideal opportunity to bring in a CRO. The concept of a CRO is having a hands-on executive rather than a consultant or an advisor who stands at arm’s length.
  2. A CRO is also well-suited where strong management exists but needs support in the restructuring function. Restructuring is a very large management distraction, one that can cause even the most seasoned management team to take their eye off the ball.
  3. A third scenario would be when the stakeholders have lost confidence in management and need a strong executive to step in.
In practical terms, in a commercial crisis there are multiple issues at play that almost always include viability issues. It is my view that the CRO option will result in a more efficient, less conflicted and more natural result. Simply put, having each party playing its natural role is usually more efficient and less problematic. The appointment of a CRO is largely a philosophical one and comes down to a few important questions:  Should the company (even in its diminished state) continue to manage its affairs?  If not, who is best positioned to deal with its affairs, including managing external stakeholders and dealing with the many potential conflicts of interest that accompany many traditional appointments?

 

2) Who typically appoints the CRO?

In our experience it is typically the Board of Directors or an influential stakeholder in the capital stack. It is a practical matter, often determined by whoever’s interests are at the greatest risk.

3) How do you get management and employees to buy in to your turnaround plan? Especially if they were not the ones who asked for your help? 

Firstly, it is never simply “our plan”, it will always be a plan developed by management. A CRO, by definition, is an officer of the company and part of the management team. This speaks to the philosophy of having a CRO vs. having an external advisor.

From the perspective of the employees, the CRO is a new “boss”, and as with any management changes, there may be some teething but things work out. From the perspective of other executives, the CRO is a new management team member or team leader. In this case, having other senior management come on board with ideas is not different than for any member of an executive team. It takes patience, clarity and some time. Where there is no time for consensus building, the decision to move forward with a given plan becomes an issue for the Board. In the case of a Court appointment it will depend on if the board is still in place and if not, it may be at the discretion of the CRO to make changes in the management team.

4) What are the most important skills/qualities that you draw on to be successful as a CRO?

  • From a non-technical standpoint: perspective and empathy. Having perspective allows one to see alternatives, while empathy helps one to understand stakeholder interests. In the end, our work is all about managing interests, not taking principled positions;
  • From a technical standpoint: commercial creativity driven by sound analytics. One has to be able to roll up one’s sleeves and do the homework. Successes are often rooted in strong accounting and analytical skills mixed with creative and unexpected solutions;
  • Strength as both a manager and executive: It was not until I acted as a CEO of a company in my first CRO mandate that I truly understood what it meant to be part of the management team versus being an “outside professional”. That divide was much larger than I had anticipated; and
  • Ability to make decisions: I have often argued that all decisions are good decisions. Lack of a decision is also a decision. In other words, it is critical that a company makes decisions and continues to move forward, as time is more valuable than money. This has always been my mantra in leading companies through difficult times.

5) What is the most interesting engagement you’ve worked?

Frankly, all our engagements have been interesting, bringing with them new relationships and experiences. What is most interesting is a common thread where we got involved in situations where the realizable value was non-existent and many had given up on a company’s commercial prospects, yet we managed to negotiate viable going concern solutions. A few stand out for different reasons:
  • Aveos Fleet Performance – given its complexity, and the size and scale of the business, combined with the politics and counterparties. At close to $1.0 billion in revenue and 3,500 union and non-union employees, operating in a regulated environment that was politically charged made for some interesting and memorable moments where stakeholder management and interest-based negotiations were key to the success achived;
  • A First Nations owned enterprise operating in Canada’s North – running the business was interesting and rewarding in and of itself; however, getting to know the First Nations and their unique culture and perspectives was a priceless experience; and
  • Running a large manufacturer based in Toronto with significant offshore purchasing in China. Moving production from China to Canada while improving results was a strategy that was counter to the market. In addition, part of the turnaround plan included redeveloping the brand, consumer experience and products, allowing our team to use our creative and commercial skills.

6) How did you get into this line of work?

I was fortunate to work with very strong mentors and leaders in Canada and many other countries while I was at Coopers and Lybrand and subsequently PriceWaterhouseCoopers and Prowis.  The strong leadership of both partners and senior managers provided me with exposure to a wide range of industries and various restructuring and commercial scenarios. I was very happy until one day I was asked a question by a debtor that changed my career trajectory. The CEO of a large complex business came to me and asked, “How do I get my company back?” I didn’t have the answer. That was a “crossing the Rubicon” moment for me. From that day forward, I started to shift my career focus from creditor to debtor.

Ultimately, what I wanted did not fit with the large accounting firm model: taking on executive suite roles and working with a multi-disciplinary team in creative ways. At the same time, I recognized that the large firms were excellent at what they did, and I did not want to compete with them. As a result, when it comes to formal mandates, we do not take Trustee, Monitor, or other Court mandates (other than Court appointed CRO, or other litigation management and/or support roles). We are happy to call any of the firms when we need a Monitor or other help including analytical, tax and other support.  My partners and I believe that getting the right “fit” in terms of people working on a case will drive value for all involved.

By design, Rel is a multi-disciplinary team with backgrounds in accounting, restructuring, operations, banking and law, something I could not build at a traditional accounting firm. I believe that fundamentally the leadership team in a restructuring should have diverse expertise and background, and also be commercially minded, in order to be successful. We have limited the mandates we take on with all these skills to ensure we stay focused in our core area of practice.

Complex turnarounds have a role for many professionals. In our case, we focus on providing leadership as CRO, interim CEO, or in some limited cases, advisor to senior management or other key stakeholders, with a focus on debtor mandates. Even in these cases, the magic happens in a restructuring when a team comes together that includes lawyers, CCAA Monitors, or Trustees, all playing their respective unique roles. As an aside, we offer certain limited creditor and equity advisory roles where our experience of having run companies affords us the insight that these clients seek.

7) What advice would you have for others considering doing something similar to you?

Overall the question is one of time and place. Today we are in a weak turnaround market with, among other things, low interest rates. A low interest rate is an indication that the market does not ascribe high value to money (as a commodity). This is not going to change overnight. Also, as I have mentioned above, the skills gained at an accounting firm and even combined with the rich experiences I was afforded, are not necessarily enough to bridge someone to the role of a management leader. In my case I worked very closely with a professional executive who helped mentor me. Each of us knows where our skills need developing and what mountains we have to climb. So, if you want to head into this, do it with your eyes wide open and be honest about who you are and what growth you need.

Background about Jonathan Solursh:
R.e.l. group inc. (Rel) is a unique chief restructuring officer and turnaround firm. The practice is holistic, focusing on combining balance sheet and commercial restructuring with stakeholder management and long-term viability, all of which are needed for a successful turnaround or restructuring. Jonathan’s background, with 17 years at Coopers and Lybrand or a related entity, focused largely on corporate national files where Coopers acted as Court Officer or Agent for Secured Lenders. He also spent many years traveling the world working on complex, and in some cases, multinational restructurings. Working in the United States, Asia, South America, Latin America, the Caribbean, Africa, Europe and Russia has defined his view of commerce.

 

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