In a stunning corporate revival, Rolls-Royce has seen its fortunes dramatically reverse, marked by a staggering 600% jump in its share price and the achievement of profit targets a full two years ahead of schedule.
This transformation, occurring just two years after newly appointed CEO Tufan Erginbilgiç delivered a stark “burning platform” warning to employees, underscores the efficacy of a focused turnaround plan that has added over $70 billion to the company’s market value.
When Tufan Erginbilgiç, a former BP executive, took the helm of Rolls-Royce, he inherited a company facing significant headwinds.
He famously described the iconic engine maker as a “burning platform” that was confronting its “last chance” at survival, lamenting its history of value-destructive investments.
At that point, Rolls-Royce, a manufacturer of engines for major aircraft producers like Airbus and Boeing, and a key supplier of propulsion systems for combat aircraft and submarines to governments including the UK’s Ministry of Defence, was languishing near its lowest market valuation.
The downturn was exacerbated by the collapse in air travel during the Covid-19 pandemic and burdensome, loss-making contracts.
While an industry-wide rebound in travel demand and astute contract renegotiations have been cited as key external factors in Rolls-Royce’s recovery, the internal strategic overhaul orchestrated by Erginbilgiç has been pivotal.
This ambitious plan actively involved the company’s extensive workforce of 42,000 employees.
The ‘Four Pillars’ of transformation: Erginbilgiç’s turnaround blueprint
In a recent interview with the Financial Times, a triumphant Erginbilgiç detailed the “four pillars” that formed the bedrock of his strategy to instigate wholesale change throughout the organization.
The first pillar centered on confronting employees with the stark reality of the company’s precarious situation.
Erginbilgiç’s “burning platform” remarks, though shocking, served to galvanize and focus his workforce on the urgent need for change.
This was followed by decisive, and at times difficult, actions.
Also read: Rolls-Royce share price nears 1,000p as a new catalyst emerges
Under Erginbilgiç’s leadership, the company implemented significant restructuring, which included laying off 2,500 employees in 2023, primarily targeting middle management positions, as reported by the FT.
This constituted a key part of the second pillar, which involved reshaping the organizational structure and, crucially, fostering a new culture of idea generation and implementation.
Concurrent with the layoffs, Erginbilgiç initiated workshops for 500 employees, creating a forum for brainstorming and a mechanism to implement the most promising ideas from the ground up.
The third pillar of Erginbilgiç’s strategy required the establishment of clear, measurable performance targets.
Rolls-Royce now operates with 17 distinct targets, including a critical metric focused on improving the amount of time its engines spend “on the wing” of an aircraft, thereby generating revenue, rather than languishing and incurring costs in repair shops.
Finally, the fourth pillar was designed to ensure that these newly defined targets were pursued with unwavering “pace and intensity” across the entire organization.
Erginbilgiç summarized the importance of this comprehensive approach to the FT:
If you don’t have a strategy that can cascade down to 42,000 people it won’t get delivered.
Management strategies for direct engagement
The approach taken by Erginbilgiç aligns with a growing trend among corporate leaders who are increasingly turning to management practices designed to communicate their strategic vision directly and effectively to a broad employee base.
This shift is often driven by a sense of urgency, as was the case at Rolls-Royce, or facilitated by advancements in technology.
For instance, Sanofi CEO Paul Hudson, speaking to Fortune last year, described his ‘Fight Club’ approach to encourage the adoption of a new AI agent among employees.
By initially introducing the tool to a small, influential group, Hudson leveraged word-of-mouth to drive wider uptake.
Similarly, Bayer, another European industrial giant facing its own struggles and investor pessimism, also implemented a significant personnel shakeup.
Bayer’s CEO, Bill Anderson, streamlined the organization by removing over 5,000 employees, mostly in managerial roles, and empowered the remaining workforce to self-organize and operate in 90-day “sprints” within self-directed teams.
A year after initiating this attack on bureaucracy, Anderson reported a fall in attrition at the company, suggesting the changes were positively received.
Erginbilgiç’s success at Rolls-Royce, built on candid communication, decisive action, clear goal-setting, and relentless execution, definitely offers a compelling case study in modern corporate turnaround artistry.
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