From Black Hole to Break Even: How I Turned Around a Failing Division
Years ago, I was part of the executive team at a global logistics company with thousands of employees and revenues in the hundreds of millions. One division, composed of a few hundred employees, had become the organization’s black hole, hemorrhaging $750,000 each month.
No one wanted the responsibility of fixing it; frankly, neither did I. Yet, I found myself tasked with the monumental challenge of orchestrating a turnaround. And six months later, we broke even. That decision led to one of the most intense—and rewarding—leadership experiences of my career.
The lessons from that turnaround, though rooted in a specific company and moment in time, have become increasingly relevant in today’s manufacturing landscape, with economic uncertainty, rising labor costs and shifting regulations putting pressure on margins.
Whether you’re overseeing a plant, a supply chain, or an entire enterprise, here’s what worked for us—and might just help you, too.
What You Don’t Know Will Hurt You
When I was first briefed on the division, the leadership narrative was simple: soft demand, temporary client attrition. But when I dug deeper—walking facilities, reviewing contracts, sitting with frontline teams—the real story came into view.
Entire teams had been built to support contracts that never materialized. Customers had quietly walked months ago, with no escalation. And we had warehouses full of inventory that lost value every day.
While that company wasn’t in manufacturing, I’ve worked with and advised manufacturers and the stakes are even higher when you’re producing at scale. In, especially at scale, false assumptions about what's happening on the floor can derail the business. If your profit and loss is raising red flags, don’t just trust the dashboards—walk the line, talk to your people and validate what you’re hearing.
According to McKinsey, companies that use real-time data to inform operational decisions outperform peers by 2.5 times in revenue growth. But getting that level of insight requires spending time on the frontlines of your operation.
Legacy Customers Can Be a Hidden Cost
It’s one of the harder-to-accept truths in business: Not every client is worth keeping.
As we dug through the division’s accounts, we uncovered clients who were paying legacy rates so far below market that we were underwater every time we serviced them. Some of our biggest monthly losses came from high-maintenance clients who consumed disproportionate resources—yet whose contracts didn’t even cover the cost of delivery.
We took a hard look at the service model and pinpointed where certain client relationships were actively eroding profitability. In cases where rates couldn’t be renegotiated and operations couldn’t be streamlined, we made the decision to walk away. It felt risky—but it was the right call.
It’s an uncomfortable truth: Not all customers are profitable. And if you're not actively evaluating your customer base, you could be sacrificing capacity that could be redeployed more effectively.
In manufacturing, this might look like dedicating premium floor space or machine hours to clients who are locking you into thin—or negative—margins. If renegotiation isn’t an option, reallocation might be.
Underperforming Facilities Can’t Be Ignored
Our five warehouses were all operating in the red—some severely. One was losing $100,000 monthly. But with long-term leases, closing them wasn’t a quick fix.
Instead, we asked hard questions: Could we consolidate? Could we sublease? Were there clients we could onboard to at least cover fixed costs?
Manufacturing executives face similar real estate burdens—especially with facility expansion outpacing volume recovery in some markets. If you’re sitting on underutilized space, it’s not just a sunk cost—it’s a strategic drag on your competitiveness.
The bottom line: there’s no margin for sentimental assets in a margin-squeezed world. You have to be ruthless about what’s serving the business—and what isn’t.
Transparency Builds Trust—and Performance
We knew early on that layoffs were coming. But instead of hiding behind closed doors, we made a different choice. We laid out what we knew, when we knew it. We told staff that within 30 days, they’d have answers. For those impacted, we offered stay bonuses and transition support. We showed up—in every city, face-to-face. We bought lunch. We were honest.
And something surprising happened: People appreciated it. We heard things like, “We were wondering why this didn’t happen sooner.”
In manufacturing environments—where plant workers and line leads often hear rumors before official updates—clear, direct communication is critical. Trust isn’t a soft metric. It’s a force multiplier.
In any turnaround, morale is fragile. But trust—especially in uncertain markets—is a performance driver. PwC’s 2023 Trust in Business report found that 91% of employees who trust their company’s leadership say they’re more likely to stay, even during difficult times. In my experience, transparency doesn’t erode confidence—it builds it.
From Stabilization to Growth
By August—six months after we started—the division hit break-even. We had reduced staff by 40%, shut down or restructured underperforming warehouses, re-engaged with clients and implemented a new go-to-market strategy.
And crucially, we weren’t just focused on survival. Even while we were stabilizing, we were laying the groundwork for growth. The sales team was already pitching to new, better-fit clients. We updated our pricing model to reflect the true cost of service, especially in areas where legacy clients had been operating under outdated rates. And we overhauled our onboarding process, which had been inconsistent and siloed—leading to gaps in client expectations and internal handoffs. We were rebuilding the foundation—smarter, leaner and with far more discipline.
Manufacturing leaders often treat turnaround phases as a freeze frame—pausing operations to assess damage, rather than using those insights to build a strategic path forward with renewed momentum. These are the best moments to reset with clarity. If your foundation is being rebuilt, make sure you’re planning what comes next.
When you’re facing millions in losses and hundreds of people looking for leadership, you don’t have time for perfect clarity. You need to act—with urgency, with discipline and with resolve. Because leadership, at its core, isn’t about the title or the corner office. It’s about being the steady hand in the storm. It’s about showing up when things are at their worst, listening without ego, making decisions others won’t and earning trust one hard moment at a time.
Turnarounds aren’t won in a single move—they’re built day by day, choice by choice. And if you do the work, if you stay with it, the results come.
