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Road Map to Success When Rebuilding After Bankruptcy

Addressing recruitment, onboarding, legal and financial challenges sooner than later are key in restructuring post-bankruptcy and the steps to success might be easier than you think.


GlobeSt.com | May 13, 2020


GlobeSt.com

The GlobeSt.com article, “Road Map to Success When Rebuilding After Bankruptcy,” quoted Russell Reynolds Associates Consultants Deb Barbanel and Rusty O’Kelley on how to effectively rebuild a board post-bankruptcy with a focus on the real estate industry. The article is excerpted below.

In what was one of the first major retail bankruptcies since the novel coronavirus struck the US, J Crew recently filed for Chapter 11 protection. Then, Neiman Marcus became the first major department store to file for bankruptcy during the pandemic. Gold’s Gym was up next and the list goes on. Those retailers are just a few of the many companies facing restructuring and bankruptcy.

Rebuilding the Board

One important but often overlooked challenge should be added to that list: Properly restructuring a board post-bankruptcy, according to Rusty O’Kelley, co-leader of the Board & CEO Advisory Partners and global leader of Board Consulting and Effectiveness Practice at Russell Reynolds Associates.

He tells GobeSt.com that when it comes to rebuilding a board, there is a clear roadmap to success. The first step? Start early. O’Kelley notes that too many companies wait until late in the restructuring process, but that leads to rushed results.

Second step, he says, is to identify the key tenant, the board chair. “Just like in real estate, having a strong name in that seat will help with recruitment for the other open spots.”

The next step is to determine the optimal size. “Larger isn’t always better with corporate boards.” He adds that a small team of strong performers can have a big impact.

Watching the Metrics

As companies struggle to regain their footing, they must scour all indicators to see how they are performing in real time. These companies should look at everything, says Los Angeles-based Deb Barbanel, who specializes in real estate and leads the Global Real Estate Practice and is also a core member of the Board & CEO Advisory Partners at Russell Reynolds Associates. “They are looking at everything from monthly rental income to debt covenants to the financial health of their tenants.” If they are a publicly traded company, she adds, they are seeing their stock price every day, “knowing that it doesn’t reflect the true value of the portfolio, which creates other stresses.”

Recruitment

Recruitment in real estate is a challenge right now, but not impossible, with firms being creative on important or truly accretive hires, Barbanel explained. She tells GlobeSt. that “there are few industries that are more personal, high touch, or more built on in-person meeting. Real estate professionals respect and thrive being together.”

What that means in terms of recruitment, she adds, is that it is in a bind, at least at the executive level. “For the most part, executive searches are continuing, and interviews are taking place virtually, but for senior-level hires, it is highly unlikely that an offer will be made until a final in-person interview can occur.”

Rethinking Composition

According to Barbanel, going through a bankruptcy also provides a company the opportunity to rethink their composition. “Many real estate boards are filled with real estate professionals, but would benefit from looking at directors with diverse backgrounds, especially those with skill sets related to digital and technology, consumer industries, and marketing,” she says. “Each of these areas are critical to real estate companies right now, and board-level expertise would be incredibly valuable.”

Additionally, she says, “making sure the full board is fluent in ESG issues, especially sustainability given real estate’s impact on the environment, will be critical in the coming years. To not be well versed as a board is to likely miss out on substantial growth and value-creating opportunities as a company.”

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Road Map to Success When Rebuilding After Bankruptcy